EU’s Money Laundering policy can be broken using Bitcoin ATMs, claims Spanish Police

  • 11 July 2019, Thursday, 16:40

Bitcoin’s tryst with regulatory authorities can be summarised as a game of cat and mouse.

Created to subvert the financial system tethered to and controlled by sovereign powers, Bitcoin broke out as a rebellious tool that was soon shackled by undue regulations. However, as recent signs indicate, the top cryptocurrency might have pulled a fast one.

The prey becomes the predator. According to Bloomberg, Bitcoin ATMs that were used for alleged drug payments brought to light a loophole in the European Union’s Money Laundering controls, citing information from Guardia Civil, a Spanish Police unit.

Cryptocurrency trading platforms, or ATMs for that matter, do not have to adhere to the same rules as money platforms hence the vetting rules are skewed.

Earlier in May, the European Union Agency for Law Enforcement Cooperation [EUROPOL] reported that the Guardia Civil arrested and charged over 10 people involved in drug pedaling operation where the money was laundered using cryptocurrency. The accused transferred fiat for crypto to hide the “origin of the proceeds,”using crypto ATMs.

All in all, the criminal unit managed two cryptocurrency ATMs, in Madrid, in addition to a crypto-exchange in order to convert cash to digital assets. Over €9 million was transferred between their financial set-up in Span and their drug operation in Latin American countries. The report added that the use of these cash-to-crypto machines was “critical.”

The operation, from end-to-end was quite complex. Citing information from the Spanish police, the report stated that Bitcoin would be added on their ATMs, by sending money from the bank account to the trading startup. On the receiving front, the accomplices would register using false information deposit cash and purchase digital assets and thereby transferred to drug traffickers.

Employing the use of the EU money laundering loophole, the criminals deposited cash in Spanish banks, used it to purchase cryptocurrency which was then sold, without anyone batting an eye. Showing how even the most regulatory aware jurisdictions in the world can be circumvented by virtual currencies, the Bitcoin-money laundering debate is firmly thrown back into the mix, which could lead to hampering guidelines.

To add fuel to the simmering Spanish fire, the country’s Supreme Court recently ruled against Bitcoin being a form of “legal electronic money.” In the court’s opinion, the cryptocurrency was a form of asset and hence cannot be used as a repayment tool.

However, the Guardia Civil stated that this ruling allows it to prod deeply into the prospect of regulating the cryptocurrency market.

Bitcoin ATMs, on the other hand, are only exploding in number. In July 2019, the number has crossed over 5,000, an increase of 48.3 percent in a year. While the United States has the most with over 3300, Spain does not rank far behind hosting just under 90 Bitcoin ATMs in the country, with two of those being involved in money laundering.