Japan revises AML regulations amid North Korean cyber attacks

• The Japanese government okayed amendment laws to prevent crypto AML.
• Japanese police warned of cyber attacks by North Korea backed Lazarus group.

According to local media reports, the Japanese government cleared the proposal to make amendments in existing financial laws to prevent crypto based money laundering and hike penalties for those engaging in money laundering.

The Foreign Exchange Act and Act on Prevention of Transfer of Criminal Proceeds will be revised after the cabinet’s approval.

After the amendments, crypto exchanges will be liable to share user information including names and addresses between platforms. The government will have the authority to freeze the assets of local individuals and entities who are named by the UN for aiding the proliferation of Weapons of Mass Destruction.

According to the Chief Cabinet secretary of Japan, Hirokazu Matsuno, the assets of 5 entities who were helping North Korea’s nuclear program were frozen.

The Lazarus group, which is backed by North Korea, is targeting cryptocurrency exchange employees. The Japanese National Police Agency announced last week that the Lazarus group was sending malware loaded emails to crypto exchange employees. The hacker group has already hacked some companies.

Cryptocurrency and money laundering

Money laundering refers to the process of disguising the trail of black money which is cash collected via illegal means (drug trafficking, corruption, extortion, theft etcetera). According to a CNBC report, money laundering in the cryptoverse occurs mainly via cross-chain bridges. Cross-chain bridges are used to transfer currency between chains. Offenders can avoid the scrutiny of centralized authorities like national financial watchdogs by transferring digital assets across blockchains.

According to blockchain research and analysis firm Eliptic, Renbridge is popular cross-chain bridge among criminals. Renbridge has been used to launder $540 million since 2020. The figure includes $153 million in ransom payments – companies were forced to pay for their data. Ransomware gangs with Russian links have used this bridge according to Eliptic.

The attacks on Japanese crypto exchanges show how vulnerable cross chain bridges are “effectively ungoverned” which makes them vulnerable to such attacks. 

The Lazarus Group

North Korean hacker group Lazarus has attacked Japanese cryptocurrency exchanges according to a joint statement issued by local police and the Financial Services Agency of Japan.

The infamous group has been accused of various cyber attacks other than crypto based attacks. In 2014, the group attacked Sony Pictures Entertainment in retaliation to the movie “The Interview ” a comedy in which the North Korean premier is assassinated. Several employees’ computers were attacked and damaged and confidential data was stolen.

In April, the US Treasury Department alleged that the Lazarus group was behind the $600 crypto theft from the Ronin bridge. Ronin bridge is the cross chain bridge connecting the Ethereum blockchain and Ronin blockchain which is a sidechain of the Ethereum chain. The Ronin bridge theft is the second largest crypto theft ever. Per Ronin, the hacker group attacked validator nodes of the chain in order to steal crypto assets.

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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