Swedish Authorities Identify Four Profiles of Illegal Crypto Exchanges

TLDR

• Swedish authorities label certain crypto exchanges as “professional money launderers”
• Four profiles identified: node, hawala, asset, and platform exchange providers
• Licensed platforms urged to monitor suspicious activity
• 21 crypto mining firms investigated for tax evasion between 2020-2023
• $90 million in unpaid taxes demanded from mining firms, some appeals accepted

Sweden is taking a firm stance against illegal cryptocurrency activities, with authorities labeling certain exchanges as “professional money launderers” and investigating crypto mining firms for tax evasion.

The Swedish Police Authority and Financial Intelligence Unit (FIU) have identified four distinct profiles of professional money launderers operating in the crypto space, while the Swedish Tax Agency has uncovered significant tax discrepancies in the mining sector.

The FIU’s analysis of unlicensed and illegal cryptocurrency providers led to their classification as professional money launderers (PMLs).

These entities are believed to have criminal connections and facilitate systematic money laundering for various individuals and criminal networks.

The four profiles identified are the node exchange provider, the hawala exchange provider, the asset exchange provider, and the platform exchange provider.

Swedish authorities emphasize the need for increased law enforcement presence on crypto trading platforms to curb illegal services.

The FIU considers illicit cryptocurrency providers an emerging threat within money laundering schemes and crucial for organized crime to maintain and expand their criminal markets.

However, the report also acknowledges the role of licensed and legitimate crypto trading platforms in combating money laundering activities.

These platforms are urged to remain vigilant, monitoring suspicious trading patterns and taking necessary actions such as halting transactions or removing problematic clients.

In a parallel effort to regulate the cryptocurrency industry, the Swedish Tax Agency has been investigating crypto mining operations. Between 2020 and 2023, the agency examined 21 crypto mining firms and found several irregularities in their tax filings.

Eighteen of these firms were found to have submitted “misleading or incomplete” information, apparently in an attempt to avoid paying value-added tax on taxable operations.

The tax agency stated that this approach led to tax revenue disappearing from the country through incorrect payments of input VAT, unpaid output VAT, and unreported crypto assets. As a result, the agency demanded approximately $90 million in unpaid taxes from these mining firms.

The crypto mining companies appealed against the tax demand to the administrative court. While most appeals were rejected, two mining firms had their appeals accepted, leading to adjustments in the demanded amounts.

These actions by Swedish authorities highlight the growing scrutiny of the cryptocurrency industry and the government’s efforts to ensure compliance with financial regulations and tax laws.

As the crypto market continues to evolve, it’s likely that we’ll see more countries implementing similar measures to combat illegal activities and ensure proper taxation of crypto-related businesses.

The Swedish government’s approach demonstrates a nuanced understanding of the cryptocurrency landscape, distinguishing between illegal operators and legitimate businesses. By targeting unlicensed exchanges and tax-evading mining operations, authorities aim to create a more regulated and transparent crypto environment in the country.

As these developments unfold, it will be interesting to see how the cryptocurrency industry in Sweden adapts to increased regulatory pressure and whether other countries will follow suit with similar classification systems and enforcement actions.