Terrorist Financing: The Role of Crypto and DeFi | European Blockchain Convention

[Music] hey yeah this is going to be so much fun I'm promise you so uh briefly about ourselves uh so we Global Ledger is a Swiss company we develop crypto IML compliance tools if you want to comply with MAA and if you want to sport terrorists in your exposure uh we create tools that allow you to save time and be faster because all these frosters now are very fast and crypto enable them to do that so yeah if you want to save time and be a little bit faster just talk to us there a lot of global people on this conference um just in terms of the problem um terrorist financing is all always like overlooked because it's a very very small percentage of funds like uh the way you read this report is to the right or yeah to the right is is where money coming from and to the left where they going to so you see this is actually the WASP maybe some people from this wasp is uh is here at the conference this is their report from 2022 and down below in the report you see there's a little bit of money like that called terrorist financing right it's it's like it's less than 0 1% it's 200k entered and 240k exited on terorist financing on this was it's less than 0.1% if you don't look at the irn section out there um that doesn't look that much right uh but the budget for 911 was actually exactly that so it's uh 400 to 500k and this is basically what the official Commission of 911 investigation concluded so in order to do an event like 911 you don't need that much so what I don't want you to have is any sort of event like this associated with your wasp because you overlooked that 0.1% um so in order to to do that but the scope for today right so we would look at the difference in cont financing procedures in a bank and in a wasp review typical pards we'll see what's the role of Defi and we'll think what we can improve in our CDF procedures to actually be better than that the data set in question it's terrorist organization paramilitary groups Associated media why media because that's usually the organizations that do fundraising for these terrorist organizations I would refer to all of them as Tangos that's just a short word to refer to them all um the data sources that we usually use when we trace the sort of organizations the public sources are sanction list social networks Messengers video content darket just General Media but when we are in in a task force groups with law enforcement or government that opens a lot more sources like prisoners of war or intercepted Communications which gives us a little bit more interesting results so every report you would see would be prepared uh like anyone any of our client can automatically prepare that report of exposure for any entity that's uh part of our KYB which is no your business tool set which can tell you where money coming and where they going for any entity any coin any time frame and you can actually also know what type of entities it is like what's their primary operational regions you know who their Founders what banks and payment systems they're using and things like that so let's start from that what's the difference between a contest financing procedures in a bank and a virtual asset exchange so the bank generally like if that's across multiple documents out there right the banking system uh the individual Bank tries to prevent the terrorist organizations from using the banking system as a whole where was would be preventing you know just their own vasp and uh bank's main sources of data is the kyc data where vasp would May encounter Anonymous wallet and they need to use a kyt or KYB and the biggest problem is the bank has limited information and visibility where for the WASP its anonymity it's un hosted wallet is the complexity of the schemes the visibility one hope hope what I mean is literally when you you know one guy sends money to another bank that's you you only see only one transaction you only see you know what is the bank that the money coming from what is the business or entity or person that is sending money was where we send you know who's the receiver uh where in crypto exchange it's it's a little bit more complicated so you you have your own wallets right but then money may come and this first wallet may be an un hosted wallet but then you realize that okay like two steps back there is a wasp and then maybe there's this another source that is a Tango so and and you have to monitor that actually yesterday that wallet might not be associated with a Tango yesterday that might be a normal wallet but today it's in a sanction list or today they've posted a social media post where they collect donations on this wallet or today it just become public and the investigations concluded that so you have to monitor multiple hopes back you know what's happening with this money what's happening with the attribution of these wallets and also for the outgoing side you know when when you're given a wallet to do a withdrawal at a crypto exchange you usually get an un hosted like you get the new wallet like there's no information it it's never been used it's not even in blockchain um you don't you don't know anything about that and then this new wallet starts sending money somewhere and you have to understand that you know maybe after some time these money can be donated to I don't know Hamas Palestinian Islamic Jihad whatever is uh whatever terrorist organization we can