Cryptocurrency Crime Tactics Quiz

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Questions and Answers

What method is commonly used in laundering proceeds from scams?

Utilizing tokens and stablecoins (correct)

Transferring funds through traditional banks

Investing in high-risk cryptocurrencies

Using cryptoasset ATMs for fiat conversion

Which activity is characteristic of money mules in the cryptocurrency space?

Using stolen identities for transactions (correct)

Conducting legitimate exchanges

Investing in decentralized finance projects

Harvesting funds from cryptocurrency mining

Privacy coins are typically used for which of the following purposes?

Enhancing transaction speeds

Layering illicit proceeds (correct)

Acting as a secure wallet

Providing transparent transaction records

What is one of the risks associated with decentralized exchanges (DEXs)?

Facilitating money laundering Signup and view all the answers

Chain hopping in cryptocurrency generally refers to what behavior?

Transferring assets from one blockchain to another Signup and view all the answers

Which of the following is a common tactic used in laundering hacked tokens?

Converting tokens to fiat currency Signup and view all the answers

What type of risk does indirect exposure to cryptoassets present for banks?

Involvement in criminal activities indirectly Signup and view all the answers

What is a significant advantage that DEXs offer to criminals?

Ability to bypass compliance controls Signup and view all the answers

Which of the following exchanges is NOT mentioned as a non-compliant exchange?

Binance Signup and view all the answers

How do DEXs compare to traditional exchanges in the context of criminal activity?

They facilitate greater anonymity Signup and view all the answers

What is the primary concern regarding DEXs as mentioned in the context of criminal exploitation?

Inability to track transactions Signup and view all the answers

What type of trading volume is implied to be higher in DEXs compared to traditional exchanges?

Criminal trading volume Signup and view all the answers

What was BTC-e primarily known for?

Facilitating illicit activities Signup and view all the answers

Who established BTC-e?

Alexander Vinnik Signup and view all the answers

What significant penalty did BTC-e face from FinCEN?

$110 million Signup and view all the answers

What type of information did BTC-e collect from its customers?

Only a username, password, and email address Signup and view all the answers

What was one of the illegal activities BTC-e was involved in?

Computer hacking and ransomware Signup and view all the answers

How did BTC-e attempt to hide its operations?

Through a web of corporate structures Signup and view all the answers

What did US authorities estimate about ransomware payments related to BTC-e?

95% of ransomware payments were cashed out via BTC-e Signup and view all the answers

What types of cryptocurrencies did BTC-e allow access to?

Privacy coins like Dash Signup and view all the answers

Which of the following statements is true regarding BTC-e's ownership structure?

It involved numerous shell companies Signup and view all the answers

What is a primary concern regarding OTC desks and their operations?

They can be used for money laundering activities. Signup and view all the answers

Which country's OTC brokers have been notably linked to large money laundering operations?

China Signup and view all the answers

What was a common operational model of the SUEX and Chatex exchange service?

Enabling crypto-to-cash swaps without KYC. Signup and view all the answers

How did US law enforcement describe the involvement of Chinese crypto brokers?

Laundering funds for Mexican drug cartels. Signup and view all the answers

What measure did Chinese authorities take regarding OTC traders?

Implemented a crackdown due to laundering concerns. Signup and view all the answers

What method do criminals often employ to deceive legitimate exchanges?

Using fraudulent KYC documents. Signup and view all the answers

What role do money mules play in money laundering operations?

They open accounts to move funds for criminals. Signup and view all the answers

What is one of the potential risks associated with using regulated exchanges?

They can be used by criminals to launder funds. Signup and view all the answers

Which type of currency swap was facilitated by some OTC brokers allowing users in the UK?

Stablecoins for fiat cash. Signup and view all the answers

What is a characteristic of the trading environment for OTC desks?

Often anonymous and less regulated. Signup and view all the answers

What is the typical initial step in a money mule operation at a cryptoasset exchange?

Individuals establish accounts at the exchange shortly after one another. Signup and view all the answers

During the money muling operations described, what type of documentation do new customers commonly provide?

Passports and driving licenses. Signup and view all the answers

What monetary amount were students reportedly offered to act as money mules?

£500 to £1,000 per week. Signup and view all the answers

What type of funds were transferred into the students' bank accounts?

Round value denominations of £700. Signup and view all the answers

How did the criminals instruct the students to handle the illicit funds?

They were instructed to buy cryptoassets using the funds. Signup and view all the answers

What was a potential result of students acting as money mules in this operation?

They aided criminals in laundering the proceeds of fraud. Signup and view all the answers

What role did personal information play in the money mule operations?

It was necessary for criminals to manipulate accounts. Signup and view all the answers

What did the criminal organization posing as job recruiters assure the students?

The process would be completely legal. Signup and view all the answers

Why might students have provided selfies as part of their identity verification?

To match their identities with the accounts they opened. Signup and view all the answers

What was the final goal of the money mule operation using student accounts?

