US Govt Issues Sanctions Against Venezuela’s ICO – the Petro Coin

By Christine Duhaime | March 25th, 2018

Executive Order 

President Trump issued an Executive Order imposing economic sanction on the initial coin offering (“ICO“) by the Government of Venezuela, called the Petro Coin (the “Petro ICO“).

The Executive Order makes it illegal to engage in transactions, dealings or financings in connection with the Petro ICO, which would include buying, selling, trading, marketing, listing or facilitating, in any way, the Petro ICO by any US person or any person in the US.

It is also illegal to attempt to violate the Petro ICO sanctions, as well as to conspire to violate the sanctions or to avoid or evade them (sanctions avoidance that occurs, for example, when money is moved through a secondary country, often Dubai, to hide its illegal origin).

What is a US Person?

It is important to note that with all US sanctions, the persons who are caught are not just Americans. By definition, it casts a much wider net and applies to any person subject to the jurisdiction of the US (a “US Person“) and those persons include:

  • US citizens and residents wherever they are situated, including Canada.
  • Anyone physically in the US, regardless of their nationality.
  • Any corporation, partnership, association or any other organization incorporated in the US.
  • Any corporation, partnership, association or other organization, regardless of where incorporated or doing business, that is owned or controlled by any US Person. So even a Canadian company that is controlled by a US person or US company must comply with US sanctions law.

World’s 1st Sanctions Against a Digital Currency

The economic sanctions against the Petro ICO are the first sanctions issued in the world against a digital currency.

The Petro ICO has been controversial for a number of other reasons including that:

  • It’s the issuance of a securities without securities law considerations or disclosure to protect investors;
  • It is represented to investors as allegedly backed by both oil and gold but is likely backed by neither;
  • It is available for sale to non-Venezuela citizens provided they pay in Euros, Yuan, Rubles and Turkish Lira;
  • One can also buy the Petro ICO with Bitcoin, Ether and NEM. The digital currency NEM has its own controversy – it was allegedly the victim of theft from hacking. Allegedly, some of the NEM digital currency ended up at a Vancouver digital currency exchange however, there is no Vancouver digital currency exchange that accepts NEM, or has ever accepted it;
  • According to the Petro ICO White Paper, Venezuela will make the Petro coin available all around the world (irrespective of sanctions law impediments); and
  • Venezuela claims it has already sold over $5 billion Petro coins to people in over 127 countries but its unclear how anyone will be able to hold them or ultimately cash out with sanctions in place.

NEM Tweets that Petro ICO Is Using its Blockchain

There’s more to the NEM connection with the Petro ICO –   according to the Venezuelan government’s White Paper for the Petro ICO, NEM is the Blockchain for the project. I’m guessing no founders of NEM or its foundation considered the advisability of legal advice before deciding to disregard US sanctions law. NEM even went so far as to broadcast on Twitter that the Venezuelan government is using NEM for the Petro coin, which would amount to providing transactions that are outright prohibited. Granted, NEM may not be an American company but it uses the US financial system, and needs US correspondent banking to survive. The fastest route to losing correspondent banking services is to knowingly violate US sanctions law.

The official website for the Petro ICO is here.

All you need to do to buy into the Petro ICO, is to scan any ID to the government website and send them your cash or  Bitcoin. They even take funds from Canadians and USD, according to the official website.

But please don’t buy any.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

Bitcoin and taxes in Canada – do you have to pay?

By Christine Duhaime | March 19th, 2018

As tax time approaches, purchasers, sellers, traders and holders of digital currencies are wondering whether taxes are payable on digital currencies in Canada. The answer is that it depends.

While the Income Tax Act governs in respect of taxes payable in the digital currency space, the issue of taxes payable on digital currencies in Canada is anything but clear because different government agencies are not on the same page on the legal nature of digital currencies.

Bank of Canada

First of all, the Bank of Canada has apparently said since 2013, that digital currencies are not money, currencies, assets or a securities and earlier this year, that digital currency trading is gambling.

And that’s what may cause confusion because in Canada, gambling winnings are not taxable. The exception is if the gambling activities are professional or are undertaken as a business. Professional gamblers, for example, must pay taxes on their winnings whereas winnings from occasional gambling activities are not taxable.

