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South Korea, Crackdown on Cryptocurrency Sex Crime

The pseudo-anonymizing features of cryptocurrency provide a new layer of concealment for criminals involved in money laundering, terrorist financing, the sale of illegal goods and services, and sex crimes, including the exploitation of underage girls. As a result, it is difficult for law enforcement to catch the bad guys and mitigate the atrocity. In South Korea, officials discovered an underage sex racket conducted with thousands of offenders spread across 30 chat rooms who allegedly paid nearly $1,200 in Bitcoin to view physical, mental, and sexual abuse of extorted minors. In addition to the entry fee, the operators of these rooms, called “nth rooms,” required users to “prove” themselves before entry was allowed. Proof came in the form of sharing sexual abuse content of their own, thereby implicating themselves in a way that would “prove” the user was not an undercover agent. Many of the minors were runaway teens who prostituted themselves to earn enough money, food, or shelter to survive. They were often lured into participating in the abusive chat room content by recruiters who promised them lucrative escorting or modeling jobs. Victims were directed to a Telegram chat in which personal information such as name, the contact information of friends and family members. This data was then used against the victim as blackmail to ensure further cooperation. South Korean officials have cracked down on cryptocurrency involved sex abuse scandals before the “nth room” case. In 2019 law enforcement shut down a Dark Web market that offered over 200,000 videos showing lewd acts against children. The cryptocurrency was the method of payment for access to the content. The South Korean national Jong-Woo Son, who established the market, is now serving an 18-month prison term for the site and other charges involving sexual abuse. Neil Walsh, a top United Nations official leading the Cybercrime and Anti-Money Laundering division of the UN Office on Drugs and Crime, said law enforcement efforts should target exchanges where illicit cryptocurrency funds may be “washed” adding another layer of secrecy to thwart law enforcement. He suggested the added security protocols would not impede legitimate cryptocurrency users as “there isn’t a large amount of risk around declaring who might be moving value using cryptocurrencies.” The intergovernmental Financial Action Task Force (FATF) is devoted to battling terrorism financing and money laundering. The FATF recommended regulating cryptocurrencies in 37 FATF member countries by requiring “virtual asset service providers” (VASPs), reenact the “travel-rule,” which would stipulate that exchanges and cryptocurrency wallet providers are now ordered to comply with Know-Your-Customer (KYC) regulations and collect real and accurate customer information. Walsh stated, “We’ve brought together those policymakers, lawyers, those cryptocurrency experts to try and look what policy might look like in this space, because when we look at some of the high-risk crime where we see kids, I’m talking babies very, very young, six months old and younger, who are in pay per view live online child sexual abuse streaming websites that are getting paid for by cryptocurrencies. We need to have some options. We need to know how we try and challenge that threat and reduce the risks for kids and reduce the opportunities for criminals to get involved.”

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