OCCRP investigation reveals surge in crypto ATM usage among scammers, criminals

Crypto ATMs, designed to facilitate converting cash to cryptocurrencies, are increasingly being exploited by scammers, according to a recent investigation by the Organized Crime and Corruption Reporting Project (OCCRP) and the Miami Herald.

The findings reveal a troubling surge in fraud facilitated by these machines across the US, which have become ubiquitous — appearing in gas stations, convenience stores, and other accessible locations.

The report comes amid similar findings by the FBI, which also recently reported a rise in crypto-related investment fraud in the country. The issue has prompted US lawmakers to call for increased scrutiny and regulation.

Lax oversight

According to the report, the rapid growth of crypto ATMs and relatively lax regulatory oversight have made them an attractive target for criminals. Compared to online exchanges, these machines typically require minimal identification, making it easier for scammers to operate without detection.

In 2023, the FBI reported that losses from scams involving crypto ATMs exceeded $120 million. The figure highlights the significant financial impact of such frauds, which often go unreported or unresolved due to the anonymity and speed of crypto transactions.

Scammers often use crypto ATMs to quickly convert stolen cash into crypto, which can then be transferred across borders and laundered through various exchanges.

The OCCRP report noted that many of these fraudulent activities are linked to international criminal networks operating from countries with weak regulatory frameworks. It added that one of the major issues contributing to the rise in crypto ATM scams is the inconsistent regulatory environment across different states.

While federal law requires crypto ATM operators to register with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and adhere to anti-money laundering (AML) standards, state-level regulations vary widely. Some states have stringent requirements, while others, like Illinois, do not classify crypto as money, thus limiting regulatory oversight.

Response to scams

The US Secret Service and the FBI are working to combat these scams but face significant challenges due to the international nature of many of these crimes. The former has identified transnational criminal networks exploiting US financial systems, often from countries that lack legal agreements with the US.

Several high-profile cases highlight the extent of the problem. In one instance, a New York City resident was convicted for operating a network of unlicensed crypto ATMs that facilitated over $5.6 million in fraudulent transactions. The machines were marketed for their anonymity, attracting a criminal clientele and highlighting the potential for misuse.

Major crypto ATM operators, such as Bitcoin Depot and FlipCoin, assert that they are taking steps to prevent fraud by implementing warning systems and monitoring transactions. DigitalMint, another operator, claims to check destination wallets against sanctions lists and frequently contacts customers about suspicious activities.

The OCCRP said the rise in crypto ATM scams calls for stronger regulatory measures and enhanced cooperation between state and federal agencies.