According to a recent report by analytics company Chainalysis, it seems that traditional money launderers are now starting to use cryptocurrency networks for their illicit activities. This means that criminals who typically operate outside of the crypto space are now utilizing blockchain technology to move their cash around in ways that may raise suspicions.
Chainalysis’ Head of Research, Kim Grauer, explained that these money launderers are creating “large-scale money laundering infrastructure” using crypto networks to clean cash that did not originate from crypto-related scams or thefts. Unlike the usual suspicious transactions that Chainalysis is known for flagging, these new transactions are coming from wallets that are not necessarily deemed illicit. However, the way these funds are being moved across blockchains and into exchanges mirrors strategies that would typically raise red flags in traditional financial institutions.
For example, these launderers are splitting their funds into smaller tranches that are just below reporting thresholds for know-your-customer regulations, and then recombining them later on. While these transactions may not definitively prove criminal activity, they certainly exhibit patterns that are commonly associated with money laundering.
Chainalysis’ July report sheds light on the scale of this trend across the entire blockchain, revealing that it is much larger than previously thought. The company found a high volume of transactions valued just under the $10,000 threshold, which triggers additional KYC requirements, when analyzing transfers to exchanges in 2024.
It’s important to note that a transaction being slightly below a certain threshold does not automatically indicate wrongdoing. However, in the traditional financial sector, such patterns are often used as heuristics to identify potentially suspicious activity. Grauer emphasized that there are various factors that investigators consider when determining the legitimacy of a transaction, and being slightly below a threshold is just one piece of the puzzle.
Of particular concern are transactions going to over-the-counter brokers who openly advertise their services for converting criminal crypto into fiat currency without asking questions. This highlights the need for enhanced compliance measures in the crypto space to align with the standards set by traditional banking institutions.
Overall, the report by Chainalysis underscores the growing trend of traditional money launderers leveraging cryptocurrency networks for their illicit activities. As regulators and industry players work to combat financial crime in the crypto space, it becomes increasingly important to implement robust compliance measures and monitoring tools to prevent misuse of blockchain technology for illegal purposes.