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11 Jan, 2022 09:51

Crypto ATMs in hot water for alleged human & drug trafficking

Government report claims cryptocurrency ATMs need tighter regulation
Crypto ATMs in hot water for alleged human & drug trafficking

A report by the US Government Accountability Office (GAO) suggests tightening registration requirements for crypto kiosks, which are blamed for increased cases of human and drug trafficking.

The organization, which provides auditing and investigative services for the US Congress, has linked the use of crypto payments to facilitate illegal human and drug trafficking to crypto ATMs in a new study released on Monday.

As [crypto] market usage expands, FBI officials said they expect to see an increase in the use of virtual currency kiosks for illicit purposes, including for human and drug trafficking,” the report stated.

According to the GAO, which examined the use of cryptocurrencies in global trafficking operations, the ATMs are becoming increasingly popular for illegal transactions. They are less regulated than crypto exchanges, meaning transactions made via the kiosks are even more difficult to trace.

The agency claims that the lack of information about the kiosks and the activities performed through them is stalling law enforcement’s efforts to identify and stop criminals. For instance, although kiosk operators must register with the Financial Crimes Enforcement Network (FinCEN), they are not bound by law to regularly report the location of their ATMs. This “limits federal agencies’ ability to identify kiosks in areas that have been designated as high risk for financial crimes,” the GAO said. By introducing stricter regulation to the crypto ATMs, agencies will get a chance to have more information on their location and use, which will help identify “potentially illicit transactions.

The report urged FinCEN and the Internal Revenue Service (IRS) to join forces in reviewing the registration requirements for crypto kiosks and exchanges. According to the GAO, the agencies are to comply with the recommendation.

Overall, according to the GAO's findings, more than half of 40 large online “commercial sex markets,” which “may be used to facilitate sex trafficking,” accept cryptocurrencies as payment. It also found that 36% of all US Immigration and Customs Enforcement investigations that involved crypto were linked to drug trafficking, as well as a quarter of crypto-related investigations carried out by the IRS, and 85% of probes by the US Postal Service.

Drug cartels and transnational criminal organizations are increasingly using virtual currency because of its perceived anonymity and as a more efficient method to move money across international borders,” the report stated.

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