HomeNewsBitcoin Cryptocurrency Adds to Venezuela Money Laundering Risk
NEWS

Bitcoin Cryptocurrency Adds to Venezuela Money Laundering Risk

ELITES AND CRIME / 7 APR 2021 BY VENEZUELA INVESTIGATIVE UNIT EN

Venezuela is increasingly turning to the cryptocurrency Bitcoin, raising questions about its possible use in laundering money and evading US sanctions, not unlike the way Venezuela already uses the gold trade.

In February, a new kind of cash machine appeared in Caracas – one that allows Venezuelans to trade fiat currency for the cryptocurrency Bitcoin, now trading at nearly $60,000 per coin. The CEO of Caracas’ Bitcoin ATMs said they are “a tool of financial inclusion” in a volatile economy cut off from the dollar.

Such machines, however, are also ideal for laundering drug money, according to a recent Drug Enforcement Administration report. Unscrupulous owners allow for the deposit of large amounts of cash into the ATMs. Once the cash is in a digital form, it can be transferred to another user, hiding the origin of the funds and “removing much of the risk of transporting large amounts of bulk currency,” the report concludes.

The DEA also warns that drug traffickers and money launderers “are increasingly incorporating virtual currency” into trade-based money laundering activities.

What’s more, in Venezuela, the appearance of the Bitcoin ATMs comes after a November 2020 announcement by the Bolivarian army that it would begin using national resources to mine Bitcoin. Mining is an energy-intensive process that creates new Bitcoin by solving complex math problems that help audit the coin’s ledgers.

SEE ALSO: Venezuela News and Profile

The leading crypto-analytics firm, Chainanalysis, estimates that just over one percent of global cryptocurrency transactions are illicit, and according to the FinCEN files report by the International Consortium of Investigative Journalists and BuzzFeed News, the vast majority of illicit gains are still laundered through the traditional banking system, not cryptocurrency.  

Still, the Venezuelan army’s announcement raised questions about how the Venezuelan government might use Bitcoin to hide illicit activity, especially since both the DEA report and another recent study by Chainalysis warn that the trend is on the rise.  In 2019 criminal entities moved more than twice as much in Bitcoin as they did in 2018, Chainalysis concluded, citing “rogue” crypto exchanges, those that don’t comply with money laundering regulations, as the weak link in the system.

InSight Crime Analysis

Neither the Bitcoin ATMs nor Bitcoin mining by the Venezuelan army are, in themselves, illegal. But the Venezuelan government’s money laundering and embezzlement schemes, involving gold and Venezuela’s own cryptocurrency the petro, leave room for doubt.

Complicating the matter is that Bitcoin does provide Venezuelans with a way to insulate themselves from chaotic economic controls, hyperinflation and US Treasury Department sanctions. In fact, Venezuelans have been leveraging the country’s subsidized electricity to mine Bitcoin for years.

In that way, Bitcoin is more comparable to Venezuelan gold than it is to traditional currency laundering methods. Gold has been mined and sold as a way of gaining foreign currency. And as oil prices dwindled and inflation soared, Venezuela began mining gold in larger and larger quantities, with the aim not only of keeping Venezuela solvent but also enriching the country’s political and military elites and avoiding US controls. In addition, it quickly became a favorite tool of money laundering for transnational drug traffickers.

Cryptocurrency could be appealing for the same reasons. In 2018, Venezuela’s President Nicolás Maduro launched a digital currency dubbed “the petro,” claiming it would “move the country toward new forms of international financing for economic and social development.”

SEE ALSO: Venezuela’s New Digital Currency: Economic Gamble or Criminal Scam?

The petro rapidly failed. But Venezuelan money laundering expert, Alejandro Rebolledo, wrote in his book Asi se lava el dinero en Venezuela (How Money is Laundered in Venezuela) that the experiment succeeded in another way – it provided cover for the Maduro regime to create structures that would allow corrupt military leaders to launder money in the form of the cryptocurrency exchanges.

These were the very same kind of crypto exchanges Chainalysis warned about. And evidence suggests this is exactly how they are being used.  In its 2020 Geography of Cryptocurrency Report, Chainanalysis examined the seven crypto-exchanges registered with the Venezuela government. Most users were likely trying “to preserve [their] wealth or move it somewhere to evade sanctions, as most high-profile Venezuelans can’t open bank accounts in other countries," Moisés Rendón, a Venezuela expert at the Center for Strategic and International Studies (CSIS), said.

In fact, in examining just one platform, the report found that more than 75 percent of transactions consisted of $1,000 or more in cryptocurrency, while Venezuelans earn an average of 72 cents a day.

share icon icon icon

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

What are your thoughts? Click here to send InSight Crime your comments.

We encourage readers to copy and distribute our work for non-commercial purposes, with attribution to InSight Crime in the byline and links to the original at both the top and bottom of the article. Check the Creative Commons website for more details of how to share our work, and please send us an email if you use an article.

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

Related Content

EL SALVADOR / 4 DEC 2015

Former El Salvador President Francisco Flores has been ordered to stand trial on corruption charges, adding to the lengthy list…

ELITES AND CRIME / 12 MAY 2014

President Otto Perez has named Thelma Aldana as Guatemala's new attorney general, a controversial decision that raises fears of a…

BOLIVIA / 4 FEB 2022

The US indictment of Bolivia's former anti-narcotics chief on drug and weapons charges means he could possibly be extradited to…

About InSight Crime

THE ORGANIZATION

Who Are Memo Fantasma and Sergio Roberto de Carvalho?

24 JUN 2022

Inside the criminal career of Memo Fantasma  In March 2020, InSight Crime revealed the identity and whereabouts of Memo Fantasma, a paramilitary commander and drug trafficker living in…

THE ORGANIZATION

Environmental and Academic Praise

17 JUN 2022

InSight Crime’s six-part series on the plunder of the Peruvian Amazon continues to inform the debate on environmental security in the region. Our Environmental Crimes Project Manager, María Fernanda Ramírez,…

LA ORGANIZACIÓN

Series on Plunder of Peru’s Amazon Makes Headlines

10 JUN 2022

Since launching on June 2, InSight Crime’s six-part series on environmental crime in Peru’s Amazon has been well-received. Detailing the shocking impunity enjoyed by those plundering the rainforest, the investigation…

THE ORGANIZATION

Duarte’s Death Makes Waves

3 JUN 2022

The announcement of the death of Gentil Duarte, one of the top dissident commanders of the defunct Revolutionary Armed Forces of Colombia (FARC), continues to reverberate in Venezuela and Colombia.

THE ORGANIZATION

Cattle Trafficking Acclaim, Investigation into Peru’s Amazon 

27 MAY 2022

On May 18, InSight Crime launched its most recent investigation into cattle trafficking between Central America and Mexico. It showed precisely how beef, illicitly produced in Honduras, Guatemala…