Evolving Tactics in Crypto Money Laundering
A recent report by Chainalysis reveals that money laundering involving crypto assets has decreased compared to the previous year. However, illicit actors are finding new ways to evade detection and obscure the movement of illicit funds.
The report shows that in 2023, illicit addresses sent around $22.2 billion worth of cryptocurrency to various services, a significant decrease from the previous year’s $31.5 billion.
While part of this decline can be attributed to an overall decrease in legitimate and illicit crypto transaction volume, money laundering activity experienced a steeper drop of 29.5% compared to the 14.9% decrease in total transaction volume.
Shift Towards Decentralized Finance (DeFi)
Centralized exchanges remain the primary destination for funds from illicit addresses, but there has been a growing share directed towards decentralized finance (DeFi) protocols. This shift can be attributed to the expansion of DeFi platforms, although their transparency makes it harder to obfuscate fund movements.
The breakdown of service types used for money laundering in 2023 was similar to the previous year, but there were notable changes in specific types of crypto criminals’ practices. There was a significant increase in funds sent to cross-chain bridges from addresses associated with stolen funds, indicating a shift towards using bridge protocols for money laundering purposes.
Additionally, there was a rise in funds sent from ransomware attacks to gambling platforms and bridges, demonstrating the adaptability and resourcefulness of cybercriminals.
North Korean Hackers and Cross-Chain Bridges
A major concern is the concentration of money laundering at fiat off-ramps where criminals convert their crypto into cash. In 2023, 71.7% of illicit funds sent to off-ramping services went to just five services, indicating a slight increase from the previous year.
The report also highlights the changing tactics of sophisticated crypto criminals, particularly North Korean-affiliated hacking groups like Lazarus Group. These actors have shown an ability to adapt their money laundering strategies in response to law enforcement actions.
Cross-chain bridges have seen substantial growth in money laundering activities, with illicit actors leveraging these protocols to move funds between blockchains. North Korean hackers, in particular, have been prominent users of bridge protocols for money laundering purposes.
Increased Diligence and Understanding
The report emphasizes the need for increased diligence and understanding of interconnectedness in fighting crypto crime by targeting money laundering infrastructure.
Hot Take: Money Laundering in Crypto Sees Decline, but Criminals Adapt
A recent report by Chainalysis reveals that while money laundering involving crypto assets has experienced a decline compared to the previous year, illicit actors are adapting their tactics to evade detection. The report highlights a decrease in the total value of cryptocurrency sent from illicit addresses and a steeper drop in money laundering activity compared to overall transaction volume. Centralized exchanges remain popular among criminals, but there is a growing share of funds being directed towards decentralized finance (DeFi) protocols. Additionally, the report highlights changes in specific types of money laundering practices, including an increase in funds sent to cross-chain bridges and from ransomware attacks. The concentration of money laundering at fiat off-ramps and the adaptability of North Korean-affiliated hacking groups are also discussed. Overall, the report emphasizes the need for increased diligence and understanding in combating crypto crime.
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