Selva Ozelli is an international tax lawyer and CPA. She writes monthly Expert Take columns about the intersection of emerging technologies and sustainability.
Recent headlines have focused on regulators’ concerns about the lack of investor protections for the cryptocurrency market. It has exploded to over $2 trillion and poses a risk to financial stability.
The high-profile cases in which cryptocurrencies played a role with ransomware attacks and intellectual property espionage are being investigated by the United States President Joe Biden’s national security agencies.
A Financial Crimes Enforcement Network report shows that ransomware-related suspicious activities reports filed in the first half 2021 are up 30% compared to the entire 2020. This indicates that ransomware poses a growing threat to the U.S. financial system, businesses, and the public.
Biden’s administration is considering an executive order allowing federal agencies to examine and make recommendations in areas related to crypto industry regulation, national security, economic innovation, and financial regulation. This initiative would coordinate the work of agencies on digital currencies across the executive branch with a White House crypto czar as a point person.
“Pandora Papers” by the International Consortium of Investigative Journalists
International Consortium of Investigative Journalists published “Pandora Papers,” which elicited almost 12,000,000 documents from law firms around the globe. This revealed the identities of the owners of 29,000 offshore businesses that have been hiding assets worth as high as $32 trillion worldwide.
These companies are owned by celebrities, politicians and criminal underworld figures hailing from more than 200 countries. This leak has already sparked corruption and tax evasion investigations into several government officials all over the globe.
The World Economic Forum has released a report that explains how blockchain technology could be used to combat corruption in government.
Related: CFTC renews: What Biden’s New Agency Picks for Crypto Regulation
The U.S. Treasury Department’s OFAC
The Office of Foreign Assets Control (OFAC), in a unique case, recently targeted Suex, an online digital currency broker, because it was allegedly involved in laundering ransomware proceeds. This was part of a wider government effort to combat ransomware and disrupt criminal networks. The purpose of the project is to improve cybersecurity in private sector, and increase reporting to U.S. agencies about ransomware payments and incidents. This includes both the Treasury Department and law enforcement under the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) framework, as digital currency is the principal means of facilitating ransomware payments and associated money laundering activities.
After this case, OFAC issued an “Updated Advisor on Potential Sanctions Risikos for Facilitating Ransomware Pays.” It emphasizes that the U.S. government strongly discourages payment of cyber ransoms and extortion demands. However, it acknowledges that it is important to improve cybersecurity practices in order to prevent or mitigate such attacks.
Similar: Transactions in fiat and crypto are subject to the same sanctions compliance
The OFAC updated the advisory to stress that victims of ransomware attacks should report to the appropriate law enforcement and government agencies. This is to help them understand and counter ransomware attacks. Visit the Stop Ransomware government website for more information.
Participants at the G7 meeting in June agreed to work together to address the escalating risks of ransomware, money laundering, and digital assets globally. They also committed to implementing and enforcing AML standards from the Financial Action Task Force on virtual asset service providers and digital assets.
Related: Are cryptocurrency ransoms tax-deductible?
Intellectual property espionage, cryptocurrency
Recent reports and cases have shown that cryptocurrency was used in intellectual property espionage. Recently, Ethereum developer Virgil Griffith pleaded guilty in a conspiracy to violate the International Emergency Economic Powers Act. This law prevents U.S citizens from exporting technology to communist countries. Griffith presented a blockchain and cryptocurrency presentation at a North Korean conference. Griffith could spend up to 6 1/2 year in prison when he is sentenced on January 20, 2022, as part of the plea agreement.
Jonathan Toebbe was a U.S. Navy Nuclear Engineer who had a top-secret security clearance. He was also specialized in naval propulsion and had access military secrets. In October, Toebbe was charged with trying to relay information about the design of American nuclear powered submarines to someone he believed was a representative from a foreign government. This was in violation of the Atomic Energy Act.
Cybereason is a provider of cyberattack protection that is operation-centric. A new report entitled “Operation GhostShell” reveals a cyberespionage operation targeting global telecommunications and aerospace companies. This report is the follow-up to the August publication of Cybereason’s “DeadRinger”, which revealed that an Iranian actor, MalKamak was behind the attacks. He has been operating at least since 2018. MalKamak was using a highly sophisticated remote access Trojan called “ShellClient”, which evades antiviruses and other security tools. He then uses cloud service provider Dropbox to command and control.
Related: U.S. updates crypto AML/CFT laws
According to ESET Slovakia, a cyberespionage organization called FamousSparrow targeted hotels, international governments and international organizations since at least 2019. To attack its victims, including the U.S. Republican Governors Association, the group exploited a Microsoft Exchange vulnerability. ESET did not link FamousSparrow with any specific country, but it did discover similarities between its methods and those of SparklingGoblin (an offshoot from Winnti Group, which is also linked to China) and DRBControl.
The U.S. government in July blamed China for the Microsoft Exchange Server attacks. It also accused the Chinese government, for the first-time, of using criminal hackers to carry out the attacks. A report warning of China’s continued targeting of defense, semiconductor and medical industries to steal intellectual property was released.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Selva Ozelli, Esq. CPA is an international tax lawyer and certified public accountant. She frequently writes about tax, legal, and accounting issues for Tax Notes and Bloomberg BNA as well as other publications such the OECD.