In Canada, people trade in digital currencies and can gamble legally online in identical ways. With respect to gambling, people register and fund their accounts on sites such as run by a provincial government agency. With respect to digital currencies, people also register and fund their accounts on sites that host digital currency exchanges. Considering the similarities of the two activities, one can see how the Bank of Canada would come to the conclusion that trading in digital currencies is gambling given also that they could fall into the same Criminal Code analysis of games of pure skill or chance.

That means that if digital currency trading is gambling, its “winnings” or gains, are not taxable to the extent that the trading is not commercial.


Despite what the Bank of Canada has said about digital currency trading being gambling, another Canadian government agency, the Canada Revenue Agency, has not characterized digital currency trading as gambling and likely never will. That’s because CRA stated in 2013 that digital currencies are a commodity and the trading thereof may result in taxable income or capital. But you would need a tax event, meaning that when it is sold or traded for something else (e.g., for another digital currency, for services or for cash), taxes if any, are triggered at that time. If a person is just sitting on digital currencies he or she bought then there is neither a gain nor a loss.

So taxes are payable on digital currencies under the Income Tax Act unless it is determined that digital currency trading is gambling and only a Court or the CRA can make such a determination.

Separate and apart from income from trading, if a person uses digital currencies to pay for goods or services, the financial transaction is a barter and taxes are payable on the barter exchange. Taxes are also clearly payable if a person earns digital currencies from mining activities because this is purely commercial.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

First unexplained wealth orders take effect in the UK against a non-UK person

By Christine Duhaime | March 18th, 2018

The National Crime Agency in the UK has been granted the first set of Unexplained Wealth Orders (“UWO”) under the Criminal Finances Act, by the UK High Court requiring that an unnamed foreign national from Asia provide a written statement explaining how they obtained sufficient wealth to purchase property. The foreign national subject to the first UWO is a politician and a politically exposed person who owns mansions and office property worth over US$30 million in London. Under the UWO, the owner is prohibited from transferring the properties.

The Criminal Finances Act came into force at the end of January, 2018, following evidence that the UK was being used by corrupt foreign nationals or PEPs to purchase expensive real estate with proceeds of crime or corruption. Several research studies showed that over US$6 billion of proceeds of foreign corruption is parked in London real estate.

Broad application

UWOs are available for property over £50,000 in two cases: (a) where there are reasonable grounds to suspect that the person, or a person connected to them, is or has been involved in the commission of a serious criminal offence in the UK or anywhere else in the world; or (b) where the property is held by a PEP.

The application of the legislation is quite broad and can capture anyone connected to the person targeted including business partners. Essentially, if a person is suspected of having property they clearly could not afford based on their salary or reported income, or taxes paid, or if they are connected to such a person as a business partner, shareholder, family member or otherwise connected, they could be subject to a UWO.

Interim freezing orders

In terms of disclosure, UWOs require proof of legitimate sources of wealth and the disclosure of owners, including beneficial owners, shareholders, trustees, etc. or the property or asset subject to the UWO. If a person subject to a UWO refuses to comply with the disclosure of information to prove the legitimacy of wealth, their property is subject to forfeiture by the government. UWOs are issued with interim freezing orders over the property to prevent a situation where wealth can’t be proven and the person attempts to sell the property.

It is likely that assets held by people from places like Iran, Nigeria and China will be the most difficult to prove were paid for with funds obtained lawfully. With respect to Iran, that is because Iranians as a matter of course, violate sanctions law by funnelling money illegally through Dubai to hide its origin and move it to places like London and Vancouver. Sanctions avoidance is a serious criminal offence. With respect to China or Nigeria, while there is no issue of sanctions, often their foreign nationals have acquired wealth from corruption.

Any property, shares or money from anywhere

It is important to note that UWOs have an international reach: a person does not need to be a UK resident, and the property can be located outside the UK – ergo, you can be chilling in Canada with property in Canada, or in a Canadian bank, or be holding shares of a Canadian company and be subject to a UWO if you have unexplained wealth.

