Spanish Police Uncovers Money Laundering Gap in Bitcoin ATMs

While trying to prosecute a gang suspected for illegal-drug payments via Bitcoin automated teller machines (ATMs), the Spanish authorities detected a weakness in the European Anti-money Laundering (AML) laws, Bloomberg reported Thursday.

According to the drug enforcement officials from the Civil Guard, a type police in Spain, the Anti-Money Laundering rules require money handlers to verify their clients before any transactions. These rules, however, do not apply to the crypto trading platform, including the cash machines’ owners.

The Civil Guard officials noted that the group hired two ATMs from unsuspecting trading platforms and set them up in an office at Madrid, which served as a center for sending remittances and trading cryptocurrencies. 

Due to the anonymity involved with cryptocurrencies, the gang was able to transfer money to the trading platforms through their bank accounts, to top up the ATMs with Bitcoin or other digital currencies. 

Once the gang members, deposit cash in the machines, they will receive either a numerical or QR code, which perhaps will enable them to claim their cryptocurrencies from the exchanges. 

Through this progress, those Bitcoins could then be quickly sent to the drug traffickers who could cash them out, the Civil Guard Officials added.

The scheme provided a hassle-free medium for large amounts of money to be deposited in bank accounts within Spain and other countries without raising red flags.

Prosecuting the case, however, is taking the Civil Guard into new territory. The authorities reportedly confiscated the two Bitcoin ATMs alongside four cold wallets and 20 online wallets. 

The prosecutors are still finding it hard to prove the relationship between the machines and the digital cash they seized, due to the lack of clarity around Bitcoin’s legal status in Spain.

The new European Union legislation set to debut by 2020 aims to include cryptocurrency exchanges, as well as custodians of online wallets in ALM rules, expect independent Bitcoin ATM owners, the officials said.

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