A recent investigation by the UK’s National Crime Agency (NCA) has uncovered a multi-billion-pound money-laundering network linked to cryptocurrency, shining a spotlight on the controversial asset class increasingly found in mainstream investment portfolios.
The operation, dubbed Operation Destabilise, exposed how Russian cybercriminals and state actors used sophisticated schemes to launder illicit cryptocurrency gains. These activities occurred within the same cryptocurrency markets that underpin various investment products used by everyday savers and large institutions alike.
Rory O’Neill, a financial adviser and general manager at Stewart Group, explains the inherent risks. “Crypto investments have always been murky due to poor legislation and a lack of oversight,” he said. “They’re a risk to investors as there isn’t usually much in the way of a safety net if these trading platforms fail, yet they still lure people in with a promise of crazy high (yet not often realised) returns.”
The NCA investigation began with the Ryuk ransomware group, which extorted at least £27 million from 149 UK victims, including hospitals, schools, and local authorities. Following the money trail led to laundering networks operated by Russian millionaires based in Moscow’s Federation Tower and spanning 30 countries.
The pseudonymous and borderless nature of cryptocurrency has made it a preferred payment method for cybercriminals. When victims of ransomware attacks, such as hospitals or businesses, receive ransom demands, these are often accompanied by cryptocurrency wallet addresses. This ease of use and lack of traceability has entrenched cryptocurrency in global criminal enterprises.
According to the NCA’s Rob Jones, crypto markets “support pretty much everything bad you can find in terms of organised crime.” The laundering process uncovered in Operation Destabilise revealed how criminal groups exchanged cryptocurrency for cash with drug gangs, laundered it through cash-rich businesses, and reinvested it in legitimate assets.
Are Your Investments at Risk?
New Zealand investors may unknowingly hold exposure to cryptocurrency markets through KiwiSaver growth and aggressive funds, managed funds, exchange-traded funds (ETFs), and unit trusts. Even funds without direct crypto holdings might invest in companies heavily involved in blockchain technologies.
For those looking to avoid such exposure, ethical investment options with robust ESG filters may be a safer alternative. However, identifying these requires due diligence. “There is a bit of legwork involved in making sure your investments align with your values,” O’Neill notes. Many investors may not realise their portfolios include cryptocurrency exposure until conducting an in-depth review.
Ethical investing has gained momentum in recent years, with many New Zealanders choosing to avoid investments in fossil fuels, tobacco, and other controversial sectors. Cryptocurrency’s role in funding criminal activities warrants similar scrutiny.
Navigating the Risks
Seeking professional financial advice is crucial to navigate the complexities of modern investment portfolios. Financial advisers can help investors identify direct and indirect cryptocurrency exposure, assess whether fund managers’ practices align with ethical policies, and recommend alternative investment options that match personal values.
While the cryptocurrency market matures, regulatory efforts may eventually help separate legitimate investments from criminal exploitation. However, the decentralised nature of cryptocurrencies makes this a challenging task. For now, investors must remain vigilant, regularly reviewing their holdings to ensure their savings align with their ethical and financial goals.
Disclaimer: This article is for general informational purposes only and should not be construed as financial advice. Always consult a qualified financial adviser before making investment decisions.