Also, a UWO can be made in respect of any “property” worth more than £50,000 – not just real estate. “Property” is defined broadly under the Proceeds of Crime Act 2002, to include property wherever situated, including money, bank accounts, cars, boats, shares, real property and other intangible or incorporeal property.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

How the US Alien Tort Statute might expose Canadian financial institutions

By Christine Duhaime | March 18th, 2018

The US Supreme Court this term is ruling on a case that may impact Canadian banks and other financial institutions. The case, Jesner v. Arab Bank, involves over 6,000 petitioners from Israel who were victims of terrorism in the Middle East who filed a tort claim against a corporation in New York, the Arab Bank, under the Alien Tort Statute, 28 U.S.C. 1350 (“ATS“). The ATS allows a civil action by a foreign national in the US for a tort committed in violation of the law of nations or a US treaty. The US Supreme Court has interpreted the ATS to permit litigation of a narrow set of common law actions derived from the law of nations available for alleged violations of international law norms that are specific, universal and obligatory.

The petitioners allege that the Arab Bank violated international law by financing (e.g., banking) and facilitating (e.g., exchanging foreign currency and wiring funds) the activities of a terrorist organization that committed the terrorist attacks in the Middle East that caused their injuries. Although the victims are in another country and the torts occurred in another country, the nexus to the US is that the Arab Bank had a branch in New York (as well as a correspondent relationship), and wired funds through the US.

The case is important and being closely followed because the US Supreme Court is being asked to determine whether a corporation can be held liable under the ATS. The petitioners allege that the Arab Bank violated the law of nations insofar as it financed terrorism, and also insofar as it directly and indirectly engaged in genocide and crimes against humanity as a result of banking terrorist organizations and wiring  funds for them. In their view, the ATS can be used to hold foreign corporations civilly liable essentially for terrorist financing that caused injuries to foreigners.

A number of groups, including the U.S. Chamber of Commerce, have filed to defend against corporate liability, pointing to the fact that there are more than 150 ATS lawsuits against US and foreign corporations doing business in two dozen industry sectors arising out of corporate activity in more than 60 countries which would be harmed by the ability of foreigners to sue corporations for torts that occurred outside the US.

Interestingly, the US federal government filed its brief, arguing that the ATS allows corporate liability but that in this case, no liability should flow because the mere fact that a bank managed and wired  transactions through its US branch does not establish a sufficient nexus to the US. It also argued that holding foreign banks liable may cause foreign banks to be less cooperative with the US to prevent terrorist financing, including in particular in respect of the Kingdom of Jordan and its efforts to defeat ISIS.

The reason why I think it may cause exposure to some Canadian banks and financial institutions in particular, is because at least one large Canadian bank relied upon a legal opinion it received from a law firm in respect of anti-money laundering law and counter-terrorist financing law that effectively advised the bank that AML and CTF laws only kick in to affect the on-boarding of a bank’s clients if and when there is a predicate criminal offence that occurred in Canada. The opinion arose in the context of the practice by some Canadian banks to allow the receipt of funds from smurfing of hundreds of wires from China of up to US$50,000 each from one person that violated China’s federal banking laws on reporting outflows of currency – it apparently advised the bank that, provided  no criminal offence had been committed in Canada, the Criminal Code of Canada allowed the receipt into Canada by banks of funds from other countries. In order words, the opinion was that as long as no offence occurred in Canada in connection with a client’s funds, the bank was go-to-good and it did not need to undertake due diligence beyond the borders of Canada for AML and CTF purposes in respect of funds.

There are problems with that advice. The Criminal Code prohibits importing into Canada (whether by wire transfer or other means), of any property (which includes funds) or proceeds thereof obtained or derived from an indictable offence that occurred anywhere, whether in Canada, China or the Middle East. In anti-money laundering law, the concept of funds or income “lawfully obtained” has always been used and it means income or funds obtained lawfully under the laws of the country from where the income or funds arise (see for example, the Criminal Finances Act 2017).

If one or more Canadian bank acted upon the view that only criminal offenses that occur in Canada were relevant for AML and CTF on-boarding purposes, then it means there is a gaping hole in how they on-board when it comes to banking clients from foreign countries which may impact them if the US Supreme Court decides banks, including Canadian banks, can be held liable under the ATS for foreign torts committed that injure foreigners.

Thinking ever further ahead, it is likely going to be in the area of injuries sustained from torts committed by cybercriminals and cyberterrorists in foreign countries against foreign nationals or foreign corporations, that have a Canadian banking connection, that may come back to bite Canadian financial institutions who have a too-narrow view of the application of the Criminal Code of Canada if the US Supreme Court holds foreign corporations liable for foreign torts in Jesner v. Arab Bank. Illustrative is the case of US v. Baratov, the 22-year-old Canadian convicted hacker who had no job but was able to buy a Mercedes Benz, an Aston Martin, a home, multiple Rolexes and to blow through millions in cash and his Canadian bank did not de-risk him despite the lavish lifestyle not matching his unemployed status.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

Selling watches and other stuff may land you in hot water

By Christine Duhaime | October 21st, 2017

The high end jewellery chain, Cartier, was fined US$384,000 for violating US sanctions on four occasions for selling expensive jewellery to Shuen Wai Holding Limited, a Hong Kong company.

