It was a late night in Minato district of Tokyo last April. A Chinese man handed over a USB memory chip to a 30 something yakuza agent in a bar on the second floor of a rundown building. The yakuza inserted the USB into a computer and opened a file titled “ZDM.” The name was after the first letters of three highly anonymous virtual currencies: Zcash, Dash and Monero.
The file opened a ledger that belonged to a yakuza gang that used virtual currencies for money laundering. The first log was recorded in June 2016, and as of April 2018, the total amount of money laundered amounted to 29.85 billion yen (about 293 billion won). Most gains were from unlawful activities such as voice phishing and drug trafficking.
In a nearby mansion, which was called “the base” by yakuza agents, eight men and women in their 20s and 30s were sitting in front of their computers. Dubbed the “execution team,” they were a group of engineers and university students tasked with blurring the traces of funds by accessing YoBit, a Russia-based cryptocurrency exchange, and switching the Bitcoin remittance from Japan into other forms of currencies such as Zcash, Dash and Monero.
Almost like a scene from a movie, this is a real story that had been covered exclusively by the Mainichi Shimbun and reported on Monday. Speculations over the use of virtual currencies as a means of money laundering have been made several times in the past, but this is one of the largest scales of money laundering caught in the act, with such great details.
According to the Japanese daily, the yakuza gang requested money laundering to a Chinese broker through a sub-organization called “vault team.” The broker in turn ordered the execution team to create several accounts in a Japanese virtual currency exchange and turn the cash (in yen) into virtual currencies such as Bitcoin or Iderium. The execution team was mainly comprised with Japanese as it requires identification of personal information to create an account in Japan.
The practice of using virtual currencies for money laundering is spreading into different parts of the world as countries have varying levels of regulation. In April last year, Japan revised the Funds Settlement Act to make the confirmation of identity a mandatory process for a customer seeking to open an account. The revised law also recommends against handling virtual currencies that are too anonymous. South Korea has also implemented a real name transaction system starting in late January. However, it is still easy to make an account without confirming personal information in many other countries around the world. This makes it very difficult to trace the remittance of virtual currencies sent overseas from Japan. Consequently, perception is spreading among the financial officials in Japan that it is “impossible for Japan to handle it alone.”
According to the Japanese police authorities, as many as 669 transactions are presumed to be money laundering through cryptocurrencies out of the reports collected between April and December last year.
Won-Jae Jang firstname.lastname@example.org