Tech
How technology is transforming money laundering
On the shallow surface of Instagram, Ramon “Hushpuppi” Abbas was a quintessential influencer. The flamboyant Nigerian portrayed a lavish lifestyle of private jets, luxury cars and designer clothes. His glamorous adventures had earned him over 2 million followers and millions of dollars. But his posts hid a darker reality.
According to the FBI, the 41-year-old was “one of the most prolific money launderers in the world.”
By his own admission, Hushpuppi conspired to launder over $300 million in just 18 months. One of his alleged clients was a certain Kim Jong Un, the supreme leader of North Korea.
With his passion for cybercrime, cryptocurrencyand social media, Hushpuppi embodied a new era for his profession. Technology was transforming money laundering.
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His escapades caught the attention of Geoff White, a UK-based investigative journalist. White had won acclaim for The Lazarus Heist, a podcast and book about a cybercriminal collective linked to the North Korean state.
In 2019, the group broke into Malta’s Bank of Valletta.
“At that point, they’re in the bank vaults,” White tells TNW. “They can take the money out, but they have to send it somewhere. They can’t send them to Kim Jong Un’s bank accounts, that would be pretty obvious. So instead they call Hushpuppi.”
Hushpuppi was open for business. The scammer provided bank accounts to wash the stolen money. Prosecutors said he helped launder about $14.7 million from the raid.
The Maltese heist highlighted the value of a tech-savvy money launderer. Even righteous hackers backed by a nation-state needed an ally like Hushpuppi.
“North Korean hackers would be extremely good at breaking into banks and financial institutions,” White says.
“Once they get there, they’re not necessarily that good at taking the money away. For this they need collaborators and accomplices who understand how international finance works, how bank accounts work and how money mules work. So they turn to a lot of dark web accomplices.”
These accomplices became the subject of White’s next book, Rinsed. To the TNW Conference on 20 and 21 June in Amsterdam he will discuss his investigation in detail. Before the event, White provided a preview of the results.
Hushpuppi’s fame on social media has made him an unusual accomplice. Using Snapchat and Instagram, he recruited money mules to help transfer stolen money from victims to criminals. As profits filtered through a network of bank accounts, they became harder to trace.
Potential money mules were offered large sums of money for small tasks and a window into much larger fortunes. With his theatrical displays of wealth, Hushpuppi was a living billboard for potential rewards.
“These high-tech money launderers weren’t just helping cybercriminals.
Younger followers are especially susceptible to temptation. In 2019, the researchers found that under-25s are six times more likely to fall victim to criminals using social media platforms than over-50s.
“It’s not just that social media channels give you the ability to find people and communicate with them,” White says. “It also allows mule recruiters to show how much money you can make; to showcase this extravagant lifestyle, driving Bentleys and wearing Yeezys. And this is a powerful tool for recruiting money mules.”
It certainly proved powerful for Hushpuppi. According to the FBI, the charismatic criminal built a global network of mules who moved money at his command. They would use their existing bank accounts or open new ones. Money would flow between them via electronic transfers.
It was a profitable operation, but it had costly drawbacks.
Investigators used Hushpuppi’s Instagram and Snapchat to track his movements and gather evidence. The findings contributed to an 11-year federal prison sentence and an order to compensate his victims $1.7 million.
However, this was a trifle compared to the sums circulating in technology’s greatest contribution to modern money laundering: cryptocurrency.
Cryptocurrency can be a force for good. It can finance those without access to banking services, disrupt centralized financial systems and add more privacy to transactions. All these attractions attract law-abiding citizens. Unfortunately, they are also very attractive to money launderers.
Without central authorities to validate and monitor transactions, criminals can exploit regulatory gaps and quickly move money across borders.
Since large sums are constantly circulating with fluctuating valuations, dirty money is also easier to hide. When the cost of a single coin can reach a growth rate of 10,000%, holders have a convenient explanation for sudden increases in wealth.
Opening accounts is also quick and free. Using computer scripts, large-scale money laundering schemes can be executed with thousands of transfers.
It’s a process that is becoming more and more accessible. Specialized cryptocurrency money laundering services have eliminated the need for technical expertise.
Second Catenaanalysisillicit addresses sent nearly $23.8 billion in cryptocurrency in 2022, 68% more than in 2021. Traditional centralized exchanges were the largest recipients, accounting for just under half of all funds.
Another reason for this growth is cost savings. A traditional money launderer might charge a new client a whopping 60% cut of the proceeds. White says. Even repeat customers can pay 40-60%.
In the world of cryptocurrencies, fees can drop dramatically. White knows brokers who charge fees as low as 4%. In exchange, they convert the cash into cryptocurrencies, remove the dirt through various transactions, and then send the cleaned money to the customer’s account.
“Depending on the size of the business, this can mean millions of pounds more in profit than if you had used traditional money launderers,” he says.
Sometimes the cryptocurrency industry isn’t just a facilitator of money laundering. It can also be a target.
Another application for cryptocurrencies is blockchain-based games. Using a business model called “play to earn,” these games reward successful players with tokens and NFTs that have real monetary value.
One of the most popular titles in the genre is Axie Infinity, which has attracted millions of players. It has also attracted the attention of cyber criminals.
In March 2022, hackers stole more than $600 million worth of cryptocurrency from the digital ledger that powers Axie Infinity. Investigators soon identified a culprit: North Korea’s Lazarus group.
The gang had pulled off one of the largest cryptocurrency thefts ever seen. To launder their stolen fortune, they turned to a service called Tornado Cash.
Tornado Cash is what is known as a “crypto mixer”. These services collect digital assets from various users, merge them, and then redistribute the funds to the designated recipients.
“It helps people protect their privacy, which in crypto transactions is important,” White says. “Unfortunately, it also helped the North Koreans successfully launder the stolen money.”
A technology invented by libertarian programmers had been exploited by one of the most authoritarian regimes in the world.
In August 2022, the US government blacklisted the service. Two founders of Tornado Cash have been charged with laundering more than $1 billion in criminal proceeds.
The Lazarus Group had created another high-tech money laundering case that made headlines. But they were only the tip of the iceberg.
During his investigations, White discovered that new techniques were becoming mainstream.
“I realized that these high-tech money launderers weren’t just helping cybercriminals,” White says. “These are criminals of all types: drug dealers, prostitution rings, child sexual abuse rings. Everyone generates money and everyone has to launder that money somewhere – and often that money ends up in the same funnel.”
As for Hushpuppi, he remains detained in the United States, but his legacy as an influencer lives on.
“I hope that one day I will be able to inspire more young people to join me on this journey,” reads one of his latest posts on Instagram.
Advances in money laundering suggest his wish has come true.
Geoff White will be speaking this year TNW Conference June 20-21 in Amsterdam! If you also want to experience the event (and say hello to our editorial team!), we have something special for our loyal readers. Use code TNWXMEDIA at checkout to get 30% off yours corporate transition, passage of the investor or boot packages (Bootstrap & Scaling up).