AUSTRAC assisted an investigation which led to the arrest of a suspect who used a digital currency to purchase, import and sell illicit drugs through a black market website.
The suspect was sentenced to three years and six months imprisonment and fined AUD1,000 for possessing controlled weapons.
Law enforcement intercepted a number of packages sent to Australia from Germany and the Netherlands via the postal system. The packages were addressed to the suspect. Authorities found that the packages contained cocaine and methylenedioxymethamphetamine (MDMA), with a combined weight of 60 grams.
AUSTRAC information identified that the suspect had sent funds to a digital currency exchange to purchase a digital currency. Analysis of AUSTRAC information showed that over a six-month period the suspect undertook 13 outgoing international funds transfer instructions (IFTIs) totalling approximately AUD28,000. The funds were transferred via banks to an online digital currency exchange based overseas. The payments enabled the suspect to purchase an amount of digital currency.
For information about digital currency exchanges see 'Digital currencies and virtual worlds', AUSTRAC Typologies and case studies report 2012, pp. 16–17.
AUSTRAC information showed that the suspect gradually increased the value of IFTIs sent to the digital currency exchange from approximately AUD600 to AUD3,500 per transaction over the six-month period. The suspect also received two incoming IFTIs totalling approximately AUD2,000 from the same online digital currency exchange.
Law enforcement executed a search warrant on the suspect's home and seized a quantity of illicit drugs including cannabis, MDMA, cocaine, amphetamine and methylamphetamine. Additionally, law enforcement seized a number of items associated with drug trafficking, namely digital scales, clip seal bags and a money counter. Authorities also seized approximately AUD2,300 cash, computers, mobile phones and a number of stun guns.
Computers and mobile phones revealed drug trafficking
Analysis of the suspect's mobile phones identified text messages that suggested the suspect was trafficking drugs. On one phone law enforcement identified 150 such messages sent during the week prior to the suspect's arrest.
Analysis of the suspect's computers revealed that he registered an online account with a black market website. The website allows users to purchase and sell illicit goods and conduct transactions using a digital currency. The use of digital currencies provides a degree of anonymity for users. The suspect used this online account to purchase, import and sell illicit drugs.
The suspect was convicted of two charges of importing a marketable quantity of a border controlled drug and one charge of trafficking a controlled drug contrary to the Criminal Code Act 1995. He also pleaded guilty to possessing a controlled weapon contrary to the Control of Weapons Act 1990.
The suspect was sentenced to three years and six months imprisonment. He was also fined AUD1,000 for possessing controlled weapons.
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Digital currencies and the regulated AML/CTF sector
Financial activity relating to the use of digital currencies may be indirectly visible to AUSTRAC via the regulated sector. For example, when digital currency-related transactions intersect with the mainstream regulated AML/CTF sector they can generate reportable transactions such as:
- reports of IFTIs between Australian accounts and foreign accounts for the purchase/sale of digital currencies
- threshold transaction reports (TTRs) for cash deposits/withdrawals of AUD10,000 or more involving the bank accounts of digital currency exchange providers
- suspicious matter reports (SMRs) submitted where reporting entities consider financial activity involving a digital currency exchange to be suspicious.