A new report by Chainalysis claims that around 55% of all money laundering facilitated with crypto came from around 270 crypto addresses. The report also revealed that most of the money laundering using crypto is concentrated in a small cluster of online services.
Services Involved In Crypto Fraud
According to the report, the services involved in crypto fraud include high-risk crypto exchanges with a dismal reputation, online gambling sites, crypto mixers, and financial firms in high-risk jurisdictions that offer crypto services.
The Chainalysis report analyzed the criminal activity of crypto addresses involved in fraud such as:
- online scams
- terror financing
- ransomware attacks
- child abuse payments
- crypto transactions linked to dark web marketplaces that sell drugs
- illegal weapons
- stolen information
The Surprising Results
With such deep analysis, the expectations would be that millions of crypto addresses were involved in these transactions. However, the report found that only 270 crypto addresses accounted for 55% of all funds laundered through the crypto space. When the figure is expanded, the researchers found that just 1,867 addresses accounted for 75% of all funds related to criminal activity in 2020. The report found that figure to be around $1.7 billion.
According to the report, the concentration of illegal activity into a few addresses was actually on the rise from 2019 figures. The report found that there was a bigger share of illicit crypto transactions going to addresses, which received $1 million to $100 million in crypto per year.
The report concluded that the increased concentration was due to criminals who transact in crypto using an increasingly small group of OTC brokers and other services, which support money laundering in digital assets. Chainalysis found that just three years ago, cybercriminals had access to a wide net of online services that they could use to launder their funds.
It Spells Good News For Law Enforcement
For law enforcement, that is good news. According to the report, criminals using crypto for money laundering will now have a harder time orchestrating their activities. The reason for this is that law enforcement can focus their attention on just a few addresses, which could be easier to shut down. Consequently, laundering funds using crypto could start to diminish if criminals see that it is not as lucrative as they once thought.
The report also found that most of the services, which aid in money laundering using crypto, are second-tier services, which are hosted by major legitimate operators. For instance, a high-risk crypto exchange would need to utilize the services of a genuine web-hosting service.
Law Enforcements Edge
In such an instance, law enforcement would not even need to track down the operators of the platform. They could simply convince the large firms to enforce their AML and ATF rules. If these firms enforce their rules strictly, most of the online services that aid money laundering using crypto would be wiped out.
The report is good news for the crypto sector. Most jurisdictions that restrict crypto transactions claim to do so because they are fighting crimes such as terror financing and money laundering. However, the report has revealed that fighting illegal activity in the crypto sector could be easier than doing so in the fiat world. It also revealed that most crypto addresses in the crypto sector are involved in legal transactions unlike the prevailing belief held by senior officials such as Janet Yellen, the head of the Federal Reserve.
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