Unregulated Chinese Financial Operators Allegedly Employ Cryptocurrency Gambling Platforms for Illegal Fund Transferops, As Asserted by TRM Labs
In a recent report by blockchain intelligence firm TRM Labs, the alarming trend of using blockchain casinos for money laundering activities has been highlighted. As physical casinos shut down during the Covid-19 lockdowns and gambling shifted online, this practice has accelerated, becoming increasingly prevalent.
If left unchecked, these activities could worsen drug epidemics, organized crime, and tax evasion, posing a significant threat to the global financial system. The digital traces left by these networks are being used by law enforcement to trace and seize illegal assets, but the efficiency of the illicit brokers involved has been a challenge.
Criminal brokers often charge less than 2% commission and offer near-instant transfers, making the cash virtually untraceable. This practice, known as "shadow banking," is linked to the centuries-old underground banking system fei qian, now modernized with cryptocurrency. The exploitation includes funds tied to organized crime, drug trafficking, and other illegal activities.
To combat this issue, TRM Labs suggests that combating the problem requires diligent blockchain analysis, interagency collaboration, and bold strategies, including going on the offensive in cyberspace. Law enforcement can effectively track and combat money laundering through blockchain casinos and cryptocurrency gambling networks by leveraging advanced AI and graph-based analytical tools.
One such approach is the use of Graph Neural Networks and Multi-Pattern Detection. By applying AI approaches like MPOCryptoML, which applies graph neural networks and multi-pattern laundering detection algorithms, complex laundering activities on blockchain platforms can be captured more accurately.
Real-time AI-powered monitoring and anomaly detection are also crucial. Deploying AI-driven, scenario-based monitoring systems that adapt continuously to evolving laundering methods can provide real-time alerts and reduce false positives significantly.
Comprehensive Risk-Based Customer Profiling and KYC (Know Your Customer) are also essential. By applying risk scoring to customers based on jurisdiction, transaction patterns, and source of wealth, high-risk profiles can be prioritized for deeper investigation. Enhanced KYC and CDD (Customer Due Diligence) incorporating biometric authentication and sanctions screening can reduce anonymity exploited by criminals.
Cross-Channel and Cross-Platform Transaction Monitoring is another effective strategy. By monitoring crypto gambling activity across various transaction rails, layering and structuring techniques used to obscure illicit fund origins can be detected.
Multi-Agency and Regulatory Coordination is also vital. Coordinated efforts between law enforcement agencies, financial regulators, and crypto businesses can enhance information sharing and enforcement actions.
Lastly, the implementation of Robust AML Compliance Programs in Crypto Casinos is crucial. Platforms must integrate AI-driven suspicious behavior detection, continuous sanctions and PEP screening, and adverse media monitoring to promptly identify and respond to laundering risks.
The report underlines the urgency of addressing this issue to prevent further growth and impact of these illegal activities. The speed, global reach, and pseudonymity of cryptocurrency make it both attractive to criminals and helpful for investigators. Targeted cyber operations could expose and dismantle portions of these shadow networks, disrupting the criminal pipelines they depend on.
The report does not mention any specific strategies or operations that have been implemented to combat this issue yet, but the call to action is clear: law enforcement, regulators, and the crypto industry must work together to protect the financial system from these threats.
Fintech and general-news sectors should be vigilant about the rising issue of money laundering through blockchain casinos, as this practice is linked to various illegal activities such as organized crime and drug trafficking. To combat this threat, the crypto industry, law enforcement, and financial regulators must collaborate, implementing robust AML compliance programs, cross-channel transaction monitoring, comprehensive risk-based customer profiling, and the use of AI-powered tools for real-time monitoring, graph neural networks, and multi-pattern detection.
