Bitcoin ATMs Frustrate Spanish Authorities With Money Laundering Loop Hole

Michael LaVere
  • Lack of regulation with Bitcoin ATMs has created a gap in EU money laundering rules. 
  • Spanish authorities are having trouble prosecuting a drug trafficking ring. 

Bitcoin and cryptocurrency ATMs have allowed criminals a loophole in the European Union’s money laundering laws, Spanish authorities claim. 

Bitcoin ATM Money Laundering

According to Bloomberg, Spanish authorities who were attempting to prosecute a money laundering group utilizing bitcoin ATMs for drug payments claim the machines provide a loophole in EU regulations. 

Law enforcement authorities from Spain’s Civil Guard police unit said that cryptocurrency trading platforms, including bitcoin ATMs, are not beholden to the rules that require money-handlers to properly vet their clients. The end result has been somewhat of a murky legal landscape in enforcing money laundering protection. 

Bitcoin ATMs have been on the rise over the last year. According to Coin ATM Radar, there are more than 5400 machines operating worldwide, with 89 located in Spain. The ATMs provide a convenient method for purchasing crypto-assets, in addition to a physical kiosk to exchange for fiat. 

However, the ATMs have increasingly been targeted in cases of fraud and illegal money trafficking, in part due to the current uncertainty surrounding crypto-asset regulation. 

More Regulation Needing

In May, Spanish officials announced the arrest of eight perpetrators involved in a complex laundering scheme that saw the transfer of more than 9 million euros ($10 million) for drug trafficking to Colombia and other countries. The laundering ring was utilizing two bitcoin ATMs to funnel drug money for bitcoin which could then be cashed in on the platforms. 

The accused criminals were operating with false identities through the ATM platform, but Spanish law enforcement says prosecuting the case will be more difficult due to the loophole in EU regulation.

Civil Guard authorities confiscated the bitcoin ATMs, in addition to a handful of cold and online wallets. However, they are unable to properly prove the relationship between digital payments and those accused of laundering drug money. 

Last week Spain’s Supreme Court issued a decision in a separate case, ruling that bitcoin is an asset and does not constitute digital money.  As a by-product of the ruling, bitcoin-related fraud must be paid back in euros. Spanish authorities involved in the ATM case said the ruling was the first step in closing the money laundering discrepancy that currently applies to digital asset trading platforms.