Crypto ATMs, designed to facilitate the conversion of cash into 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 disturbing increase in fraud enabled by these machines in the US, which have become ubiquitous – appearing in gas stations, convenience stores and other accessible locations.
The report comes amid similar findings from the FBI, which also recently reported an increase in crypto-related investment fraud in the country. The issue has prompted US lawmakers to call for greater oversight and regulation.
Lack of supervision
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 unsolved due to the anonymity and speed of crypto transactions.
Scammers often use crypto ATMs to quickly convert stolen money into crypto, which can then be transferred across borders and laundered through various exchanges.
The OCCRP report notes 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 main issues contributing to the increase in crypto ATM fraud is inconsistent regulations across 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 strict requirements, while others, such as Illinois, do not classify crypto as money, limiting regulatory oversight.
Response to scams
The U.S. 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 first has identified transnational criminal networks exploiting US financial systems, often from countries that have no legal agreements with the US.
Several high-profile cases highlight the scale of the problem. In one case, a New York City resident was convicted of operating a network of unlicensed crypto ATMs that facilitated more than $5.6 million in fraudulent transactions. The machines were marketed for their anonymity, attracting a criminal clientele and highlighting the potential for abuse.
Major cryptocurrency ATM operators, such as Bitcoin Depot and FlipCoin, claim they are taking steps to prevent fraud by implementing alert systems and monitoring transactions. DigitalMint, another operator, claims to check destination wallets against sanctions lists and regularly contacts customers about suspicious activity.
The OCCRP said the increase in crypto ATM scams calls for stricter regulatory measures and improved cooperation between state and federal agencies.
