AUSTRAC in crypto clamp down, nixing Bitcoin ATM operator’s rego

Financial intelligence and illicit activities investigator AUSTRAC has announced a further crackdown on Australia’s cryptocurrency sector after observing “worrying trends in crypto ATM compliance”.

AUSTRAC revealed it has refused to renew the operator registration of South Australia-based crypto ATM operator Harro’s Empires, as well as placing operating conditions, including transaction limits, on others.

The new conditions were imposed after an AUSTRAC taskforce identified, it says, “customer activity that bears the hallmarks of scams, fraud, and other illicit activity”.

Among the new conditions include a $5,000 limit on cash deposits and withdrawals, enhanced customer due diligence obligations, mandatory scam warnings, and requirements for more robust transaction monitoring, noted AUSTRAC chief executive Brendan Thomas.

“The conditions are designed to help protect individuals from scams by deterring criminals from directing them to a crypto ATM, as well as to protect businesses from criminal exploitation,” Thomas said.

“In light of the risks and harms we consider it is absolutely necessary to ensure the sector meets minimum standards and reduces the criminal misuse of crypto ATMs.”

While the cash limit applies only to crypto ATM providers, the regulator has called for other digital currency exchange providers that accept cash to impose similar limits.

“This will reduce their exposure to money laundering, terrorism financing and other serious crime risks,” Thomas said.

Harro’s Empires, which operates four Bitcoin ATMs across the Greater Adelaide area, was blocked by AUSTRAC after it was found to be “exhibiting ongoing risks that its [crypto ATMs] could be exploited”.

“This action draws a clear line in the sand and serves as a warning to other digital currency exchange providers that aren’t meeting their responsibilities under the AML/CTF Act,” Thomas said.

The presence of crypto ATMs in Australia has exploded in recent years – from just 23 ATMs in 2019 to more than 1,800 machines in operation today, AUSTRAC estimates. Over the last two years alone, the regulator has observed a 15-fold increase in crypto ATMs across Australia.

These machines enable individuals to convert cash or debit card payments into cryptocurrencies, including popular coins Bitcoin, Ethereum, and Tether.

Australia is also home to more than 400 digital currency exchange providers (by contrast, Britain has just 40), with only around 40 businesses involved in crypto holding an ASIC licence.

AUSTRAC has projected that almost 150,000 transactions occur annually, with about $275 million being moved using crypto ATMs.

Around 99% of these transactions are cash deposits for the purchase of cryptocurrencies.

Curiously, the 60 to 70 age group were identified as one of the most prolific users of crypto ATMs in Australia – many of whom are victims of scammers and criminal money laundering operations.

A previous report found that many victims in this age group were being exploited as “money mules”, used to convert cash raised by organised criminals into often untraceable cryptocurrencies that can then be ferried out of Australia, beyond the jurisdiction of regulators.

“It is a huge concern that people in this demographic are over-represented as customers using cash to purchase cryptocurrency and, as evidence suggests, that a large number of 60- to 70-year-old users are victims of scam activity,” Thomas said.

According to AUSTRAC’s Cryptocurrency Taskforce, which collected data from nine crypto ATM providers, the majority of crypto ATM users are over 50 years of age. What is more, they accounted for more than two-thirds (72%) of all transactions by value, with 60- to 70-year-olds alone accounting for 29% of all transactions by value.