Organized crime groups in Japan are quickly adopting cryptocurrencies to launder money and conduct other criminal activities because of the anonymity digital assets provide. The local authorities are virtually helpless to deal with them because of different regulations across international jurisdictions.
An investigative report by Mainichi Shimbun has confirmed several transactions since 2016 involving a Chinese individual and members of a Japanese organized crime group.
The report quotes a senior official from the Financial Services Agency (FSA) as saying:
"It's nearly impossible for Japan to handle the problem alone. Even if trade is restricted to only domestic transfers or monitoring is enhanced, it's still not enough to counter money laundering. It would be best if all the group of 20 industrial and emerging nations and regions (G-20) would take the same steps toward prevention."
The report tracks the exchanges between the Chinese man and his Japanese contacts who meet at a bar in Tokyo's Akasaka district every month to pass information about digital currencies from a network of members-only blogs and social media.
"There were no problems," the Chinese man reportedly told the Japanese gang members as he handed over a USB drive containing information about all money laundering transactions using cryptocurrencies Zcash, DASH, and Monero.
Compiled since June 2016, the file shows the group’s capital totaling almost 30 billion yen ($274 million) after the laundering, with the latest transactions recorded in February this year. They total only 130 million yen ($1.19 million), the small amount being attributed by a gang member to the recent turmoil hitting crypto exchanges and the group’s wish to avoid any attention.
After the exchange, the group moved to an apartment building near the bar to their “base camp.” There, the gang members, mostly engineers and students in their 20s and 30s, work on their computers to convert the money to cryptocurrencies such as Bitcoin and Ethereum at local exchange operators.
One gang member said, "We have bases just like this all over the Tokyo area. The most important thing is to process the money in small amounts,” adding that all the equipment and personnel were supplied by the gang.
The FSA official commented:
"It's a typical money laundering scheme. In a way, I'm not surprised. If you are going to do something illegal, then everyone knows to use the 'three anonymous siblings.'"
FSA quietly pressuring exchanges to stop handling gang-favored cryptos
In a move to stop money laundering by organized criminal groups, the FSA has been applying pressure on Japanese digital currency exchanges to stop servicing cryptocurrencies used by criminals and hackers to launder money, most notably Monero, Dash, and Zcash.
The FSA has been looking for ways to stop the use of virtual currencies that are hard to track because they have become favorites w the criminal underworld.