To launder illicit funds through cryptoasset exchanges. Signup and view all the answers

What major event occurred on March 29th, 2022 involving Ronin Network?

A large-scale hack resulted in $615 million being stolen. Signup and view all the answers

What indicates a possible red flag related to customer activity on a decentralized exchange (DEX)?

A customer suddenly attempts to cash out a large sum. Signup and view all the answers

What method did the attacker use to steal funds from the Ronin bridge?

Compromising the private keys of validator nodes. Signup and view all the answers

Which of the following actions was taken by the US Treasury in response to the Ronin bridge hack?

Initiated sanctions against the identified thief's Ethereum address. Signup and view all the answers

What percentage of the stolen funds from the Ronin hack was estimated to have been laundered as of April 14th?

18% Signup and view all the answers

What common characteristic do individuals involved in money mule schemes often share?

They usually belong to the same nationality and reside at similar addresses. Signup and view all the answers

What was one specific instruction given to students acting as money mules?

To transfer illicit funds to cryptoasset exchanges and purchase cryptoassets. Signup and view all the answers

What type of identity documentation was typically needed from new customers at cryptoasset exchanges involved in such operations?

Government-issued identification like passports and driving licenses. Signup and view all the answers

What type of funds did the criminal organization transfer to the students' bank accounts?

Illicit funds derived from online fraud. Signup and view all the answers

How did the criminal organization initially attract students to the money muling scheme?

By offering high paying job advertisements on social media. Signup and view all the answers

What was the primary purpose of the money mule accounts in the scheme targeting students?

To act as fronts for laundering illicit funds. Signup and view all the answers

What monetary range was offered to students who acted as money mules?

£500 to £1,000 per week. Signup and view all the answers

Which of the following describes a method used by criminals to manipulate money mule accounts?

Transfer and withdraw funds to/from different cryptoexchanges. Signup and view all the answers

What kind of financial activities were the students initially unaware of during their participation in the scheme?

The nature of the job advertisement's legality. Signup and view all the answers

What role do compliance teams play in monitoring blockchain activity?

To manage risk exposure related to illicit activities Signup and view all the answers

Which of the following is NOT considered a high-risk jurisdiction for money laundering?

Regions with effective AML/CTF regulations Signup and view all the answers

What type of exposure do exchanges risk when associated with cryptoasset mixers?

Transactional exposure to sanctioned wallets Signup and view all the answers

What is a key characteristic of countries with ineffective regulatory frameworks for cryptoassets?

They may not be categorized as high-risk in other contexts Signup and view all the answers

Which type of illicit actors might compliance teams specifically monitor in blockchain transactions?

Connections to dark web markets and cybercriminals Signup and view all the answers

What common aspect do high-risk jurisdictions share regarding cryptoasset activities?

They present risk for money laundering and terrorist financing Signup and view all the answers

What is a critical function of a comprehensive dashboard used by compliance teams?

To assess the risk of illicit transactional exposure Signup and view all the answers

What primary mechanism do criminals use to convert illicit funds through DEXs?

Swapping Ether or Ethereum-based tokens for new tokens Signup and view all the answers

Which group was noted for frequently using DEXs in 2022 to hide stolen funds?

Lazarus Group from North Korea Signup and view all the answers

What advantage do DEXs offer in terms of transaction visibility?

They provide transparency through public blockchain records. Signup and view all the answers

What process typically follows after a criminal swaps tokens at a DEX?

They deposit the new tokens at a legitimate exchange. Signup and view all the answers

What is one of the limitations of laundering funds through DEXs?

Funds through DEXs can be analyzed using blockchain analytics. Signup and view all the answers

Which technology enables the visibility of transactions on DEXs?

Smart contracts recorded on the blockchain Signup and view all the answers

How do DEXs differ from centralized exchanges in terms of user oversight?

DEXs lack a central administrator with oversight. Signup and view all the answers

What role does Tornado Cash play in the ecosystem surrounding DEXs?

It is a mixing service that obscures transaction origins. Signup and view all the answers

What is a common first step in a money laundering typology involving DEXs?

Obtaining Ether or Ethereum-based tokens through hacking. Signup and view all the answers

What potential risk might arise from DEXs concerning law enforcement activities?

Transactions are more transparent, making tracking easier. Signup and view all the answers

What is a primary feature of decentralized exchanges (DEXs) compared to centralized exchanges?

DEXs prioritize user control over funds. Signup and view all the answers

How much money has been laundered through DEXs according to the research mentioned?

$1.2 billion Signup and view all the answers

What type of trading do DEXs facilitate?

Peer-to-peer trading through smart contracts Signup and view all the answers

Which factor has contributed to the increase of vulnerabilities in DEXs?

Explosive trading volumes and liquidity Signup and view all the answers

What is a significant challenge in monitoring money laundering activities on DEXs?

Immediate and anonymous transactions Signup and view all the answers

Which of the following statements is true regarding the competition between DEXs and centralized exchanges?

