The Security Service of Ukraine (SBU) has conducted raids at eight properties across Kyiv that were part of an international cryptocurrency scheme operating in post-Soviet countries.
The raids turned up large amounts of cash, bank cards, computer equipment and documentation providing evidence of illegal activities, the SBU announced on July 13.
According to the SBU, internally displaced persons from the Donbas had created several online services that allowed users to convert cryptocurrency from unverified sources into cash and other currencies. The services ran unhindered between 2017 and 2020, before the SBU shut them down under anti-money laundering laws.
Forensic investigations are now underway to find out whether the scheme was financing Russian-backed militants occupying parts of Ukraine’s Donetsk and Luhansk oblasts. At the raided properties, officers found dozens of Russian SIM cards, mobile routers and evidence of foreign internet traffic.
The services provided cash for cryptocurrency, issuing undisclosed quantities of money to customers using exchange offices licensed by the National Bank of Ukraine. The physical exchange of cryptocurrency was conducted abroad to avoid restrictions and was handled by shadow-entities controlled by the criminals, the SBU said. Payments were conducted using the “WebMoney” platform, which is subject to sanctions by the National Security and Defense Council of Ukraine.
Cryptocurrency is currently not recognised as a valid payment tool in Ukraine.
Photos released by the Security Service of Ukraine (SBU) show currency and SIM cards for mobile phones confiscated during raids on premises used for a cryptocurrency scheme.
The individuals behind the scheme did not declare their activities to the relevant authorities in Ukraine and did not pay taxes. Furthermore, they failed to undertake required accounting or to identify customers’ identities.
This is not the first time that the Ukrainian security services have cracked down on cryptocurrency operations.
In July 2019, the SBU revealed that the South Ukraine Nuclear Power Plant in Yuzhnoukrainsk was being exploited to mine cryptocurrency. Employees of the power plant were found to have committed a serious breach of state secrecy due to the vulnerability of the plant’s networking systems.
On July 14, the Ministry of Digital Transformation announced that it was working toward the legalization of cryptocurrencies and blockchain technology. A bill aimed at amending Ukraine’s Tax Code will include provisions to legalize these technologies, provided that they comply with international anti-money laundering and anti-terrorist financing standards.
The ministry hopes that blockchain technologies will help create the necessary conditions for increased investment in Ukraine. The government is reportedly working alongside the blockchain community to facilitate the changes.
If the cryptocurrency scheme in Kyiv is found to have been funnelling funds to the occupied territories, it would be one of the Russian-backed militants’ most sophisticated methods of funding their activities.
In 2017, Latvian media reported that a bank in the Baltic country was being used to route donations to the occupied territories of Ukraine. According to Latvian public broadcaster LSM.LV, the militants’ unrecognized representatives in France were soliciting donations through a British payment provider called PSI-Pay Limited to a Latvian bank account used by “officials” of occupied Donetsk Oblast.
