Crypto Investigation in Australia
Cryptocurrencies are digital assets that operate on decentralised networks of computers, using cryptography to secure transactions and control the creation of new units. They have become increasingly popular in recent years, attracting millions of investors, traders, and enthusiasts around the world.
However, cryptocurrencies also pose significant challenges for law enforcement agencies, regulators, and policymakers. Due to their anonymous, borderless, and peer-to-peer nature, cryptocurrencies can facilitate various forms of illicit activities, such as money laundering, tax evasion, fraud, cybercrime, terrorism financing, and sanctions evasion.
In Australia, authorities have been ramping up their efforts to combat crypto crimes and protect consumers from potential risks. Here are some of the recent developments and initiatives in the field of crypto investigation in Australia.
The Australian Federal Police Launch a New Crypto Forensic Unit
One of the most notable steps taken by the Australian authorities to tackle crypto crimes is the establishment of a new crypto forensic unit within the Australian Federal Police (AFP). The unit was launched in July 2021 and is led by Stefan Jerga, the national lead of criminal confiscation at the AFP.
The unit consists of a team of experts who specialise in tracing and recovering crypto assets that are involved in criminal activities. The unit uses advanced tools and techniques to track the movement of cryptocurrencies across multiple platforms, exchanges, and wallets, and identify the perpetrators and beneficiaries of crypto crimes.
The unit also works closely with other domestic and international agencies, such as the Australian Transaction Reports and Analysis Centre (AUSTRAC), the Australian Securities and Investments Commission (ASIC), the Australian Taxation Office (ATO), the Australian Cyber Security Centre (ACSC), Interpol, Europol, and the FBI.
The unit was formed in response to the surge in illegal crypto use in Australia since 2018, when the AFP made its first asset seizure involving cryptocurrencies. According to Jerga, the AFP has seen a 600% increase in crypto-related cases since then.
Some of the recent cases handled by the unit include:
- The arrest of a 33-year-old man from Sydney in August 2021 for allegedly laundering over $5 million worth of cryptocurrencies through an unregistered exchange.
- The seizure of over $6 million worth of cryptocurrencies from a 25-year-old woman from Melbourne in July 2021 for allegedly being involved in a dark web drug trafficking syndicate.
- The confiscation of over $8 million worth of cryptocurrencies from a 27-year-old man from Perth in June 2021 for allegedly operating a money laundering service for cybercriminals.
The AFP’s crypto forensic unit was one of the first of its kind in the world and demonstrates Australia’s commitment to combating crypto crimes and enhancing its capabilities in this emerging field.
The Australian Consumer Watchdog Reports a Spike in Crypto Scams
Another major challenge faced by the Australian authorities is the proliferation of crypto scams that target unsuspecting consumers. According to figures from the Australian Competition and Consumer Commission (ACCC), Australians lost over $109 million to crypto scams between January and November 2021, which represents a 172% increase from the same period in 2020.
The ACCC’s Scamwatch service received over 7,000 reports of crypto scams in 2021, with an average loss of over $15,000 per report. The most common types of crypto scams reported include:
These are websites or apps that claim to offer cryptocurrency trading services but are actually designed to steal money or personal information from users. They often use fake testimonials, reviews, or news articles to lure victims into signing up and depositing funds. Once they have access to the victims’ money or data, they either disappear or demand more payments under various pretexts.
These are schemes that promise high returns or guaranteed profits from investing in cryptocurrencies or related projects. They often use social media, email, or phone calls to contact potential victims and persuade them to join their programs. They may also use celebrities or influencers to endorse their schemes or create fake websites or White Papers to appear legitimate. However, these schemes are either Ponzi schemes that pay out early investors with money from new investors until they collapse or exit scams that run away with all the funds collected.
These are scams that offer free or discounted cryptocurrencies or tokens as prizes or rewards for completing certain tasks or actions. They often require users to send a small amount of cryptocurrency to a specified address or scan a QR code to verify their identity or eligibility. However, these are just tricks to steal cryptocurrency from users or infect their devices with malware.