DEX trading volumes can match large centralized exchanges. Signup and view all the answers

What is one of the primary methods used by money launderers on DEXs?

Layering large volumes of funds through DEXs Signup and view all the answers

What technological advancement has Elliptic pioneered to combat risks in cross-chain crime?

Holistic Screening capabilities Signup and view all the answers

What was one outcome of the increased liquidity on DEXs?

Increased vulnerability to exploitation Signup and view all the answers

Study Notes

Executive Summary 2024

Elliptic's 2024 report details recent developments in the nexus between cryptoassets and financial crimes, including new findings from FinCEN and OFAC.
Key developments included increased use of stablecoins in scams and sanctions evasion, and cryptoasset exchanges in high risk jurisdictions continuing to facilitate criminal activity.
Criminals are using AI-enhanced tools like deepfakes and botnets to perpetrate crimes involving cryptoassets more effectively and at a larger scale
Elliptic's report aims to equip investigators and analysts with the necessary tools and information to identify new financial crime risks in the quickly developing crypto asset landscape.
Increased use of stablecoins and cryptoasset exchanges in high-risk jurisdictions; and criminals are using AI for more effective crime.

Part I: Money Laundering

Cryptoasset Exchanges:
- Criminals frequently utilize unlicensed or non-compliant exchanges to move funds.
- Exchanges in high-risk jurisdictions often facilitate money laundering.
- Money mules and fraudulent documents are commonly used to disguise illicit transactions.
- Use of non-compliant and unlicensed exchanges allows criminals to bypass regulations and ensure fewer obstacles in moving illicit funds between fiat and cryptoasset platforms or crypto-to-crypto.
Mixers and Privacy Wallets:
- Mixing services obscure transaction trails, making it harder to trace money laundering activities.
- Law enforcement has actively targeted and disrupted key mixing services like Helix and Bitcoin Fog.
- Increasingly, evasion is reliant on multiple techniques.
Decentralized Finance (DeFi) and Cross-chain Crime:
- Decentralized exchanges (DEXs) are increasingly utilized for money laundering due to their decentralized and transparent nature.
- Cross-chain bridges facilitate the seamless transfer of funds across different blockchain networks, enabling rapid laundering.
- Funds are frequently moved between numerous addresses as evasion techniques.
Tokens and Stablecoins:
- Misleading token projects or initial coin offerings (ICOs) are frequently used to defraud investors.
- Unregulated and non-compliant exchange services or those in high-risk jurisdictions are preferred by criminals for layering illicit funds in stablecoins.
- Stablecoins are increasingly used to launder illicit funds, particularly in "pig butchering" scams.
Privacy Coins and Chain Hopping:
- Privacy coins such as Monero, Dash, and Zcash are commonly employed to layer illicit funds.
- Chain hopping enables criminals to swap funds between different blockchains.
- Coinswap services are primarily used by criminals and are frequently located in high-risk regions.
Wallet-specific Behaviors:
- Criminals employ techniques like chain peeling to obscure their transaction history and avoid detection.
  - Frequently repeating new wallet addresses during transactions
- Multi-customer cross-wallet activities (simultaneously operating multiple accounts) facilitate transactions involving multiple parties in a criminal network.

Part II: Terrorist Financing

Some specific money laundering trends include fraud schemes, use of crypto ATMs, and cryptocurrency for terrorist financing.
- There appears to be an ongoing trend of using digital currencies to fund terrorist activities.

Part III: Key Trends: Criminal and Threat Actors

Hackers and Cybercriminals:
- Hackers and cybercriminals use complex and sophisticated money laundering techniques to move funds from illicit activities.
- They utilize a range of complex financial crime methods.
Dark Web Vendors:
- The sale of illicit goods and services on the dark web often involves cryptocurrencies and specialized money laundering methods.
Fraudsters:
- Fraudsters use the internet and social media to deceive individuals, and cryptocurrencies are often used in these scams to obscure the trail.
Professional Money Launderers:
- Sophisticated professionals use cryptocurrencies for large-scale laundering operations.
Street Drug Dealers:
- Drug dealers use cryptocurrencies to facilitate transactions and avoid traditional financial institutions.
Human Traffickers and Sex Traders:
- These groups employ cryptocurrency for transactions within their business models.
Tax Evaders:
- Individuals use cryptoassets to evade tax obligations.
State Actors/Sanctions Evaders:
- State-sponsored cybercriminals and sanctioned actors frequently use cryptocurrencies for sanctions evasion.
Terrorists/Political Extremists:
- Terrorists use crypto assets to fund activities outside traditional banking systems.
Many actors employ multiple methods to obscure the origin and movement of their funds.
Overall, the use of cryptocurrencies for illicit activities is increasing and becoming more sophisticated.

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Description

Test your knowledge on the various tactics and risks associated with cryptocurrency fraud and decentralized exchanges. This quiz covers money laundering methods, characteristics of money mules, and the advantages and concerns of DEXs. Explore how these elements interact in the crypto landscape.