Money laundering 4.0 in 2021 – Domains, Flower Shops and NFT instead of Cash
As a graduate in banking and business administration, as a former banker, many friends ask me for advice, e.g. on financing and insurance. Last week, however, I received a request of a different kind. Namely the question: "Can money laundering nowadays be designed in such a way that it becomes impossible for the State Criminal Police Office to trace this?"
Legal Notice - Disclaimer:
This is not a recommendation for tax evasion, not a guide for criminally illegal actions and I can't possibly be held liable for it, respectively the following article serves only to entertain a fictitious invented by me potential way to launder money....
How did money laundering go so far | Prologue:
This is actually subtle to answer. So simple you wouldn't believe it. Let's assume that Alice and Bob were extorted by threat of violence to pay a monthly protection fee. This was primarily paid in cash, so the transaction was not documented. This variant nevertheless has many bottlenecks, because the cash is difficult to exchange into giro money without having to declare the origin according to the money laundering law, one can be caught during the handover, and a direct transaction takes place between the parties, i.e. without an intermediary. In the second example, for example, a hacker X blackmails a company Y with a virus to pay Z euros, otherwise the system will not be restarted. Here, too, there is the bottleneck: How should the money be paid? In bitcoin? On most Bitcoin exchanges you can trade up to one or two Bitcoins per day without having to legitimize yourself, nevertheless how is a company supposed to exchange Euros for Bitcoin, in this short time? But if the company pays in Euro the transaction is back in the FIAT system and can be traced abroad. Difficult...But how does it look modern?
2021 - modern money laundering using Crypto, NFT, Domains and Flower Shops:
Let's start with Flower Shops. Never heard of it, not even in connection with Wirecard? Let me explain it briefly. There are payment providers and casinos or poker websites. The payment providers don't like to work with these sites, because often credit cards are used to pay the stakes. The causal consequence: if the user loses, he cancels the credit card payment, etc. Therefore Wirecard (my personal opinion as a thesis; no desire for lawyers) had specialized in these payments, positioned itself pointedly as a middleman and thus earned high fees leading the risky intermediate business as a kind of bail bondsman. Then gambling was reprimanded and only poker sites had a potential chance of survival because (I'm a poker pro) poker is more statistics and probability calculation than luck. But casinos didn't want to give up and invented flower stores. So the user did not deposit more money on the casino's site, but bought XY USD worth of flowers in a flower fake show, which of course were never delivered. No gambling transaction in bank sales, no gambling in payment processors, etc....
But how to use Flower Shops?
Back to the examples:
Instead of taking the cash, one does the following: You build a flower store or a store with perishable goods, which is not operated within Europe, mostly where there is no framework agreement for criminal cooperation (I don't want to give more tips at this point) and operate this store via a TOR browser (a network for anonymizing connection data; the IP is not traceable through x-fold server connections). The protector now buys perishable flowers in this store, which are never delivered, worth 5,000 € in Bitcoin! In some of the known exchanges, according to the law, actual identification by ID must take place as soon as money is exchanged into Bitcoin or the other way around, but there are exchanges with exemption limits. Bitcoin will also never be prevented, because it is not a recognized currency, but a binary number code for a decentralized database. You can only regulate the exchanges, miners, etc. So now the bitcoins are sent to a wallet address of the flower store. Just a quick info: crypto is not anonymous! On the contrary! Through the blockchain every transaction is transparent, only the link from person A to wallet X is difficult. However, if I get this info, I can trace every transaction. So the receipt of the Bitcoin has to be diluted. I now exchange the Bitcoins in the exchange for another currency, for example Monero.
Now the flower shop operator has changed the currency and the X coins are still in country Y on the wallet. Now here's what happens: I look for a domain exchange (feel free to look at www.tom-illauer.de/domains) that accepts Bitcoins. I register there, create a new domain which I registered anonymously with an anonymous mail address, offer it for sale (there are domain marketplaces with payment in Bitcoin or Eth) and the flower store buys this domain. Here are then 6% as an example of commissions, nevertheless still cheaper than the manual historical personal distribution. The flower store gets the domain, the domain seller, for example on the C islands, gets his Bitcoins from the platform for the domain sale. Now I exchange these again into another cryptocurrency. In Germany, I now create an NFT (a unique digital image with a token) and make my work available for sale on platforms (e.g. OpenSea). The wallet on the C islands now buys in crypto currency the NFT and I get my Bitcoins in Germany. I change them again within the blockchain into another currency, sell them, legitimize myself at the Bitcoin exchange, show the bank my NFT sales and have legal Giral money....
I copy the store and adapt the in new, I change the wallet and that in the interval of three months. In court, the prosecution has to prove the flow of money for the crime of predatory extortion, which makes the process very time-consuming. Multiple wallets, multiple currencies and blockchains, multiple legal sales, etc. The Bitcoins could of course be seized as circumstantial evidence, but how to prove? The direct origin of the money in Germany can be proven, after all....
Addendum: What if I already have cash?
Badly running restaurants are impossible as a money laundering place, because tax offices also control use of goods and co. One solution so far is "smurfing": here the amounts are split and deposited into several accounts (see cash reporting obligation). Way too much effort...Structuring: You buy luxury goods and sell them back abroad. Way too much effort...You rent luxury apartments, pay the deposit in cash, cancel and have the money transferred to the C islands...Also too much effort...It's easier: There are Bitcoin machines, you get paid in Bitcoin at the brothel, you buy goods in cash and exchange them back into currency (exchange right), etc....
My hint to all crooks: If you have understood this, then you are much too intelligent for the business and can earn just as well legally ;-)