Digital currency ATMs used for drugs and human trafficking: GAO

A new report has recommended that the US government strengthen its oversight of digital currency ATMs to curb their alleged growing use in drug and human trafficking activities. The report by a US Congress-linked agency blamed lax regulations for ATM operators, saying they make it easy for criminals to convert illicit cash into digital currencies and then send them around the world.

Digital currencies are increasingly being used for drug and human trafficking, both in the United States and globally, according to the US Government Accountability Office (GAO) report. And while there have been several measures to counter this vice, ATMs have largely been left to operate with minimal supervision, the GAO said.

GAO is a US government agency that provides audit and investigative services for the US Congress. Known as the watchdog of Congress, it publishes about 900 reports a year, most of which are at the request of members of Congress and others are general annual reports on key issues.

In its report on digital currencies, the GAO observed that US authorities are doing the bare minimum to stamp out ATM-related crime. Although ATM operators are required to register with the Financial Crimes Enforcement Network (FinCEN), they are not required to consistently report their specific location.

“This limits the ability of federal agencies to identify kiosks in areas that have been designated as high risk for financial crimes and may involve human and drug trafficking,” the report said.

To curb the use of digital currency ATMs in human trafficking, the GAO has suggested that FinCEN and the Internal Revenue Service (IRS) team up to better police the sector.

The GAO is not the first agency to recommend stricter regulations for ATMs. Last year, the New Jersey State Commission revealed that it had studied the industry for five years and found that criminals were targeting ATMs for financial scams and suspicious transactions. Later that year, the Drug Enforcement Administration revealed that ATMs are increasingly being used to launder drug proceeds.

The GAO report found that ATMs are used more for sex trafficking than for labor trafficking. In its study of 27 platforms in the online commercial sex market, the agency found that 15 of them accepted payments in digital currency.

Another study cited by nonprofit Polaris put the number at 23 out of 40 markets. He also found that digital currencies were favored as payment methods as credit and debit card companies are more strict about using their services.

In the drug trade, the GAO noted that digital currencies have also found many followers. Although authorities dismantled Silk Road and imprisoned founder Ross Ulbricht, criminals continued to operate in smaller markets that were harder to track and capture. They still rely quite heavily on digital assets as their primary means of payment.

The GAO made two recommendations, the first to the IRS, urging it to review the money services business registration requirements for ATM operators. He also recommended that FinCEN require ATM operators to submit their kiosk locations and update that information if operating conditions change to allow for easy monitoring.

And while the GAO is calling for tougher ATM regulations, another federal agency has issued a public alert about a new form of ATM scam. The Federal Trade Commission claimed that the new scam involved three key elements: the impersonator, a digital ATM, and a QR code.

In some versions, the scammers pose as public officials and law enforcement officers who call their victims and demand some form of payment. In other cases, they present themselves as romantic conquests from dating apps or even representatives of lottery companies who tell their victims that they have won some sort of prize.

They then instruct the victim to withdraw money from the bank and deposit it in a digital currency ATM. The crooks then send a QR code linked to their wallet to the victim, and once they scan it on the ATM, the crooks receive the digital currencies.

“Here’s the main thing to know: No one from the government, law enforcement, utility company, or price promoter is ever going to tell you to pay them in cryptocurrency. If someone does, it’s it’s a scam, every time,” warned the FTC’s Cristina Miranda.

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About Ruben V. Albin

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