No paper trail: Beware of criminal use of virtual currencies

These open-source currencies have no central administrative authority: UNODC

ISLAMABAD: United Nations Office on Drugs and Crime (UNODC) country office Pakistan called upon law enforcement agencies of the country to develop an understanding of how to tackle the criminal exploitation of virtual currencies.     

“It is crucial from an investigative point of view to understand the interfaces between electronic money, virtual currencies and the traditional financial system”, according to a UNODC document titled “The Laundering of Crime Proceeds Using Virtual Currencies”.

It said the UNODC Pakistan works in close collaboration with Pakistan’s anti-corruption agencies to help develop their awareness regarding countermeasures.

Virtual currencies are not a new concept however recent innovations of Bitcoin and other similarly structured currencies currently pose a challenge to law enforcement agencies. These open-source currencies have no central administrative authority, for example.

Similarly convertible virtual currency can be exchanged back and forth for real cash for example Bitcoin, e-gold, Liberty Reserve and Web-Money.

According to the UNIDO document, the threats presented by virtual currencies include fast, irreversible transactions and transfers from one account to another. Proceeds from virtual currency can be used to finance drug trafficking and organised crime.

The document also cited challenge of the anonymous nature of virtual currency which allows criminals to participate in financial markets and convert, transfer and withdraw funds across borders without detection.

It said that there is limited awareness among investigators and prosecutors regarding the existence and capabilities of virtual currencies.

There are virtually no paper trails available except for a limited set of operations that involve exchange of virtual currency into fiat money.

Published in The Express Tribune, August 25^th, 2015.