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Spanish Police: Bitcoin ATMs a Blind Spot for Money Laundering Laws

Spanish law enforcement pointed out that Bitcoin ATMs show a gap in European Union’s anti-money laundering regulation.

Spanish law enforcement pointed out that Bitcoin (BTC) automated teller machines (ATMs) show a gap in European Union’s Anti-Money Laundering (AML) regulations, Bloomberg reports on July 11.

Per the report, Spanish police uncovered a local gang that used Bitcoin ATMs to transfer more than 9 million euros ($10 million) for drug traffickers in Colombia and other countries. 

Bloomberg cites anonymous representatives of Guardia Civil (a type of Spanish law enforcement) alleging that the group hired two machines from trading platforms and installed them in an office in Madrid.

The office in question masqueraded as a center for remittances and cryptocurrency trading. The group reportedly used the center to transfer money from bank accounts to trading platforms to top up the ATMs with digital assets. Cryptocurrencies obtained this way would allegedly then end up being sent to the aforementioned drug traffickers.

Police also reportedly seized the two Bitcoin ATMs, four cold wallets, and 20 online wallets. Bloomberg further notes that prosecutors are now trying to prove a correlation between the ATMs and the confiscated digital assets.

As Cointelegraph reported at the beginning of June, the city of Vancouver, Canada, is considering banning bitcoin ATMs due to money laundering concerns.

On the other hand, earlier this month Canadian exchange Coinsquare announced that it has acquired software allowing traditional ATMs to sell cryptocurrencies.

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$515 Million in Bitcoin Spent on Illicit Activity This Year

$515 million in Bitcoin has been spent on illegal activities in 2019, but this only accounts for 1% of total BTC transactions.

Recent research by Chainanalysis suggests that the amount of bitcoin (BTC) spent on illegal transactions this year could hit a record high of $1 billion, even as the ratio of illegal to legal transactions is shrinking, according to a report by Bloomberg on July 1.

As per the report, the total flat value of BTC spent on illegal activity so far this year is thought to be $515 million. The research suggests that by the end of the year, this figure will double to reach $1 billion.

However, the amount of BTC spent on illegal services as opposed to legal ones is on the decline. Chananalysis executive Hannah Curtis says that just 1% of BTC activity this year is illegal activity, which is down from 7% in 2012.

As per the report, the $515 million spent on illegal activities was used in transactions on the dark web: a small subsection of the deep web, which is in turn subsection of the internet that doesn’t appear in search engines (e.g. Google).

The largest illegal dark web marketplace for spending BTC is reportedly “Hydra.” BTC is apparently the cryptocurrency of choice on such marketplaces, and Monero (XRM) comes in second, according to the report. Oftentimes, these marketplaces are involved in the distribution of drugs and/or illegal pornography

As previously reported by Cointelegraph in April, for instance, two men behind the dark web marketplace NextDayGear pled guilty to selling steroids and controlled substances and to money laundering. The website apparently offered injectable and oral steroids, as well as Xanax, Valium and Viagra as a means to stymie unwanted side effects.

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Silk Road: Dealer Fights Police over Bitcoin (BTC) Worth Millions b

Vancouver Police Department Accused of Withholding $2.5m in Bitcoin

Despite the fact that the Bitcoin-friendly Silk Road in its original form is now long gone, there still remain court cases on the subject matter.

For those who missed the memo, the Silk Road was the name of a popular, infamous online marketplace (situated on the deep/dark web) that allowed its users to trade an array of different goods, mostly narcotics, for BTC. However, it was shut down after U.S. authorities managed to capture those involved, including Bitcoin pioneer and now-convict Ross Ulbricht, who many in the cryptocurrency believe should not be held responsible.

Anyhow, back to the matter at hand. As reported by prominent Canadian media outlet CBC this week, an individual going by “D.A.L.” is accusing the Vancouver Police Department of mistreating assets pertaining to his case.

D.A.L., who has already served his time for trafficking mostly marijuana, claims that the VPD should not continue to have access to a laptop hard drive, reported having millions worth of Bitcoin stored on it because earlier this month, the British Columbia Supreme Court ruled that it should be returned to the owner.

The police believe that the Bitcoin found on the hard drives, seized in 2013, are the proceeds of the sale of illicit goods on Silk Road, and have thus kept it. D.A.L., on the other hand, has begged to differ, stating:

The police committed fraud by deliberately failing to advise the justice of all the pertinent facts. The police deliberately and fraudulently misled, not only the justice who approved their application, but also counsel.”

