Prepared by PRM SFI Tom Varvitsiotis (Chicago Division) – August 2022
From discussions with Agents and Confidential Sources (CS) it appears that Money Laundering Organizations (MLO) and Colombian Money brokers are requesting the Fiat Currency (I.E. US Dollar, Euro, etc) they provide to DEA Undercovers or CS’s be converted to Cryptocurrency, specifically Stable coins, which are backed by US Dollars.
1 Tether Coin equals 1 USD.
The most prominent Stable coin the MLO’s are using is called USD – Tether (USDT), although they have also used a Stable coin called USD Coin (USDC).
Once their respective Fiat Currency is converted into USDT and placed into their respective Cryptocurrency Digital Wallet, the MLO’s enjoy the ease of digitally transferring millions of from Digital Wallet Address in a click of a button. They do not have to be concerned with International banking regulations or the burden of physically transporting and concealing large and bulky amounts of Fiat Currency through interstate highways or foreign borders and Air transport.
The majority of the MLO’s utilize digital wallets that are used via APP on their mobile phones or in Cold Storage wallets that are not connected to a network and very difficult access even when they are physically seized. Some members of the MLO’s utilize Cryptocurrency Exchanges, IE, Binance, Huobi, Kraken, FTX, Kucoin to replenish their members digital wallet address in furtherance of sending USDT to members of the MLO.
Move to Digital:
It makes sense in a digital economy and an in-basket culture, that MLO and DTO use the internet and digital currency space to facilitate their drug trafficking activities. In this instance with USDT it’s the ease or cross border movement of Digital Cash.
What we have noticed in Chicago is the MLO initially wanted the USDT be provided via a TRON Blockchain Digital Wallet Address, because of the UC Wallet Address limitation, we could only send the USDT via an Ethereum Blockchain Digital Wallet Address.
USDT is a Stable coin that has to rely on the Ethereum, TRON and other Blockchain Networks to facilitate the movement. Think of Ethereum and TRON as the Rails (Train Station) and USDT as the Passenger trying to decide which Train Station to take based on Cost. Due to the higher transaction costs (Gas Fees) on the Ethereum network, the MLOs like using TRON for its lower costs.
If the trends continue to USDT and it becomes (or has already become) the primary method to move drug proceeds, DEA and other LEO will need the ability to track these funds and identify ways to seize USDT. Preliminary Analysis indicated that the MLO’s are moving tens of millions per week in USDT. The USDT transfers from wallet to wallet within minutes, which presents challenges for seizure.