But surprisingly, the purchases took place in California and Nevada. Shuen Wai Holding Limited is on the OFAC List of Specially Designated Nationals and Blocked Persons and American persons and entities are prohibited from dealing with OFAC listed persons. The US Treasury noted, in assessing the fine, that Cartier’s failed to undertake the most basic due diligence of running client names through OFAC’s free database.

The Hong Kong company is listed under the Foreign Narcotics Kingpin Designation Act, which includes many of the worst drug organizations and facilitators in the world.

OFAC noted that the enforcement  highlights the risks for retailers that engage in international transactions and sell to customers or ship products to persons and entities on the sanctions list.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

The non-techie guide to the Blockchain, distributed ledger tech and Bitcoin

By Christine Duhaime | September 3rd, 2017

This guide to Bitcoin, Blockchain, distributed ledger tech, and digital currencies is taken from a collection of presentations, comments, speeches we’ve made at global conferences and articles written by us from 2012 to 2015.


Consumer payments and ways of transferring value in Canada and globally have shifted over the last several decades from paper-based media, such as cash and cheques, to card-based media such as credit and debit cards, electronic methods such as pre-authorized payments through ACH, and more recently, digital methods such as digital currencies.

A digital currency is a digital form of a monetary instrument with a bidirectional flow, meaning it allows users to both buy and sell, or use, the digital currency. Bitcoin is the most popular digital currency. Bitcoin operates peer-to-peer and machine-to-machine (M2M). Unlike traditional fiat currencies that are issued by national governments and controlled by central banks, Bitcoin has no central monetary authority and is not backed by any central bank, authority or government. The supply of Bitcoin is not controlled by any central governmental authority, and it is not yet legal tender.

Users can buy digital currencies in person, at an ATM or online with real monetary instruments and can subsequently use digital currencies to buy goods and services globally or to transfer value. The purchase and selling price of digital currencies is determined by supply and demand in the digital currency market.

Trust me — “Because its trustless, its trustworthy”

The transactions for goods and services bought or sold using digital currencies are not processed through a centralized authority, or clearing house. A Bitcoin transaction is processed through the Blockchain, which acts similar to a third party clearing house except that the clearing (or reconciliation and verification of transactions) component is entirely M2M on the Blockchain (i.e., direct).

Cryptographic software validates each transaction through a process referred to as mining where participants compete to make records by solving computationally complex cryptographic problems. In the transactional validation process, transactions are time-stamped via a hash algorithm which creates an ongoing chain, and a decentralized digital and permanent record (the ledger) that theoretically cannot be altered or eliminated. A proof-of-work concept records the transactions chronologically and publicly. The shared public distributed ledger is the Blockchain. The Blockchain, by design, prevents anyone from double-spending, and therefore using digital currencies they do not own. 

Although it may appear an oxymoron to say so, financial transactions on any distributed ledger tech, including the Blockchain, are  designed to be trustless and therefore they are trustworthy. What I mean by that is that it is designed with a lack of trust in respect of all its users (me, you and the system), which makes the system trustworthy.

Not everyone in the space agrees on this point, however, if you read the White Paper from Satoshi Nakamoto on the technology of Bitcoin, it appears evident that part of what he was attempting to accomplish was to facilitate online gambling, and Bitcoin makes sense to the online gambling space, more than any other space.

By contrast, other online currencies or payment systems, such as bank credit cards are indirectly settled – they involve a central administrator or financial institution middleman that sits between the transacting parties. These intermediaries validate and reconcile transactions to avoid double spending by a person. In other words, there is a human involved. Digital currency transactions on the Blockchain rely on computer software to perform that function, cutting out the institutional go-between in financial transactions, and no human is involved.

As a result of the Blockchain, it is possible to buy currency, shop for goods or services and remit value internationally almost instantaneously, purely M2M without the need for institutional middlemen.

