Austrac warns criminals are using crypto, NFTs to money launder, commit crimes

They may look innocent but cartoon apes are increasingly being used for money laundering, the financial intelligence agency has warned.

Austrac, led by Nicole Rose, has warned that cryptocurrencies and NFTs are increasingly being used by criminals to money launder and commit crimes. Picture: Gary Ramage/NCA NewsWire

Financial intelligence agency Austrac has issued a fresh warning against cryptocurrency and NFT scams, with criminals increasingly turning to the pseudo-anonymous technologies to launder money and commit crimes.

Austrac on Thursday published two new financial crime guides to help businesses avoid ransomware attack payments and prevent criminal abuse of digital currencies.

The agency’s national manager for intelligence partnerships Jon Brewer said in an interview that ransomware attacks are up 15 per cent in the past year, while NFTs — often in the form of cartoon tokens — are being abused to enable money laundering.

He said criminals in the last 12 months in particular have been targeting digital artworks and currencies to move the proceeds of crime.

Bored Ape Yacht Club is a 10,000-strong NFT collection being bought out by the likes of Justin Beiber. Picture: Supplied

“Digital currencies have rapidly grown in popularity over the last five years and criminals are trying to take advantage of these new technologies to commit crimes such as scams, ransomware, and money laundering,” Mr Brewer said.

“As Australians rapidly take up this technology, governments and the financial industry must work together to respond to financial crime risks and protect Australian individuals and businesses. The development of these financial crime guides is the result of the close partnership between government and industry to identify and prevent money laundering risks associated with digital currencies.

“Australian businesses should use these guides to help them understand and look out for the signs of criminal activity and take steps to protect themselves and their customers.”

NFTs – or non-fungible tokens – also represent a new crime risk according to Austrac, given they can be created by anyone and their value is subjective.

So-called ‘rug pulls’, in which NFT developers promote a new project and then disappear, have fleeced investors of millions of dollars globally over the past year.

“Financial service providers need to be alert to the signs of criminal use of digital currencies, including their use in ransomware attacks,” Austrac chief executive Nicole Rose said in a statement.

Blockchain Australia CEO Steve Vallas said criminal abuse of digital currencies “has no place in our sector.”

“Open dialogue, proactive guidance and strong relationships between government and industry are necessary to ensure businesses can identify and report behaviour that puts Australians at risk of harm,” he said.

“The development of resources, such as this guide, help ensure greater awareness of the risks associated with the sector are not an impediment to innovation and economic opportunity presented by this technology.”

Research from Chainalysis found that crypto asset-based crime globally hit a new all-time high in 2021, with illicit addresses receiving $US14bn ($18.8bn) over the year, nearly doubling from $US7.8bn in 2020.

Austrac’s financial crimes guide warns businesses to be vigilant about customers with unexplained wealth, or whose cryptocurrency wallet addresses show exposure to darknet marketplaces.

Uptake of both DeFi, or decentralised finance, and NFTs have surged, the report says, which has led to opportunities for the new technologies be used for criminal activities such as money laundering.

“The value of NFTs are subjective so they can be purchased and sold for any value. This allows for criminal activities such as the laundering of funds which may have come from illicit activities,” the report states.

“Austrac recognises that most people engage with digital currency for legitimate purposes. However, financial service providers, including digital currency exchange providers, should assess and understand the risks associated with the services they offer.”

Regulations flagged by Treasurer Josh Frydenberg would help bring certainty and safety to crypto investors but have yet to be brought to parliament.

Crypto scams have exploded in the past year and Chrispin Kerr, vice president at cyber security firm Proofpoint, said criminals are taking advantage of a less regulated environment in Australia where digital currencies are more difficult to track.

“Cybercriminals have become more sophisticated, even setting up fake cryptocurrency exchange platforms to carry out cryptojacking, tricking people into using their computers and mobile devices to mine cryptocurrency against the users’ will,” he said.

In one high-profile case Fortescue Metals chairman Andrew Forrest has brought criminal charges against Facebook, alleging the social media giant funnelled users to cryptocurrency scams that used his name to defraud unsuspecting victims.

Dr Forrest is one of several Australians including actor Chris Hemsworth, and media personalities Waleed Aly and David Koch, whose images and names have been used to endorse a boom in cryptocurrency scams on Facebook since 2019.

“These scenarios played out in the underlying scam which used Dr Forrest’s name, likeness, and reputation to find victims, who often reported being swindled after believing Dr Forrest was actually endorsing the investment scheme,” documents filed with the California courts read. One Australian victim, lost $US670,000 ($952,000) after falling for a fake endorsement from the mining magnate.

“While Dr Forrest does not know the precise number or identities of the individuals defrauded by reason of this vicious scam, the scope of the harm is vast. The fraudulent scam facilitated by Facebook has defrauded victims out of millions of dollars.”