By Samantha B. Larkin

Niki Hutchinson, at twenty-four years of age, decided it was time to start dating. She thought she connected with a guy named Hao on Hinge, a dating website. The two started messaging and formed a bond after Hao told Niki he was born in the same town in China from which she was adopted. After learning she recently lost her mom, Hao offered to help Niki make money with her inheritance and told her he knew how to invest in cryptocurrency. While Niki was initially skeptical, Hao eventually instructed Niki on how to make wire transfers from her bank account to Crypto.com, an exchange platform. Through illustrated screenshots and text messaging, Hao described to Niki exactly how to use the platform. From there, Hao convinced Niki to transfer her crypto assets to another website. On the second platform, Niki saw profits in her account and decided to keep investing. She even convinced her father to invest in cryptocurrency too. But when Niki went to withdraw her virtual funds, she was informed that she needed to pay the tax bill with a new transfer of capital to release her earnings. The realization then set in that Niki and her dad lost over $390,000 to scammers. The scam Niki encountered is called “pig butchering.” Pig butchering is a billion-dollar industry of loss, draining American bank accounts, according to official government publications. Scammers abroad invented the term, referring to the concept of “fattening a pig before the slaughter,” where the goal is to nourish trust and confidence in a virtual relationship before conning the victim out of their money and slaughtering their savings. Cryptocurrency is the signature of the scheme. According to complaints received by the Federal Bureau of Investigation’s (FBI) Internet Crime Complaint Center (IC3), the typical targets in crypto-investment scams are individuals between the ages of thirty and forty-nine. Aiming at young professionals with disposable income, these scammers vet their targets to ensure a level of sophistication with technology and susceptibility to emotional manipulation. Scammers then coach their targets into virtual exchanges on false websites, where the victims are manipulated into believing they are making a profit. Their investments increase over time, typically until the victim attempts to cash out their illusory gains, and then the scam reaches its final stage: the victim is informed they need to pay exorbitant taxes or fees with fresh crypto transfers in order to release their funds. In reality, their assets were already gone. (continued)

Roger Williams University Law Review, Volume 30, Issue 1 (2025) Winter 2025, 47p.

By Global Financial Integrity and the Cyrus R. Vance Center for International Justice

On September 7, 2021, El Salvador became the first country in the world to adopt Bitcoin as legal tender. Two years later, the country has undergone technological change and growth, faced operational and regulatory challenges, and learned a tremendous amount in the process. This joint publication by the Vance Center and Global Financial Integrity (GFI) analyzes virtual assets (VAs) in El Salvador, first from a legal and regulatory perspective, as well as from an anti-money laundering (AML) and counter-terrorism financing (CFT) perspective The first half of the report analyzes the current regulatory landscape in El Salvador regarding Bitcoin and VAs. El Salvador has taken a major leap in embracing technological innovation, specifically in the digitalization of the financial system, through adopting bitcoin, cryptocurrencies, and digital assets. The country has established a regulatory framework encompassing the Bitcoin Law, the Digital Assets Issuance Law, and the Innovation and Manufacture of Technologies Promotion Law. These laws aim to provide a supportive environment for individuals and businesses engaging in transactions involving digital currencies while fostering innovation and technology manufacturing within the nation.

As a result, El Salvador is poised to become a leading proponent of emerging technologies across various sectors of its economy. Due to the dynamic nature of the subject matter and the ongoing efforts to standardize these frameworks internationally, the report identifies additional areas that may still require regulation.

The second half of the report analyzes VAs in El Salvador from an AML/CFT perspective. The report approaches these issues from the perspective of the Financial Action Task Force (FATF), which states that “the cornerstone (…) is the risk-based approach which emphasizes the need for countries to identify and understand the money laundering (ML) and terrorism financing (TF) risks they are exposed to.”

Understanding risks enables countries such as El Salvador to take mitigating measures and to deploy limited resources effectively. In this regard, the report analyzes financial crime risks for the most common predicate offenses for ML in El Salvador, considering drug trafficking, extortion, migrant smuggling, and misappropriation of public funds (peculado). The report also assesses financial crime risks related to specific operational features or developments within El Salvador’s VA ecosystem.

The report concludes with policy recommendations that can help El Salvador to maximize the benefits and minimize the risks associated with financial innovation. Key recommendations include:

Policymakers in El Salvador should urgently adopt reforms strengthening AML/CFT as well as ensuring robust oversight over VAs. These reforms are particularly important in light of El Salvador’s upcoming Mutual Evaluation.

The Government of El Salvador, and specifically the Central Reserve Bank (BCR) and the National Commission of Digital Assets (NCDA), should engage with the legal and business community in developing regulations and technical standards according to need and practice for the Bitcoin Law and Digital Assets Issuance Law, following international best practices.

Lawyers and law firms advising companies wanting to operate in El Salvador should enhance compliance mechanisms to verify client backgrounds to prevent criminal actors from entering the national financial system.

All relevant government agencies should ensure transparency and access to public information, including contractual and operational processes, fraud and mismanagement investigations, and the use of public funds, per domestic laws and international standards.

The BCR should incorporate information on government Bitcoin purchases into the Balance of Payments and other similar documents.

