- Traditional money launderers have increasingly used blockchain technology to obscure illicit funds, according to Chainalysis
- This shift has marked a move from typical crypto-based crimes to traditional criminals leveraging digital networks
- The development will alarm crypto supporters who fear even tighter government controls amid legislative progress against money laundering
Traditional money launderers are increasingly using blockchain technology to obscure their illicit fund movements, according to a recent report by analytics firm Chainalysis. The news marks a shift from the typical crypto-based crimes such as scams and ransomware attacks, suggesting that criminals from outside the cryptocurrency world are now leveraging these digital networks. The news comes just as governments seem to be making headway in their battle against money launderers through legislation and will alarm supporters who will fear even tighter controls.
Big Boys Are Starting to Play
Chainalysis’ latest report, released on Thursday, highlights how conventional money launderers are exploiting crypto networks to establish a “large-scale money laundering infrastructure”. Kim Grauer, Head of Research at Chainalysis, told CoinDesk that these operations aim to clean cash that originally came from non-crypto sources, showing that its appeal is spreading beyond the early adopters of crypto for illicit means.
Unlike the transactions flagged by Chainalysis’ tools as stemming from crypto-related crimes, these new types of transfers originate from wallets not previously associated with illicit activities. Nevertheless, they follow patterns that would raise red flags in traditional banking systems, such as transactions being broken down into amounts just below regulatory reporting thresholds and later recombined, a tactic known as “structuring.”
Chainalysis has been instrumental in helping crypto exchanges and regulatory bodies identify and avoid accepting funds linked to criminal activities. However, this new class of transactions poses a different challenge due to its opacity and the sophisticated strategies employed by the launderers.
A Case of ‘When,’ Not ‘If’
Grauer noted that the phenomenon has been a potential issue for years, but the July report is Chainalysis’ first comprehensive attempt to quantify its scale across the blockchain. The findings indicate that these questionable transactions are significantly more extensive than previously known illicit activities.
In their 2024 analysis of transactions sent to exchanges, Chainalysis discovered a large number of transfers valued just below the $10,000 mark. This amount is significant because it falls just under the threshold that triggers additional know-your-customer (KYC) requirements. Although a transaction slightly under $10,000 isn’t automatically suspicious, traditional financial institutions often use such heuristics to identify potential criminal activity.
Grauer emphasized that while these patterns alone aren’t enough to prove wrongdoing, they are a crucial component of a broader investigative process. More concerning are the transactions directed to over-the-counter brokers who openly advertise their willingness to convert illicit crypto into dollars without asking questions.
“This report aims to advance the conversation on how compliance techniques developed in traditional banking can be adapted for the crypto industry,” Grauer stated.
As traditional criminals increasingly adopt blockchain technology, the report underscores the need for the crypto industry to enhance its compliance measures to prevent illicit fund movements.