Ethereum & Smart Contracts

Canadians created distributed ledger technology early on. It’s true – Canadian talent, including law firms, were involved in the space early on when few in the mainstream world knew what a Bitcoin was and many more were disparaging the technology.

For example, Ethereum is a distributed ledger company that was created in Toronto. It moved to Switzerland when Canada announced the world’s first regulation of digital currencies. Its digital currency is called Ether. It is a distributed ledger that is programmable by users. Etherium promotes something called “smart contracts” which are not actually contracts or smart contracts. They are escrow payments that are, in essence, arrangements established purely by computer coding. The theory behind it is that a contracting party will buy Ether through Etherium and pre-pay certain Ether into a wallet and have it programmed to be held in escrow. Upon the fulfillment of the relevant legal condition precedent under the contract between the parties, the payment held in escrow on the distributed ledger is automatically released to a contracting party as a matter of computer coding.

The Ethereum distributed ledger is also often mischaracterized as able to “enforce legal contracts” or the so-called smart contracts. However, it does the opposite – these smart contract complete the payment terms of a contract voluntarily by pre-agreement of the parties and performs no enforcement function whatsoever.

Ethereum is very novel but it cannot create legal contracts or contracts that are enforceable on the distributed ledger – what it can do is much more simple – its tech can be used for escrow payments in Ether that are auto-released to an Ethereum wallet, irrespective of the existence of a contract between parties.

I think the potential more cool applications of smart contracts include the possibility of creating invoices that automatically execute a payment when a shipment arrives or the issuance of dividends which are automatically paid to shareholders if corporate profits reach a certain level. Imagine the articles of incorporation with dividend rights whereby declarations of dividends are auto paid by smart contracts.

Cool Law Enforcement Uses 

Independent of traditional uses of digital currencies, there are a much broader set of potential applications for Blockchain beyond the payments industry which are significant. As noted earlier, a distributed ledger operates as an online ledger where all the validated transactions that are processed through it are recorded, linked, and can be traced.

In some respects, the distributed ledger is like a public searchable database of all of a bank’s transaction records for every financial transaction ever completed by a customer. If a person’s wallet address is known, anyone can view the history of their financial transactions. In my view, as a financial crime legal expert, if wallet addresses were eventually not anonymous, the Blockchain and distributed ledger technology would be the world’s most perfect counter-terrorist financing and anti-money laundering tool for law enforcement because its unique features mean that it is a permanent depository of evidence, in the legal sense. If you are a lawyer and work in the space of foreign asset recovery and tracing proceeds of crime through the financial system you will get what I mean by the benefits of having a permanent bank of evidence for financial crime.

Read here for the financial crime risks of digital currencies.

Law Purposes

There are other legal applications of distributed ledgers and the Blockchain. It allows for the permanent recording of certain records in circumstances where it may be commercially expedient to do so, such as to record the date of issuance of stock options and other securities-related transactions. It has applications as well in cases where it is legally expedient to record certain legal information or triggering dates, such as notice periods, limitation periods, warranty periods, or the commencement of options to exercise certain legal rights. Such application are not yet legal in the sense that no court of law or judicial or legal body has vetted or approved such use as legally relevant, let alone legally binding upon any third party or government agency.

Distributed ledgers and the Blockchain can revolutionize not only the banking sector, but equally the role of law enforcement, financial transactional reporting, and the practice of law and the administration of justice by virtue of what I call the “permanent bank of evidence.”

Vision for the Future

This is what I believe are the promises of the tech:

  • A reduction in terrorist financing if transactions were operated through a distributed ledger system by virtue of the permanent evidence of transactions on the distributed ledger and Blockchain that can be used simultaneously and cooperatively by law enforcement agencies globally;
  • Elimination of some forms of fraud because of the impossibility of double spending using distributed ledger and the Blockchain for financial transactions that could save billions in many areas from environmental fraud arising from the carbon credit trading systems, securities-law related fraud and bribery payments to politically exposed persons;
  • Elimination of bank corruption in developing countries, for example in places like Vietnam, where we have seen citizens that are required to pay bank employees bribes, in addition to bank fees, for the privilege of using the banking system to remove or deposit money into their bank accounts or cash pay cheques;
  • An inexpensive remittance system that can service millions of poor and unbanked populations, mostly in Africa and Asia, that allows them to receive value from relatives abroad to keep their families alive, and allows more fortunate Canadians to send value directly to them;
  • Empowerment, and sometimes the survival, of marginalized or undocumented sectors of the population who are denied financial services because they live in refugee camps in destitution or live on the street with no government issued ID to set up bank accounts. We have seen this first hand in Jordan and Turkey;
  • Financial freedom for women, especially those who are denied banking services because of social, political, economic or geographical circumstances, for example, because they live in repressive societies where women cannot receive banking services or are victims of human trafficking whose ID is confiscated by traffickers;
  • Ability to quickly and easily transfer value to hundreds of thousands of volunteers who work with international aid organizations around the world in times of crisis when traditional financial institutions are shut down (or destroyed) such as during a terrorist attack, a tsunami, or an earthquake. This is a serious concern that is ever present in the counter-terrorism field; and
  • To provide financial inclusion to First Nations across Canada who are unbanked because they lack permanent residences (are homeless or live in halfway houses) to set up bank accounts or there are no bank branches within proximity to them.

Obviously, the case studies above to advance humanity or law and justice are unique to my experiences in law but nonetheless they present real problems that one day could be solved with distributed ledger tech and digital currencies.

@2012 -2017, Christine Duhaime.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

US to adopt national money laundering & terrorist financing strategy that includes risks from digital currencies

By Christine Duhaime | August 7th, 2017

US President Trump signed new sanctions legislation into law on August 3, 2017, against Iran, Russia and North Korea, and at the same time, adopted a new national strategy to combat terrorist financing and money laundering. The legislation, “HR3364 – Countering America’s Adversaries Though Sanctions Act” is more than about sanctions. In large part, it’s about financial crime – and indeed, the more enduring parts are those related to financial crime.

Pursuant to HR3364, the President is required to develop a national strategy for financial crime to deal with “illicit finance.” The strategy must be developed with bank regulators, the AG, the Secretary of DHS, the NSA and budget officials. “Illicit finance” means the financing of terrorism, money laundering, funds from narcotics trafficking, funds from proliferation of WMD, or other forms of illicit financing that occur domestically or internationally.

US National Strategy on Financial Crime

The national financial crime strategy must include:

  • an evaluation of how the US is addressing its own risk assessment and if it supports counter-terrorism efforts;
  • goals and priorities to disrupt and prevent illicit finance running through the US financial system (i.e., this means the correspondent banking system wherein US global banks act as correspondents for most of the banks in the world to establish US jurisdiction). The goals will include the dollar value of money laundering that goes through the US system.
  • details of the most significant threats of money laundering that go through the US financial system;
  • comments on the extent to which law enforcement is going after money laundering, terrorist financing and funds used to finance illegal drug trafficking;
  • commentary on striving towards a P3 with financial institutions for financial crime mitigation;
  • plans to develop more cooperative efforts with other countries to address illicit finance;
  • Analysis on trends in illicit finance using digital currencies (called cryptocurrencies) in respect of cyber crime; and
  • an analysis on how to leverage technology to get better at financial crime.

Financial Inclusion Tech

There is also a plan to create technology to establish a money services business to facilitate the transfer of money to Somalia. The Somalia pilot project will be used to try to find a way in which the US government can lead the way in addressing financial inclusion and provide banking in high risk areas with compliance with financial crime law.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

Pope lays out his plan to take down the Mafia and deal with corruption globally

By Christine Duhaime | August 6th, 2017


The Vatican’s justice branch has released its statement emanating from its recent anti-Mafia meeting with global law enforcement agencies to take-down the Mafia around the world through excommunication, if necessary.

The Pope believes that he can make a difference in eradicating the Mafia and transactional criminal organizations through the reach of the Catholic Church. The Catholic Church has committed to use its reach to address, in particular, countries that are rife with corrupt persons that cause suffering as a result (where for example the rule of law does not prevail). Interestingly, the Pope advocates that, as part of the anti-Mafia and anti-corruption movement, that countries be called upon to respect human rights treaties and to fight indifference of the law.

A new group was established to take on the Mafia and corruption and its goals include:

  • Define the Mafia so that people understand it, and explain the relevance of the rule of law, and in particular the Palermo Convention;
  • Help foster a culture globally of respect for the law;
  • Teach about the consequences of corruption;
  • Envourage International agencies to follow international treaties on corruption and organized crime;
  • Tell the stories of victims of the Mafia and of corruption so that people understand the harm that comes to regular people;
  • Locate and foster relationships with institutions and thought leaders in the space; and
  • publish magazine, stories, newsletters and hold conferences to address the issues.