The Bitcoin in question amounts to 226.44 coins, which is valued at over $2.5 million U.S. as of the time of writing this. It is no small sum, that’s for sure. But back then, the cryptocurrency may have only amounted to a few thousand dollars. Considering that the cost of living in Vancouver, which is where D.A.L. and his family reside, is sky-high, it is no surprise that he is fighting for the money that he believes he deserves.

If courts find that the Vancouver Police Department’s claim of upholding justice to keep the hard drive is unbacked, D.A.L. is likely to receive the Bitcoin back. However, with the ever-changing state of the cryptocurrency markets, the value of said coins may be drastically different then than it is now.

D.A.L.’s case is very different than other Silk Road traffickers in that he claims that he should have possession of the Bitcoin, while other cases have seen the suspects lose their assets, which often amount to millions worth of different digital assets, forever.

Photo by Osman Rana on Unsplash

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Tracking Drugs on Blockchain: How Significant Is Walmart and IBM’s New Collaboration?

The FDA needs to track drugs by 2023, but will it go with blockchain?

Walmart is no stranger to distributed ledger technology (DLT). Back in October 2016, the multinational food retailer began collaborating with IBM on a blockchain-based system that could identify and flag recalled foods. Since then, it has dived into a number of patents and trials — e.g., tracking meat in Chinatracking delivery drones, patenting smart deliveries and tracking live food in the United States.

And in addition to several other U.S. patents and global initiatives, Walmart has recently announced its latest foray into applying blockchain technology. This is its collaboration with the Food and Drug Administration, which — in conjunction with IBM, Merck and KPMG — will see it working on the development of a proof-of-concept blockchain for identifying and tracking prescription drugs.

As with Walmart’s other blockchain-focused experiments, there’s a chance that this latest endeavor won’t progress beyond the trial stage and that the parties involved could move onto other things once the pilot has been completed.

However, given that the pilot has been initiated under the terms of the Drug Supply Chain Security Act (DSCSA) and that it calls for the creation of “an electronic, interoperable system to identify and trace certain prescription drugs” by 2023, there’s every chance that blockchain technology will be involved to some degree in the final system that’s eventually established.

What is it and how will it work?

In February, the Food and Drug Administration (FDA) announced the DSCSA Pilot Project Program and also invited interested companies to submit applications to participate. As the accompanying press release makes clear, the aim of the program is to improve the tracing and authentication of prescription drugs, and to ensure that counterfeit or illegal drugs don’t enter the supply chain. FDA Commissioner Scott Gottlieb said in February:

“Using new innovations, we believe we can improve the overall security of our closed system and improve our ability to prevent the introduction of illegitimate products, better detect the introduction of illegitimate products, and enable stakeholders and the FDA to respond more rapidly when such products are found.”

At the time of the initial announcement, the FDA was open to a variety of proposals involving several new technologies. But it would appear that proposals focusing on blockchain-based technology must have been particularly convincing — because in June, the likes of Merck, Walmart, KPMG and IBM began announcing that they would jointly be working with the FDA on a trial revolving around the use of blockchain.

As pharmaceutical giant Merck stated in a press release, each participant will contribute their respective skills and expertise to the new pilot, which “will create a shared permissioned blockchain network that allows real-time monitoring of products.” Asked why blockchain is likely a better proposition for tracking drug supplies than other new technologies, Merck’s director of global communications, Charles McCurdy, told Cointelegraph:

“A permissioned blockchain network has the potential to create greater transparency, reduce the time needed to track and trace inventory, help determine the integrity of products (such as whether they are kept at the correct temperature), prevent and remove counterfeit drugs, and more.”

KPMG — another participant in the pilot — is equally enthused by the promise shown by blockchain in the context of drug supply chains, and its U.S. blockchain leader, Arun Ghosh, explained to Cointelegraph via the email that DLT will help simplify such chains, which can sometimes operate in a convoluted manner.

“Pharmaceutical supply chains are complex given the numerous entities involved and increased reliance on the use of contracted manufacturers/packagers, re-packagers, and 3rd Party Logistics (3PL) providers. Additionally, joint-collaborations and co-licensing partnerships between Marketing Authorization Holders (MAHs) result in the need to share information and operate from an immutable record. Blockchain is a good fit for tracking the supply of prescription drugs because it provides a private, permissioned network and immutable database. In other words, multiple parties can access the same data in their secured, respective environments (i.e. their ‘node’).”

Moving beyond the actual participants in the DSCSA Pilot Project Program, figures within the blockchain and logistics industry also agree that DLT is an ideal fit for tracking the movement of pharmaceuticals, largely because of its immutability and interoperability. Raja Sharif — the CEO of medical blockchain company FarmaTrust, told Cointelegraph that:

“Blockchain provides the characteristics of immutability and incorruptibility which acts as an important safeguard against tampering with the chain. Which is all important to prevent counterfeits and substandard drugs entering the pharmaceutical supply chain. Another characteristic of blockchain is the ability for it to aggregate data from different systems efficiently.”