These are scams that pretend to offer assistance or solutions to users who have lost access to their cryptocurrency wallets or accounts. They often claim to be affiliated with reputable platforms, exchanges, or organisations and ask users to provide their wallet details, passwords, recovery phrases, or private keys. However, these are just attempts to gain access to the users’ cryptocurrency and transfer it to their own wallets.
The ACCC warns consumers to be wary of any offers or requests involving cryptocurrencies that sound too good to be true, and to do their own research before engaging with any crypto-related platforms, services, or schemes. The ACCC also advises consumers to report any suspected crypto scams to Scamwatch or the police.
The Australian Regulators Clarify the Legal Status of Crypto Assets
Another important aspect of crypto investigation in Australia is the legal status and regulation of crypto assets. In Australia, there is no specific legislation that defines or regulates cryptocurrencies or tokens. Instead, the existing laws and regulations apply depending on the nature and characteristics of each crypto asset and its use case.
According to a guide published by Lander & Rogers, a leading Australian law firm, the legal status of crypto assets in Australia can be summarised as follows:
These are digital assets that function as a medium of exchange, store of value, or unit of account. They are not considered as legal tender or fiat currency in Australia, but they are subject to taxation and anti-money laundering rules. They may also be subject to consumer protection and financial services rules if they are used for payment or investment purposes.
These are digital assets that provide access to a service or platform, such as cloud storage, bandwidth, or computing power. They are not considered as financial products or securities in Australia, but they may be subject to taxation and anti-money laundering rules. They may also be subject to consumer protection and data privacy rules if they involve personal information or data.
These are digital assets that represent a right or interest in an underlying asset, such as equity, debt, or revenue. They are considered as financial products or securities in Australia and are subject to the same rules and regulations as traditional securities, such as licensing, disclosure, reporting, and compliance requirements.
These are digital assets that represent a unique or scarce item, such as art, music, collectibles, or gaming items. They are not considered as financial products or securities in Australia, but they may be subject to taxation and anti-money laundering rules. They may also be subject to intellectual property and consumer protection rules if they involve copyrighted or trademarked content or goods.
Australian regulators have been actively monitoring and engaging with the crypto industry to provide guidance and clarity on the legal status and regulation of crypto assets. Some of the key regulators involved include:
- The Australian Securities and Investments Commission (ASIC), the primary regulator for financial markets, services, and products in Australia. It oversees the compliance of crypto-related platforms, services, and products with the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001. It also provides guidance on the classification and treatment of crypto assets as financial products or securities.
- The Australian Transaction Reports and Analysis Centre (AUSTRAC), the national anti-money laundering and counter-terrorism financing regulator in Australia. It administers the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and the Financial Transaction Reports Act 1988. It requires crypto-related platforms and services that provide exchange, transfer, or custody services for cryptocurrencies or tokens to register with AUSTRAC and comply with its rules and obligations.
- The Australian Taxation Office (ATO), the principal revenue collection agency in Australia. It administers the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997. It treats cryptocurrencies and tokens as property or capital assets for taxation purposes and requires crypto-related platforms, services, and users to report their income, gains, losses, deductions, and expenses related to their crypto transactions.
Australian regulators have also been collaborating with each other and with international counterparts to share information and best practices on crypto regulation and enforcement. For example, ASIC is a member of the Global Financial Innovation Network (GFIN), which is a forum comprised of over 60 regulators and organisations that aim to foster cross-border cooperation on financial innovation and regulation.
Conclusion
Crypto investigation in Australia is a complex and evolving field that involves various challenges and opportunities for the authorities, regulators, industry players, and consumers. The Australian authorities have been taking proactive steps to combat crypto crimes and protect consumers from potential risks while also providing guidance and clarity on the legal status and regulation of crypto assets.
As cryptocurrencies continue to grow in popularity and adoption in Australia and around the world, it is expected that crypto investigation will become more important and sophisticated in the future.