On June 15, the International Consultation Group for justice, corruption, organized crime and mafia, part of the Vatican dicastery for Promoting Integral Human Development, organized an International Debate on Corruption. The event, hosted in collaboration with the Pontifical Academy for Social Sciences, drew some 50 participants from all over the world, including anti-mafia and anti-corruption magistrates, bishops, Vatican officials, representatives from the U.N. and various States, heads of movements, victims and ambassadors.

The Mafia take-down is, the Vatican stated, our collective moral duty.

On July 15, 2017, (summarized here), the Pope said that taking down the Mafia and those who support them, is necessary to save humanity.

The reference to the Palermo Convention and the Mafia is no accident – that is the international treaty dealing with global anti-money laundering law that is the basis for the criminalization of moving, dealing with, accepting etc. proceeds of crime from one country to another, which prohibits banks from wiring proceeds of crime internationally. The undercurrent of the meeting is that countries are not adhering to anti-money laundering law to shut down organized criminal activities.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

BTC-e was the Bitcoin exchange for 95% of global ransomware extortions

By Christine Duhaime | July 30th, 2017

According to tracing that was revealed this week at the Black Hat USA Conference, BTC-e was the Bitcoin exchange that serviced over 95% of all the ransomware extortion payments globally since 2014. Researchers wrote scripts that extracted payments to Bitcoin wallet addresses to determine what exchanges was used for extortion payments. The research also showed that ransomware extortion payments exceeded US$2 million per month in 2016, its most lucrative year.

The corporate entity behind the BTC-e Bitcoin exchange was indicted this week by the US as was its director, officer and founder, Alex Vinnik, who was arrested in Greece. He will be extradited to the US to face charges that include money laundering and running a MSB without the requisite AML registration and policies and procedures.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

US continues its take down of Bitcoin entities with indictment of foreign Bitcoin exchange that “banked” many global cyberattackers and processed $9B in payments

By Christine Duhaime | July 28th, 2017

The US continued its take down of Bitcoin companies this week with the unsealing of an indictment against BTC-e and Alex Vinnik, and his arrest in Greece. The Indictment against Vinnik and BTC-e was obtained in January 2017, and was sealed until now so that he could be located internationally and arrangements made to effect his arrest. The Defendants are charged with operating an unlicensed MSB and 16 counts of money laundering.

According to the indictment, BTC-e operated an unlicensed MSB since 2011 that processed several billions of dollars worth of payments in digital currencies and acted as a money laundering service for cyber-criminals around the world. Vinnik is alleged to be the founder and controller of BTC-e. More particularly, BTC-e is alleged to have moved money and provided wallets (effectively to have “banked”), via Bitcoin, international bad actors who were engaged in ransomeware cybercrimes that demanded extortion payments in Biticoin.

It also allegedly banked criminals who were engaged in international drug trafficking, weapons dealing and it allegedly provided Bitcoin services to a number of corrupt public officials, although the indictment does not identify which public officials used the Bitcoin exchange. Allegedly BTC-e had no anti-money laundering controls, policies or procedures in place. Many Bitcoin exchanges provide deposit taking services for customers by virtue of the fact that they take in deposits into their bank accounts without having a bank licence and in that sense, are said to provide “banking” services, in addition to currency conversion services.

BTC-e is alleged to have accepted a significant number of transactions from the US although it advertised that it did not. It is not known where BTC-E operated as it advertised that it was in Bulgaria but was incorporated in the Seychelles and had companies in Russia, France, Singapore, BVI and New Zealand. BTC-e had 700,000 customers globally. It was Russia’s most popular digital currency exchange and over the course of its history, it received over 9 million Bitcoin worth over $18 billion. According to the indictment, BTC-e was the exchange for Liberty Reserve, which was taken down in 2013 by the US government, and many of the same people allegedly used both services.

In order to deflect law enforcement, BTC-e is alleged to have posted comfort statements on its website that were untrue, such as that it verified the identity of its customers when they were onboarded and that it did not accept funds from US persons. In essence, it is alleged that the exchange made statements about anti-money laundering compliance that were completely untrue in order to lure customers to do business with it, suggesting that it was law-abiding when the US government alleges that it was not.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email