Of course, the word “blockchain” is being used in an increasingly wide variety of contexts, often when DLT doesn’t play a central or even a significant role in a system or a platform with which it’s being associated (e.g., in the case of Visa’s new ”blockchain-based” system).

Related: Visa Set to Join the Expanding Field of Blockchain-Based International Payment Providers

However, in the case of the FDA’s latest pilot, the platform being built will indeed be a (private) blockchain, rather than some other system that tangentially uses only one or two features of blockchain technology. In this case, however, the project does focus on using DLT, as confirmed by McCurdy, who added that the ledger being developed would record such information as “the time and dates a product or products pass through certain checkpoints, temperatures at which they are stored during transport, etc.”

Not only would the new ledger record important info for confirming authenticity and quality, but McCurdy explained that it would do so in accordance with distributed, cryptographically secure principles:

“It would store information such as the above in an immutable format (a permissioned, distributed, networked ‘ledger’) that would guarantee to those who have permission to use the system that the information is connected to the specified product. Specific uses are to track medicines and vaccines through the supply chain from manufacturer to customer.”

Also, according to KPMG’s Ghosh, the pilot will focus specifically on using blockchain tech to make the whole process of tracking pharmaceuticals more efficient and more reliable:

“The pilot is intended to explore how blockchain technology can help reduce the amount of time needed to track a product, make it faster to retrieve more accurate drug distribution information, increase accuracy of information shared among network members and prevent illegitimate products from entering the supply chain.  Location information, in the form of a Global Location Number (GLN), the serialized product identifier, and the event (for example, shipping, receiving, dispensing, destroying) would be stored on the blockchain and viewable based on permission.”

As a concrete example, the pilot would involve newly manufactured drugs being given registration numbers and recorded on the blockchain. From there, they would be shipped to distributors and retailers, and at each point in the supply chain, all movement would be registered on the ledger, while receivers of the drugs would be able to check the incoming drugs against records kept on the distributed database.

As Sharif explained, such a system would make it very hard to surreptitiously pass off counterfeit drugs as the real thing:

“Since in the US all new labels need to be registered and in Europe they are issued by the central authorities, it’s going to be difficult for criminals to infiltrate the pharmaceutical supply chain. Not only that, but if two unique labels are found in the system then automatic alerts will go to the designated authorities or personnel. A further protection is that if a particular batch or label should be in Sweden but appears in Canada, for instance, then this will also be suspicious.”

In fact, things don’t stop there, because not only would counterfeiters have to duplicate the packaging and registered info of legitimate drugs, but they would need to gain access to the permissioned ledger in order to do this. On top of that, they would also have to take the legitimate drugs out of the supply chain, because, as Sharif warned, the existence of drugs with duplicate info would likely be noticed by those with access to the ledger.

Good, but…

In the context of drug supply chains, the potential shown by blockchain technology is evidently large. That said, there’s no guarantee that anything permanent will come out of the FDA-led pilot. because, as McCurdy informed Cointelegraph, the blockchain-focused project is only one of 20 that the FDA has greenlighted as part of the Drug Supply Chain Security Act program. There is, then, a chance that the FDA ends up favoring a pilot that doesn’t harness blockchain technology in any appreciable way.

Indeed, as the FDA explained to Cointelegraph, it has been — and continues to be — resolutely open to other technological means of tracking the supply of prescription medicines, including those that don’t make any use of blockchain. FDA spokesperson clarified that:

“The FDA is actively exploring all potential technologies that will help supply chain trading partners trace drugs as they move through the supply chain, enhancing the agency’s ability to help protect consumers from exposure to drugs that may be counterfeit, stolen, contaminated or otherwise harmful. Blockchain is one of many technologies that is being researched for product tracing and verification. FDA is open to considering all viable technologies and methods through the DSCSA Pilot Project Program.”

Nonetheless, it’s worth pointing out that the Drug Supply Chain Security Act necessitates that the FDA implements an interoperable system for tracing drugs by 2023. Because of this need for interoperability, the final system has to be open to all parties working within the drug supply chain, a requirement that a blockchain-based platform would fulfill very well. This, at least, is what Mersk and KPMG believe:

“The main objective of the project is to explore how blockchain technology can be used to identify, track, and trace prescription medicines and vaccines as they enter and move throughout the U.S. supply chain.”