The Superintendence of the Financial System (SSF) should require that Chivo Wallet collect information on legal persons opening Chivo Wallet accounts in line with the requirements for legal persons to open other types of financial accounts. In addition, Chivo Wallet should maintain beneficial ownership information for legal persons using Chivo Wallet, in line with FATF Recommendation 15’s interpretive guidance and similar to the requirements for financial institutions.

Considering that financial institutions and other obligated entities submit suspicious transaction reports (STRs) for crypto transactions, the Financial Intelligence Unit (FIU) of El Salvador and other government authorities should provide education and training opportunities to the financial sector and other obligated entities regarding identification of red flag indicators in crypto transactions. This will help to ensure that STRs contain relevant information and reflect an informed understanding of the risks.

Washington, DC: Global Financial Integrity 2023. 63p,

By Tom G. Meling, Magne Mogstad, and Arnstein Vestre

We quantify the extent of crypto tax noncompliance and evasion, and assess the efficacy of alternative tax enforcement interventions. The context of the study is Norway. This context allows us to address key measurement challenges by combining de-anonymized crypto trading data with individual tax returns, survey data, and information from tax enforcement interventions. We find that crypto tax noncompliance is pervasive, even among investors trading on exchanges that share identifiable trading data with tax authorities. However, since most crypto investors owe little in crypto-related taxes, enforcement strategies need to be well-targeted or cheap for benefits to outweigh costs.

Chicago: University of Chicago, The Becker Friedman Institute for Economics (BFI) , 2024. 69p.

By The Asian Racing Federation Council on Anti-illegal Betting & Related Financial Crime

The purpose of this report is to explain how blockchain technology and cryptocurrencies are being used in the illegal betting industry in Asia. Blockchain and cryptocurrencies have been widely adopted in the betting industry in the form of payments, betting applications built on blockchain technology and to move funds. The emergence of this technology is a threat to legal betting because of the intrinsic features of many cryptocurrencies, such as: facilitating avoidance of anti-money laundering (AML) and know-your-customer (KYC) procedures by betting operators; circumvention by operators of international betting regulatory and licensing requirements; and instantaneous and anonymous cross-border transactions from bettors and operators. All of these features are attractive to bettors and operators in jurisdictions where online betting is illegal and/or restricted. Regulators in many jurisdictions have also been slow to keep up with the growth of blockchain,1 creating loopholes exploited by organised crime. International law enforcement and anti-money laundering bodies have highlighted that blockchain and cryptocurrencies facilitate illicit activities including illegal betting and money laundering. 2 As a measure of the growth of cryptocurrency in betting, Bitcoin is now accepted on at least 127 offshore sports betting websites and 284 online casinos, which is a seven- and 13-fold increase respectively since 2018.3 In addition to Bitcoin, at least 780 offshore websites accept one or more of the five biggest cryptocurrencies,4 and most of these websites accept players from jurisdictions such as Hong Kong (83%), Australia (78%), Japan (92%) and Singapore (82%). 5 Cryptocurrencies further facilitate illegal betting by giving the operators of illegal bookmaking syndicates and related entities such as Macau casino junket operators a means of transferring money without detection in order to offshore the criminal proceeds of their illegal betting operations, settle payments with customers, and pay employees in overseas illegal betting hubs such as the Philippines. For these reasons they have also been enthusiastically adopted by entities linked to the junket industry.

The Asian Racing Federation Council. 2021. 12p.

By EUROPOL

The use of cryptocurrency as part of criminal schemes is increasing and the uptake of this payment medium accelerating. However, the overall number and value of cryptocurrency transactions related to criminal activities still represents only a limited share of the criminal economy when compared to cash and other forms of transactions. A range of constraints are related to the use of cryptocurrencies, with high volatility likely a major factor in criminals’ reluctance to use cryptocurrencies for long term investments. Recent years have seen cryptocurrency increasingly used as part of criminal activities and to launder criminal proceeds. Criminals have also become more sophisticated in their use of cryptocurrencies. In addition to using cryptocurrencies to obfuscate money flows as part of increasingly complex money laundering schemes, cryptocurrencies are increasingly used by criminals as a means of payment or as an investment fraud currency. The number of cases involving cryptocurrencies for the financing of terrorism remains limited. The criminal use of cryptocurrency is no longer primarily confined to cybercrime activities, but now relates to all types of crime that require the transmission of monetary value. However, the scale and share of the illicit use of cryptocurrencies as part of criminal activities is difficult to estimate. Criminals and criminal networks involved in serious and organised crime also continue to rely on traditional fiat money and transactions to a large degree, in addition to emerging value transfer opportunities.    

The Hague: EUROPOL, 2022. 20p.

By Calum Inverarity, Gareth Price, Courtney Rice and Christopher Sabatini

Travel restrictions and lockdowns have forced changes to the traditional means illicit groups have used to launder their ill-gotten profits. This paper explores whether COVID-19 may have affected these processes through three main channels: increased reliance on cryptocurrencies to move and launder funds tied to illicit activity; the expanded use of the internet through e-commerce sites to continue and expand trade mispricing practices to move illicit funds; and the use of FinTech and peer-to-peer payment services to transfer illicit funds.

Miami: Florida International University, 2021. 37p.