The Threat of Cyber-Laundering: An Evaluation of the Security Landscape and Vulnerability of Crypto Exchange

• In Event: Navigating the Nexus of Cryptocurrency Fraud, Cybercrime, and Regulatory Public Sentiment

Abstract

Innovations in money laundering have made the process even easier and more difficult for law enforcement to intercept. One such innovation has been dubbed “cyber-laundering,” which involves the use of cryptocurrencies. Cyber-laundering occurs in the context of the crypto exchange, the online money exchange businesses where individuals can exchange between fiat currency and cryptocurrencies. Cyber-criminals take advantage of security weaknesses within crypto exchanges to pseudonymously engage in the layering of illicitly obtained profits through various cryptocurrency transactions, and end with laundered fiat profits to continue their operations. While there have been growing calls for legislation regarding the regulation of crypto exchanges, the crypto exchanges and regulatory bodies have been at odds. While regulatory bodies want to impose more stringent policies, the crypto exchanges want to promote a freer economy for monetary trade and thus feel as though they are being punished for the actions of these cyber-criminals. Nevertheless, in the shadow of this debate is the question of how to prevent the threat of cyber-laundering. The goal of this research is to develop an analytical framework through the lens of situational crime prevention that can be used to assess the vulnerability of crypto exchanges to cyber-laundering.

Author

• Lauryn Krebs, University of Massachusetts Lowell