Ghosh is also hopeful that the new pilot will demonstrate the power of blockchain, because while he accepts that the trial will be relatively small in scale, he also affirms that DLT is just the thing the pharmaceutical industry has been waiting for:

“In this case, creating interoperability within the pharmaceutical supply chain is a challenge where blockchain is extremely well-suited. However, like any emerging technology, we must start with what I call ‘controlled explosions,’ or small projects with a limited blast radius that allow us to measure and test the real business impact before scaling.”

In other words, even if there’s no guarantee that the FDA won’t end up going with a nonblockchain-based system, the early signs indicate that the platform being developed by IBM, Walmart, KPMG and Merck has a good chance of satisfying the criteria the FDA is likely to employ in choosing its winning candidate. And the fact that such names have signed on to the new pilot would suggest that they really believe in its potential.

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US FDA Partners With IBM and Walmart to Improve Drug Supply Chain Using Blockchain

The U.S. Food and Drug Administration teamed up with four major global companies to boost drug supply chains with blockchain.

The United States Food and Drug Administration (FDA) has partnered with four global high-profile firms to apply blockchain in the drug supply chain, tech media outlet ZDNet reports on June 13.

The FDA has reportedly teamed up with companies including IBM, Walmart, Big Four auditor KPMG, and the world’s oldest pharma firm Merck in order to build a proof-of-concept (PoC) blockchain network to share and track data on distribution of prescription drugs.

According to the report, the initiative is connected with the United States Drug Supply Chain Security Act (DSCSA) and intends to assist the FDA — as well as other pharmaceutical organizations — in optimizing the supply chain of pharma products.

Specifically, the project’s participants aim to speed up the process of tracking inventory, as well as providing accuracy of data shared between members of the supply chain and the integrity of products.

Mark Treshock, IBM’s global solutions leader for Blockchain in Healthcare & Life Science, emphasized that blockchain technology not only enables an efficient basis for tracing pharma products on supply chain, but also allows for the tracking of connections between network participants without revealing the data itself.

The FDA first revealed its plans to apply blockchain technology to enable a digital drug supply chain platform in February 2019, expecting to launch the technology-enabled platform by 2023.

Recently, Cointelegraph reported that as much as 44% of healthcare organizations in Europe have never heard of blockchain applications’ benefits. Meanwhile, EMD Serono, the North American biopharmaceutical business of Merck KGaA, has recently teamed up with blockchain firm Nebula Genomics to create a blockchain platform for generating and sharing genomic data.

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German Police Seize Six Figures in Crypto From Suspects Involved in Dark Web Site

The Wall Street Market, the world’s second largest dark web market, was shut down with six figures in crypto seized by police.

German police, along with Europol, have shut down servers of a dark web marketplace and seized six figures in crypto from the arrested suspects, Europol announced on May 3.

The Wall Street Market, reportedly the world’s second-largest dark web market, has been shut down by the German Federal Criminal Police under the authority of the German Public Prosecutor’s office.

According to the report, German authorities arrested three suspects and seized over 550,000 euros ($615,000) in cash  along with bitcoin (BTC) and monero (XMR) in six figure amounts (actual value unspecified) as well as several cars, computers, hard drives and other items.

Europol noted that the Wall Street Market had more than 1.15 million registered users, with 5,400 of them registered as sellers of drugs, stolen data, fake documents and malicious software.

In the same announcement, Europol also officially announced that Finnish Customs also staged a takedown of dark web marketplace Valhalla, also known as Silkkitie. According to Helsinki Times, the authorities have also made a “significant bitcoin seizure,” from the website, which was operational in the anonymous Tor network since 2013.

In other crime news, two men recently plead guilty in the United States for illicitly selling steroids and controlled substances and laundering millions of dollars in cryptocurrencies and Western Union payments.

As well, in early April a court in Toronto ordered an online drug dealer to pay his entire $1.4 million bitcoin holdings to the state in what is reportedly Canada’s largest ever forfeiture.

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US: Two Men Plead Guilty to Selling Drugs for Crypto and Laundering $2.8 Million

Two men plead guilty for illicitly selling steroids and controlled substances and laundering millions of dollars in crypto.

Manhattan District Attorney Cyrus R. Vance announced on April 23 that two men plead guilty for illicitly selling steroids and controlled substances and laundering millions of dollars in cryptocurrencies and Western Union payments.

Callaway Crain, 35, and Mark Sanchez, also 35, were allegedly behind the darknet website “NextDayGear,” and also manufactured some of the substances they sold. Among their products were reportedly injectable and oral steroids, as well as medication to counteract the adverse effects of their use, including Xanax, Valium and Viagra.

