Site icon IT World Canada

Illegal use of virtual currency sites on the rise: McAfee

malware, cyber crime, data theft, network security

Security software company McAfee Inc. is raising the alarm on the increasing use by criminal organizations of virtual currency sites to launder money while law enforcement agencies face a tough time putting a stop to their activities.

“The proliferation of digital currencies fuels the proliferation of tools and services necessary for cybercrime,” according to by Raj Samani, vice-president of McAfee for Europe, the Middle East and Africa , co-author of the whitepaper from McAfee titled Digital Laundry. “This in turn helps fuel the growth in cybercrime and other forms of digital disruption.” Digital Laundry was co-written by Francois Paget and Matthew Hart of McAfee Labs.

Unfortunately, attempts by law enforcement bodies can do to address the situation appear to be ineffective, the whitepaper’s authors said.

“Attempts to close down such services have historically resulted in criminals simply moving their business elsewhere…,” according to report. Now that virtual currencies has gained enough traction, McAfee said it will “not go away” and businesses should instead find ways of leveraging its advantages while avoiding getting entangled in criminal activities.

Virtual currency systems are different from electronic money transfer system because money transfers use traditional and regulated money or units of currency. By contrast virtual currency systems use “invented money” which is unregulated by government agencies and in many instances untraceable.

Virtual currency trading is also easier and faster compared to conventional systems . For example online money transactions can take up to eight days to transfer funds. Virtual currency transactions are almost instant.

The forerunner to today’s virtual currency is e-gold which was established in 1996. Because of the systems lack of verification of an account holder’s identity, e-gold was a favourite of criminals. By 2005, the site boasted three million accounts. When U.S. Security Services and FBI agents raided its office and accounts were frozen, most of its customers just moved to other virtual currency providers such as WebMoney.

Different virtual currencies offered by different sites have varying values against traditional currencies. For instance, in April 9, this year a Bitcoin (a popular virtual currency developed in 2009) was worth US$230 it has since gone down to around US$135. Some individuals and groups use virtual currencies as an investment vehicle, tax shelter, for buying items such as electronics or illegal drugs and for money laundering purposes.

By May this year when US authorities shut down the operations of virtual currency provider Liberty Reserve, the system created in 2006 had more than 200,000 users and was alleged to laundered no less than $6 billion in criminal proceeds.

Despite frequently being linked to crime, virtual currencies hold many opportunities for legitimate use. However, it’s a buyer beware market according to McAfee.

“Virtual currencies will not go away…” according to the McAfee paper. “”ignoring this market opportunity is likely to cost potential legitimate investors significant revenue, but failure to address the potential risks may cost a lot more.”

 

Exit mobile version