05/18/2024

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US Crypto Money Laundering Indictment Reflects Increased Enforcement Efforts

US Crypto Money Laundering Indictment Reflects Increased Enforcement Efforts

US prosecutors have charged a purported member of the Cartier luxury goods family with laundering hundreds of millions of dollars in drug profits using cryptocurrency, underscoring an increased law enforcement focus on this relatively new modus operandi. 

Authorities announced the charges on May 2 against Maximilien de Hoop Cartier, a singer and purported member of the famed Cartier family, and three Colombian co-conspirators, alleging they used an unlicensed cryptocurrency exchange to send drug profits from the United States to Colombia. 

Two other Colombian nationals who made up the network were also charged for conspiracy to import over 100 kilograms of cocaine into the United States. 

SEE ALSO: Digital Wild West: Latin America Unprepared for Crypto-Crime

Prosecutors said that the group disguised the origin of the money made from drug trafficking by using it to buy a cryptocurrency called Tether, then sending it to companies controlled by Cartier to convert the cryptocurrency back into US dollars. Once laundered, the money was wired to Colombian shell companies controlled by his three co-conspirators, prosecutors said. 

According to the indictment, the network laundered hundreds of millions of dollars since the beginning of Cartier’s involvement in January 2020, including an estimated $14.5 million between May 2023 and November 2023.

Cartier was arrested in February in Miami, while the five Colombian suspects were arrested in their home country in late April, according to a US Department of Justice press release. 

InSight Crime could not reach the defendants or their attorneys, and prosecutors did not respond to a request for comment.

InSight Crime Analysis

While the indictment shows the vulnerability of cryptocurrencies to criminal misuse in Latin America and the Caribbean, it also suggests a heightened awareness of the issue within law enforcement and a more concerted effort in tackling it.

Due to its decentralized nature and an absence of strong governmental regulation, cryptocurrency offers attractive money laundering opportunities for criminal organizations from the region. The lack of a strong regulatory framework has rendered Latin America unprepared for the growth of crypto-crime, which has been exploited by a range of criminal actors.

Financial crime expert Kenneth Rijock told InSight Crime that money launderers are drawn to cryptocurrency because it operates “outside of normal financial compliance pathways,” making transactions virtually impossible to trace.

SEE ALSO: Murder, Drugs, God and Crypto – The Downfall of Brazil’s Pharaoh of Bitcoins

He added that “changing the nature of the asset, repeatedly, to confuse and deceive compliance, which is looking for normal pipelines of funds transfer, usually results in a successful operation.” 

This lack of transparency negates law enforcement’s ability to follow the money. The region’s drug trafficking organizations often use virtual currencies to mask their supply chain payments. This is particularly true in the case of Mexican criminal organizations that produce synthetic drugs and import precursor chemicals from suppliers in China and India. 

However, this indictment suggests significant steps being made by law enforcement in tackling the issue. 

The US has led the effort against the misuse of cryptocurrencies. In 2021, it created the National Cryptocurrency Enforcement Team to “tackle complex investigations and prosecutions of criminal misuses of cryptocurrency.” 

Some Latin American countries have followed suit. In recent years, Colombian financial regulators have worked together to reduce the prevalence of money laundering through virtual currencies and strengthen the regulatory framework around crypto. In 2024, Mexico also introduced stronger regulations around cryptocurrency transactions.

Feature image: Tether, the cryptocurrency used by Maximilien de Hoop Cartier and conspirators to launder drug money. Credit: Corporate Financial Institute

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