Bitcoin – A very 21st century fraud

RSM’s special investigations team have identified a growing trend in cases where virtual currencies are manipulated for fraudulent gain. Advisers charged with investigating fraud therefore need to increase their own knowledge to ensure they are up to speed on the issue.

What is Bitcoin (BTC)?

BTC is a virtual currency enabling users to make payment for goods and services across the internet. It is a system controlled by the users of BTC and doesn’t need a third party ie a bank to facilitate a transaction.

How does Bitcoin work?

BTC are traded using Bitcoin Wallets, which is software that can be downloaded onto a computer or smartphone. Each wallet has a specific unique ID, which acts as an address destination, similar to a bank account number. From this wallet, users can transfer and receive BTC to other wallets around the world. 

Regulation of BTC

Currently there are no Government or Money Laundering Regulations applicable to BTC in the UK. It is susceptible to use for fraudulent gain and other illegal activities. 

BTC is therefore a popular method of payment for illegal goods and services on the ‘Dark Web’ because the user is private, with only the Wallet ID shown. This makes it easy for individuals to purchase drugs, ammunition or even inappropriate images. 

Although the BTC industry is developing safeguards and risk analysis tools to try to reduce the risks, advisers must ensure they are aware of how the risks might relate to them.

How we can help

RSM’s forensic technology and special investigations teams have the capability and expert contacts to provide you with advice on safeguarding from potential fraud. Alternatively if you have been the victim of a fraud we can investigate and assist in possible recovery action. 

Our in house experts can provide advice on the best technology available as well as assist with your own investigations into use of IT data to defraud.

The special investigation team use powers available in the Insolvency Act to recover assets for the benefit of victims of fraud.

For further information on how to ensure both you and your clients avoid being subjected to fraud using currencies and how to identify fraud to protect yourself, please contact Jack Plunkett or Mark Wilson.