Tracfin tracks cryptocurrency-related fraud

Cryptocurrency-related fraud occupied Tracfin the most in 2021. The focus of the financial intelligence service linked to Bercy, in terms of cryptocurrencies, was mainly focused on monitoring the financial flows resulting from cyber attacks by ransomware, Tracfin says in the his report made public on July 27. The cell of the Ministry of Economy notes a professionalization of these malicious acts, which affect all sectors of activity.

cases of ransomware are piling up

As ransom demands are made exclusively in cryptocurrencies, Tracfin established a unit of analysts in 2018 that specializes in exploring public blockchains. The latter track the crypto-asset flows linked to the payment of a ransom. In 2021, Tracfin received 66 reports of suspicious transactions related to ransomware, up from 28 in 2020 and 19 in 2019. A multiplication of more than three in two years.

The service sent ten investigation files related to a ransomware attack in 2021, including eight to the “J3” section of the Paris prosecutor’s office, which centralizes these procedures. An enhanced partnership has also been established with this court. The files transmitted concern ransoms ranging from 11,000 euros to 1.5 million euros.

attention to tax evasion

Tracfin’s activities involving cryptocurrencies are also about tax evasion. In most cases, these are account omissions or capital gains from the sale of digital assets. The service draws attention to the fraud potential relating to NFTs, “in the absence of precise tax qualification” of these non-fungible tokens.

Their “could be used to underestimate tax returns”for example considering that they do not fall under the tax regime on capital gains from the sale of digital assets, or even “use the high volatility of art market prices to underestimate the selling price of an NFT between two companies owned by the same beneficiary in order to declare a loss rather than a gain”observes Tracfin.

Fight against money laundering: the rise to power

Another source of concern and cause for “active standby” for the Bercy unit: decentralized finance, which “develops outside any regulatory framework in terms of LCB-FT” (fight against money laundering and terrorist financing).

This observation is important. Indeed, as digital asset providers are subject to the LCB-FT system, under the 2019 PACTE law, the number of suspicious transaction reports they submit has been multiplied by 8.5. The reporting activity of these industry providers increased by 259% in 2021, which can be explained by the increase in the number of PSANs registered with MFA, the “greater power of LCB-FT systems within these plants”and market growth “with, incidentally, people looking to exploit possible LCB-FT vulnerabilities in the industry”acknowledges the activity report.

Tracfin itself plays a role in the development of regulations. The service notes, for example, that its work on cryptocurrency payment to child pornography sites hosted on the darknet has helped align the review of European fund transfer regulations, in terms of crypto-assets, with the French regime.

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