Latest Insights on Crypto Money Laundering Trends
- By 2024, crypto money laundering covers all types of criminal activities.
- Common laundering methods include intermediary wallets, mixers, privacy coins, and cross-chain bridges.
- Centralized exchanges remain key destinations for laundered funds, but AML programs are improving.
Key Trends in Crypto Money Laundering for 2024
In a recent post on X, Chainalysis, a cryptocurrency tracing company, revealed a money Laundering report. The report shows how the bad actors are now incorporating cryptocurrencies to facilitate money laundering from off-chain crimes and not only crypto-originating crimes such as ransomware. Chainalysis looks into more sophisticated tracing methods and shows how data from blockchains is already being used to fight financial criminals.
The Broadening Horizons of Crypto Money Laundering
Money laundering through cryptocurrencies is becoming more prevalent due to their cross-border, instant, and low-cost nature. While public blockchains are transparent, cyber criminals use them to hide funds from on-chain crimes like darknet markets and ransomware. However, cryptocurrencies are now also used to launder money from off-chain crimes such as drug trafficking and fraud.
By 2024, the scope of money laundering through crypto has expanded to cover all types of criminal activities, not just those directly linked to the crypto world.
This trend means that law enforcement expertise in cryptocurrency must expand beyond cybercrime units to all agencies. Despite the challenges, blockchain's transparency can help investigators detect and trace illicit activities, providing valuable intelligence and evidence.
Chainalysis also highlights the most common methods used for money laundering in the cryptocurrency world. According to their findings, around 80% of illicit funds are funneled through intermediary wallets.
Additionally, the report identifies other frequently used techniques by money launderers, including mixers, privacy coins, and cross-chain bridge protocols.
Surge in Illicit Crypto Transfers through Bridges Reaches Record High
Starting in late 2023, there was a significant increase in the amount of illegal money being moved through bridges. By January 2024, nearly $234 million of these illicit funds were recorded, marking the highest amount ever seen.
Source: Chainalysis
This surge was mainly due to money being transferred from Tornado Cash, a privacy tool, to other platforms known as bridges, which help move funds between different cryptocurrencies.
Centralized Exchanges: Key Destinations for Laundered Crypto Funds
Cybercriminals often try to convert their illegal crypto funds into cash, with over 50% of these funds ending up at centralized exchanges. These exchanges are popular because they offer high liquidity and easy conversion to traditional money.
However, the amount of illicit funds going to these exchanges has decreased from nearly $2 billion a month to about $780 million a month, indicating that anti-money laundering (AML) programs at these exchanges are becoming more effective.
Conclusion
The Chainalysis report shows that the nature of cryptocurrency money laundering is changing, and it is actively used in both on-chain and off-chain crimes. Nonetheless, the pseudonymity and the high velocity of the transactions that characterize cryptocurrencies, present numerous problems for their identification and prevention, the fundamental principles of blockchain technology provide substantial opportunities for the police to track and counter unlawful operations.
It also reveals that there is a change in the modus operandi of money laundering with an increase in the use of intermediary wallets, mixers, privacy coins, and cross-chain bridges. Fortunately, the results of anti-money laundering programs in centralized exchanges are gradually enhancing, as the rate of the flow of illicit funds through these platforms has been reduced.
