The new Chainalysis money laundering report further adds to findings from the recent past that have shown how law enforcement and crypto-related services face continued challenges due to advanced crypto laundering techniques.
Sophisticated money-laundering techniques remain one of the major setbacks for law-enforcement agencies and service providers to cryptocurrency, with more revelations coming into play through a report by Chainalysis.
An “Anti-Money Laundering and Cryptocurrency Report” published by blockchain analysis firm Chainalysis on July 11 brought to light the fact that every month billions flow through the crypto ecosystem from illicit wallets to conversion services. Advanced flow methodology clearly hides sources and movement of such funds.
Masking the trail
The other popular method was through the use of intermediary wallets, which obscured the flow of dirty money. Hops are great in making the flow of funds difficult to trace; more than 80% of the total value in the laundering channels flowed via these intermediary wallets. The use of such transactions is further complicated by the increased use of stablecoins, like Tether USDT, in these transactions and the inherent risks that pose for launderers, as the issuers can freeze stablecoin funds.
A case in point, according to the report: the June 2023 Atomic Wallet exploit was channeled by North Korea’s TraderTraitor hacker group and is one of the ways that such tactics are now being used in crypto-native laundering.
This incident illustrates the advanced methods used to conceal funds that had been obtained illegally, making it illustrative of the persistent challenge facing investigators.
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Mixers in the mix
Mixing services, including mixers and privacy coins, further complicate the tracking of illicit funds. An example of a mixer is Tornado Cash, which jumbles cryptocurrencies of different users to hide their sources. Even if it was sanctioned and targeted by the watchdogs, mixers made a comeback in 2024, proving that this kind of service is still a hit with bad actors. Privacy coins, such as Monero XMR and Zcash ZEC, come with much better anonymity features, which are now going to make the tracking of such transactions almost impossible, hence attracting illicit actors.
Centralized exchanges
The report further remarked that illicit funds tend to, by and large, prefer centralized exchanges, with over 50% ending up at centralized exchanges for their high liquidity and integration with traditional financial services. However, significant reduction in the volume received by centralized exchanges suggests improved Anti-Money Laundering programs.
In addition, over-the-counter brokers, especially those operating without adequate Know Your Customer procedures, have been at the forefront of enabling the off-ramping of these ill-gotten monies. In these cases, such brokers usually advertise their services on encrypted messaging platforms and offer direct conversion to fiat with the lure of anonymity to crooks.
The report thus emphasizes the need for continual development of tools for blockchain analysis and consistent regulatory efforts against these sophisticated tactics used in crypto-native money laundering, including proper anti-money laundering laws.