News 01st Nov 2023

Exposed: The thriving black market for crypto-to-fiat money mules.

Steve Goodrich

Head of Research and Investigations

Steve is Transparency International UK’s Head of Research and Investigations. He is responsible for managing TI-UK’s research unit and is our specialist on lobbying accountability, party funding and open governance. Before joining TI-UK in May 2015, Steve worked as a Senior Policy Adviser at the Electoral Commission. He has over five years’ experience working on political finance regulation, legislation and data.

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Unless you’ve been living under a rock for the past decade, you’ll probably have heard of ‘cryptocurrencies’ even if you’re not quite sure what they are. Once the preserve of a tech-savvy elite, these digital assets have been promoted as a mainstream alternative to our traditional banking system, even if that remains an elusive aspiration for now. While the technology underlying cryptocurrencies can be very complex, the idea is rather simple.

Whereas the conventional banking system relies on financial institutions holding and checking their own ‘ledger’ of payments in and out to record transactions, in the crypto world this happens in one place. Users then verify payments, which are added to an ever-growing list that is open to scrutiny. This is a radical shift from old-school banking where individual flows of money are withheld from the public eye.

So far, so transparent.

The flipside is that cryptocurrencies are held in ‘wallets’ – akin to bank accounts, which are invariably anonymous. This has made them attractive to criminals, especially those looking to launder the proceeds of crime. However, to be of day-to-day use it’s still necessary to transfer the value of these sometimes-volatile assets into fiat currencies, like the British Pound, US Dollar and Euro.

In recent years, there has been a growing number of companies providing crypto-to-fiat currency services legally and seamlessly. For those who’ve invested in crypto this is very handy. You can now pay for most things using debit cards connected to your reserve of digital assets. What our colleagues at Transparency International Russia in Exile (TI-R) have found, though, is that some of these crypto-to-fiat providers are being hijacked for potentially criminal purposes.

After digging on the dark web, investigators uncovered several intermediaries offering ready-made accounts at Wirex, a crypto-to-fiat payment provider, that would be held in the name of a nominee. This is often referred to as a ‘money mule’ account, which are used by criminals to move money through the financial system without revealing their identity and the possible origin of funds. These money mule accounts were being sold to Russian speakers for between $30 to $220 depending on the location of the nominee account holder, which included Bulgaria, Latvia, Estonia, Poland, Czech Republic and Spain. Some of the nominees offered were Ukrainian refugees living in Western Europe. Those buying these accounts would receive proof of the nominee’s identity, and be able to contact the nominee through the seller if Wirex blocked the account or any other problems arose.

The anonymity of cryptocurrencies combined with money mule accounts makes an ideal method for money laundering.

Tracing payments through the intermediaries’ crypto wallets investigators at TI-R found that hundreds, potentially thousands, of money mule accounts at Wirex and a range of other crypto-to-fiat providers could be being sold every month.

Neither TI-R or TI-UK claim that Wirex knew about this activity, and we have recommended they and the wider finance industry use the following as red flags for possible money mule accounts:

  • a long absence of any operations after account registration by an individual, and then a sudden change of password and contact phone number right before the account starts to perform transactions
  • a change of password and contact phone number right after account registration
  • accounts registered to refugees or individuals of one country with transactions taking place in a completely different jurisdiction
  • any clients with an identifiable connection to those selling money mule accounts on the dark web

Since 8 October 2023, new rules mean that those seeking to advertise cryptocurrencies to UK customers must either be registered with the Financial Conduct Authority (FCA), the industry regulator, or have their communication approved by someone authorised by the FCA. Currently, Wirex is not registered with the FCA and cannot advertise its cryptocurrency products directly to UK customers.

When contacted for comment, Wirex stated they have complied with all relevant law and regulations, and we make no allegation that they have broken these new advertising restrictions or UK anti-money laundering laws.

While the pace of regulation is finally catching-up with the speed of this industry’s innovation, it is clear there are ways in which some are trying to secure a secret backdoor into the conventional financial system. As Russia remains frozen out of the global financial system, methods such as this are likely to become increasingly appealing to those seeking to skirt sanctions. Crypto might seem like the next big thing to some in the City, but it’s also an opportunity for criminals and kleptocrats that policy makers, regulators and industry cannot ignore.