Leaked FBI report reveals how Illegal Transactions are being Tracked

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A 270GB dump by Blueleaks exposes a report prepared by the FBI's Washington field office. The leaks reveal tricks the FBI uses to track criminals laundering cryptocurrency on the dark-net. The report mainly focuses on criminals converting Bitcoin to Monero. Monero is a privacy focused coin and does not allow people to track transactions.

Identifying dark-net Transactions

The FBI document that leaked details three cases in which the Panamanian cryptocurrency exchange was used. The Panamanian exchange calls itself an 'Instant' exchange and lacks KYC verification. The lack of KYC allows criminals to easily launder coins.

In January of 2020 the FBI had identified dark-net market actors linked to Apollon market. The FBI identified them because of a suspicious transaction MorphToken. The people linked to Apollon sent at least 11 Bitcoins worth approximately $80,000 to the exchange. The FBI used a 'Proprietary Software Tool' that analyzes financial transactions on the blockchain. MorphToken also provided an API that can be used to monitor transactions.

The FBI analyzed commission fees from bitcoin transactions conducted on Cryptonia. The tool kept analyzing transactions from May to September of 2019. This revealed a lot of assets that were associated with the market were sent to MorpToken. Every single transaction could be checked using MorphToken's API.

In November 2019, the FBI also identified at least four dark web vendors who sent Bitcoin drug sales proceeds to MorphToken.

The FBI report mentions that all transactions linked to dark-net actors had one pattern. MorphToken offers to convert to five currencies but all the dark-net actors chose Monero. This identification was noted in the FBI report.

Law enforcement assumes that dark-net actors ar4e not just hopping onto Monero for no reason. The intent is to cover tracks rather than diversifying their portfolio. Due to the FBI's policy, the Bureau rejected to comment on this story.

What is an instant Conversion?

Instant cryptocurrency exchanges allow people to exchange to other currencies quickly. The FBI highlights the lack of formal KYC (Know your customer) protocols in suck exchanges. MorphToken is one such exchange that lacks a lot of KYC elements. The exchange declined to comment on the leaked FBI report.

MorphToken is based in Panama, a region that has not implemented any regulations for Cryptocurrencies. Panamanian Law firm Kraemer and Kraemer stated that the region does not regulate any virtual currencies or exchanges.

Leaks such as the ones from Panama Papers mention how Panama has become synonymous with bank secrecy. The use of legal protections and corporate statures that shield the anonymity of tax evaders are a real problem.

Why can't Monero be tracked?

Monero's stealth comes from multiple cool techniques it employs. It features an autonomous regenerating and scrambled payment chain. Tom Robinson, chief scientist of British crypto compliance firm Elliptic commented on Monero. He said that he thinks it's not possible to pierce the cryptocurrency privacy bubble created by currencies like Monero.

He also mentioned that he does not expect to see blockchain monitoring-based compliance tools appear for Monero any time soon or ever.

The leaked FBI report also assessed one issue. As more successful cases of law enforcement tracing cryptocurrencies appear, more and more people will switch to XMR. The FBI is expecting anonymity-enhancing coins such as Monero to blow up in popularity in the next few years.

The FBI pointed to user posts on dark-net markets and forums that discuss coin laundering tactics. Many users were talking about MorphToken and its simple ability to cover the coins tracks. Other similar services that help users convert coins to Monero without KYC were also mentioned. Dark-net users called Monero the most resilient 'Anonymity-enhancing cryptocurrency' in circulation. MorphToken is one of eight Monero 'changers' talked about on the dark-web community forum Dread.

The advanced blockchain analysis firm 'Chainalysis' released a report on Monero. The report stated that Monero might become the cryptocurrency choice for criminals in 2020.

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