Transfer Spoofing – A New Level of Layering

As technology evolves, it provides new avenues for #moneylaundering and to disguise financial transactions. “Transfer Spoofing” is one such technique that helps cryptocurrency launderers to disguise the origin of the transaction.

What is Transfer Spoofing?

In simple terms, transfer spoofing is an alteration of the transfer details. In this form of spoofing, details such as the name of the transferor or precisely the wallet address of the transferor are altered.

The”transfer” and “transferFrom” functions can be modified in ERC-20 Standard. It allows any arbitrary address to be the sender of tokens, as long as this is specified within the smart contract.

This misleads the software tools which generate their reports based on etherscan. Most of the block explorers display the address of the transferor and not the initiator address.

Imagine what will happen if you can change the name of the remitter while transferring money from one bank account to other.

You can simply change the remittances coming from drug dealers as remittances from Central Bank and the #investigators would never have any doubts. This will help the criminals to disguise the nature of the transaction.

In money laundering parlance, this process is also termed layering.

FTX Hack and Spoofed Transfers

This term gained attention amid controversies relating to the insolvency of the cryptocurrency exchange FTX. After it filed for bankruptcy there were certain transfers to the wallets which were not recognized by the remaining employees of the exchange and were termed as a hacking attack.
While transferring the funds from the alleged FTX hack, the “transferFrom” function was changed to mislead the agencies watching the cryptocurrency transactions.

There is also speculation that Bahamian officials were behind the FTX hack. In the wake of such attacks, new terms are emerging in the parlance of money laundering. It becomes imperative for Anti Money Laundering Officers to understand the changing dynamics in the wake of emerging new techniques of money laundering. Moreover, courses such as Certified Crypto Currency Laundering Expert would play a significant role in the capacity building of AML investigators in the crypto world.