name and maybe even the wallet you actually send money from your exchange directly may become a wallet associated with a Tango so what you really need to do is you need to trace back the real Source you need to monitor always monitor that attribution order to understand like in real time what is happening with all these wallets attribution in the world and then you also need to trace forward and you need to monitor the movement of these funds and this is a much more complex work compared to a bank that I was showing you before for like this this requires a lot more resources from a wasp and it it's it costs Fortune usually so and actually in all this you have to be fast and you have to be real time because if you receive that information that this wallet is Tango after a month after everyone is knowing then there might be already your name in the investigation uh in the law enforcement table the good news is uh unlike cyber crime like hackers or darket Tangles are not using very complex schemes let me show you one so there's a there's a 5,000 withdrawal to a Tango wallet so that was a donation to a well-known terrorist organization so what this terorist organization did they they send money to un hosted wallet and almost immediately cashed it out in a small portion they cashed it out in another wasp it worked so they they thought like okay we can get away with that so they made a 3,000 trans transaction to the same wasp even skipping the UN hosted wallet stage and that that didn't work so they got blocked out there so they said okay like we're learning so they they used another un hosted wallet and they dissipated funds into small portions and they used six accounts at the at the waspc that's that's actually not a very complex scheme one of the takeaways from that is that this, Euro threshold that we have is something that is known to these guys and they kind of use it right so they they understand it um the centralized exchange is steal like M like 8 88% of all of the Tango transactions like so they cash out for centralized exchanges they they receive donations from it but uh the defi like you see the deck is a top three this is actually from 2024 so we see in a lot of situations money been sent through defi as a donate but that's not because like def users very like Tangos um it's because this is actually what the host was saying this is not a guideline uh this is warning uh because what Tango had like they would think okay we have a funds that may be publicly marked as risky so we wouldn't deposit it to us because if we get blocked we can use mixing but then we get questions and there are not a lot of mixing friendly wasps so what they use is is they they send money to D and then they use mixing and then they use another dii and then they deposit to wasp so the WASP would think that the money are just coming from Defi and not even from something like mixing so this way you go from a completely red flag to a sort of a sort of a yellow flag and you know maybe not to draw a lot of attention so not a guideline for sure it actually works both ways for them so if you if you want to donate that you want your wasp not to freak out and not you not to block all your funds so if you want to donate you would also want to use some Dy or something you order to deposit to to a Tango wallet um and a you can see it in the in a Tado cash example right so the biggest counterbody is for Tado cach some of the hackers you see the cyber crime hack exploit some of them they may directly or indirectly like a few hops send money directly to tornado cash that's a report from Q3 last year but the biggest counterpart is are still decks there are actually primary two or three uh decks entities behind behind that and the most popular ones you can still see it's like a cross chain protocol bridge and things like that and it's actually the same this year I mean you see a lot of un hosted wallets is just because it was generated like yesterday so these money just not spent or not not sent to the decks but you see like it's defi it's Bridge it's cross chain it's decks it's R token so that's that's that's how the professional cyber crime guys doing it so to to rub it up a little bit right so we looked at the CDF procedes in aank and in aasp in aasp it's it's very complex it requires a lot of manpower to really understand what kind of money you receive and uh you have to monitor the attribution and and the exposure constantly in real time and that may cost you a fortune but with us may cost you a little bit less and a little bit less over your time and uh we review the typical Partners in ter financing they they are not not very sophiscated right now but since some of the tangles they really even introduce like their cyber crime divisions uh the complexity May grow for you guys and um what we can improve is that you need a fast real-time software that requires lower effort from you because you probably wouldn't be able to manage a lot of these requests uh you probably shouldn't rely on a, EUR threshold it's public for anyone and in crypto it is very easy to bypass it and um you probably should pay a little bit more attention to decks and mixing sandwich because something can be behind it I mean actually mixing Protocols are fairly traceable so uh you can know what is behind it um if you guys have any questions or you want to connect use these C codes fantastic my dear friends give it up for Lex fison that was great