Per the announcement, the defendants shipped over 10,000 packages across the United States, generating over $2.3 million in revenue between 2013 and 2018. They purportedly used Western Union and cryptocurrency transactions, which were laundered and converted to cash.

The two men reportedly purchased steroids, precursor chemicals and other products from China and other countries, which they then marketed and sold, often under brand names they created. Among their customers were reportedly an NFL football player, a college football player, a professional volleyball player, fitness trainers, police officers and members of the armed services deployed overseas.

Crain and Sanchez pleaded guilty to money laundering and criminal sale of a controlled substance, with the promises of prison sentences ranging from two and a half to seven and a half years. They are expected to be sentenced on July 12 this year. Attorney Vance commented:

“Online drug sellers who do business in New York should take note: whether you’re operating in plain sight or in hidden corners of the dark web, my Office has the skills and resources to follow the money, shut down your business, and hold you accountable.”

The announcement claims that this was the first conviction for money laundering involving cryptocurrency that took place in New York. The announcement also points out that on April 16, New York state prosecutors also indicted three men for the sale of illicit drugs on the dark web and laundering $2.3 million in cryptocurrency.

As Cointelegraph reported in January, the value of bitcoin (BTC) sent to darknet markets increased by 70 percent during the last year.

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FBI Has 130 Ongoing Crypto Cases, a ‘Small Sliver’ of All Investigations, Agent Says

FBI agent Kyle Armstrong said the Bureau has 130 ongoing crypto-related cases, with dark web drug sales a particular concern, Bloomberg reported Wednesday, June 27.

Speaking at the Crypto Evolved conference in New York on Wednesday, the supervisory special agent said the number represented “a small sliver,” of the FBI’s activities, which number “thousands of cases.” The agency has nonetheless noticed an increase in illegal activity facilitated by cryptocurrency payments, he said.

The 130 “threat tagged” files related to crypto span a gamut of crimes, including human trafficking, kidnapping, ransomware attacks and illicit drug sales.

This latter has become a focus for the Bureau, according to Armstrong, highlighting the opioid epidemic in the U.S. He considered the dark web to be a factor in enabling drug abuse, saying that 10 percent of global drug users make their purchases on illegal online marketplaces.

Armstrong’s figure of 10 percent is notably not higher than statistics released by an older Global Drug Survey from 2017, which found the global median for the percentage of drug users who use the darknet to be 10.1 percent. 90 percent then, continue to purchase illicit substances via more ‘traditional’ methods.

Armstrong, who manages the three-year-old Virtual Currency Initiative for the FBI as it relates to money laundering activities, said that while the underlying blockchain technology makes it easier for investigators to trace cryptocurrencies than cash, the relative anonymity of transactions can prove an obstacle.

In February, a two-year study of the dark web ecosystem claimed that Bitcoin may in fact be losing its cachet as the most popular currency on dark web markets, seemingly due to consumers’ annoyance at network traffic and high transaction fees.

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Indian Government Think Tank Trials Blockchain to Combat Fake Meds

An Indian government think tank is working on a blockchain solution aimed to combat the country’s roaring counterfeit drugs trade.

The National Institution for Transforming India, known as NITI Aayog, aims to have a proof-of-concept (PoC) of the solution completed by the end of 2018 and begin rolling it out next year, according to local news source Factor Daily,

An anonymous NITI Aayog official was cited as saying:

“We are all taking those [fake] medicines and I am sure people are dying. One way to reduce that is put the entire supply chain on the blockchain.”

According to a World Health Organisation (WHO) report, India produces 35 percent of counterfeit drugs that are sold globally. Furthermore, the Associated Chambers of Commerce and Industry of India (Assocham), states that around “60-70 percent of dietary supplements being sold across India are fake, counterfeit, unregistered and unapproved.”

NITI Aayog hopes to counter this state of affairs by generating a unique ID number for each medicine, which will be tracked through the supply chain on a blockchain, the official explained. With the system, a consumer or business can access the history and source of the drug by scanning a QR code or barcode on the medicine.

The project has reportedly got the green light from the country’s pharmaceutical industry, despite some cost concerns.

Dilip G. Shah, secretary general of the Indian Pharmaceutical Alliance, a lobby group, said:

“Fake drugs are a concern and, if blockchain can help the industry get rid of the problem, we are up for it.”

The project is also in line with the Indian governments’ vision to explore blockchain technology “for ushering in [a] digital economy,” as stated by the country’s finance minister Arun Jaitley during his budget speech in February.

NITI Aayog also stated earlier this year that it is developing other proofs-of-concept to explore blockchain tech in sectors including education, health and agriculture.

Rupee and drugs image via Shutterstock

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