Chinese Nationals Charged with Laundering More Than $100 Million in Cryptocurrency

Two Chinese nationals were charged by the US Justice Department with laundering more than $100 million worth of cryptocurrency that was part of more than $230 million hacked from a virtual currency exchange by North Korean co-conspirators.

According to an indictment unsealed in the US District Court for the District of Columbia, Tian Yinyin and Li Jiadong were charged with money laundering conspiracy and operating an unlicensed money transmitting business.

“The hacking of virtual currency exchanges and related money laundering for the benefit of North Korean actors poses a grave threat to the security and integrity of the global financial system,” US Attorney Timothy Shea said in a statement.

Nearly $101 million was laundered through hundreds of automated cryptocurrency transactions in order to prevent law enforcement from tracing the funds.

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According to the legal complaint against Yinyin and Jiadong, in 2018, an employee of the exchange communicated with a “potential client” via email. While communicating with the potential client, the employee unwittingly downloaded malware that attacked the exchange. The malware provided remote access to the exchange and unauthorized access to private keys controlling wallets to seven virtual currencies.

Yinyin and Jiadong engaged in nearly $101 million in virtual currency transactions, which primarily consisted of their exchange of virtual currency traceable to the hack of the exchange, the complaint said. The two allegedly converted the virtual currency into fiat currency and transferred it to customers for a fee. The funds were laundered through hundreds of automated cryptocurrency transactions aimed at preventing law enforcement from tracing the funds.

The North Korean co-conspirators circumvented multiple virtual currency exchanges’ controls by submitting doctored photographs and falsified identification documentation, according to the complaint. A portion of the laundered funds was used to pay for infrastructure used in North Korean hacking campaigns against the financial industry.

“North Korea continues to attack the growing worldwide ecosystem of virtual currency as a means to bypass the sanctions imposed on it by the United States and the United Nations Security Council,” IRS-Criminal Investigation (IRS-CI) Chief Don Fort said.

The complaint also alleges that the North Korean co-conspirators are tied to the theft of approximately $48.5 million worth of virtual currency from a South Korea-based virtual currency exchange in November. As with the prior theft, they allegedly laundered the stolen funds through hundreds of automated transactions and submitted doctored photographs and falsified identification documentation.

The civil forfeiture complaint specifically names 113 virtual currency accounts and addresses that were used by the two defendants and unnamed co-conspirators to launder the funds. The forfeiture complaint seeks to recover the funds, a portion of which has already been seized.

The US Department of the Treasury’s Office of Foreign Assets Control also imposed sanctions on Yinyin and Jiadong for “having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, a malicious cyber-enabled activity.”

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Tags: Chinese, Cryptocurrency, hack, Li Jiadong, North Korean, Tian Yinyin, virtual exchange

If the current rate at which people in the UK are withdrawing cash from their pensions continues, future retirees will risk running out of money in retirement, according a report from the Association of British Insurers (ABI). And to prevent this, the group is calling on the government to reform the so-called pension freedoms.

The pension freedoms were launched in 2015 when the UK loosened the restrictions over access to pensions to allow people to withdraw their savings as they choose while only having to pay their marginal income tax rate. But the ABI said the changes have also put far more responsibility on individuals to ensure that they make the retirement choices that are right for them.

According to the ABI, more than £30 billion has been accessed from pensions since the pension freedoms were enacted, with latest figures showing that more than 350,000 pension plans were fully withdrawn in 2018 to 2019 alone.

The ABI warns that too many people are making complex and important retirement decisions without help as 48% of people who accessed their pensions did so without regulated advice or guidance, according to the Financial Conduct Authority (FCA). The rate of withdrawal, combined with the lack of advice taken, has alarmed the ABI, which said further reforms and safeguards are needed to ensure the long-term sustainability of the pension freedoms.

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“The jury is still out on the success of the pension freedoms,” ABI Director General Huw Evans said in a statement. “We will only be able to judge their true impact decades from now, once it is clear whether those who have exercised their choices have the retirement that they were hoping for.”

Citing information from the FCA, the report said that withdrawal rates of 8% and higher were the most common rate across all pension sizes except for the largest, adding that “these are not sustainable rates.” According to the Pensions Policy Institute (PPI), a withdrawal rate of 3.5% ensures a 95% chance of not exhausting savings by time of death, while a withdrawal rate of 7% gives around a 50% chance of exhausting savings by average life expectancy. That means that the current average withdrawal rate of 8% gives retirees less than a 50% of having enough money to last their retirement.

The ABI said that while this may not be a problem with retirees who have defined benefit plans or other sources of income, it will likely be a problem for retirees with only defined contribution plans.

“In the future, more people will rely on DC pensions, often exclusively,” the report said. “This means there will be much more at stake when they make retirement decision.”

The report’s key recommendations include suggestions on how to help “future proof” the pension freedoms, such as the Department for Work and Pensions sending a letter to defined benefit pension plan members who want to transfer their pension to a defined contribution warning of the risks involved; a “later-life review” from the Money and Pensions Service to help people plan during their retirement, and a retirement commission set up by the government to advise on policy changes needed for good customer outcomes in retirement.

“While the reforms have proved very popular, and have increased people’s options at retirement, it will be decades before their full impact can be assessed,” the ABI said. “The real test of the reforms will be in the years to come, when we will see if those who have exercised their options have sufficient income in later retirement.”