Hong Kong police launched a new Web3 platform known as “CyberDefender Metaverse” on Saturday.

To commemorate this, the unit held the first event “Exploring the Metaverse” in virtual space.

Cracking down on cryptocurrency crime

During the launch event, Cybersecurity and Technology Crime Bureau (CSTCB) Chief Inspector General Yip Chukyu spoke about the dangers posed by Web3. He told attendees that fraud, hacking, theft, sex crimes and other crimes are all threats in the Metaverse.

The event also focused on the use of digital assets by modern cybercriminals and progress in combating cryptocurrency crime.

and press release Along with this, the Hong Kong police announced that in 2022, 2,336 cases of crypto-related crimes were recorded in Hong Kong. These caused victims to lose $1.7 billion.

And in the first quarter of this year, 663 such cases have already been reported. Alarmingly, in just three months, reported losses reached $570 million, a 75% increase compared to Q1 2022.

The release states that most of these incidents involve cryptocurrency investments. “Criminals have taken advantage of the public’s lack of knowledge about crypto assets to lure them into non-existent investments,” it warned.

Hong Kong regulator updates AML rules

In addition to the new Metaverse platform, the Hong Kong Securities Regulatory Commission (HKSRC) has issued its latest anti-money laundering (AML) guidelines this week.

The HKSRC guide details how criminals use digital assets to launder money. In addition, we further elaborate on the steps financial institutions can take to protect themselves from being involved in illegal activities.

The new rules apply to all companies dealing with crypto assets. Changes include enhanced Know Your Customer (KYC) and due diligence requirements.

The updated guidelines require institutions facilitating cryptocurrency transactions over RMB 8,000 to collect identifying information about both senders and recipients.

Globalization of Digital Crime Countermeasures

Hong Kong has stepped up its efforts to prevent dirty money from flowing into the city by enforcing enhanced KYC rules. Businesses must conduct KYC checks regardless of where their customers are based.

Hong Kong will therefore become a less attractive destination for criminals who use cryptocurrencies to hide their identities.

Other jurisdictions besides Hong Kong have also adapted their AML frameworks to address the use of digital assets by criminal networks. For example, Japan also announced stricter AML rules for cryptocurrency transfers this week.

Specifically, the country will impose so-called “travel rules”.

With the Travel Rule in place, cryptocurrency exchanges will need to ensure that details about senders are shared with other parties.

Ultimately, to be effective, crime-fighting efforts must be as international as the criminal networks themselves.
As such, it was reported last month that the Internal Revenue Service (IRS) will deploy cyber agents internationally to investigate the use of cryptocurrencies in financial crimes.