Cryptocurrency money laundering is highly concentrated

Money Laundering

A new report has found that criminals who use cryptocurrency to launder their funds do so through a small number of services. This, it is believed, can open the door for law enforcement actions.

Chainalysis has found that the actual number of those undertaking illicit transactions is remarkably small. Intelligence suggests that just 1,867 deposit addresses received 75% of all cryptocurrency value sent from illicit address in 2020.

Out of this, a smaller group of 270 addresses collectively received 55% of transactions for a total of $1.3 billion. And of these, again, just 24 received more than $500 million in a year.

The numbers get more interesting yet.

55% of all illicit cryptocurrency funds were found to be deposited into just five exchanges. The report does not name the services, but it does call out nested services at HitBTC. Nested service providers set up accounts on major cryptocurrency exchanges, acting as middlemen in facilitating transactions.

As Chainalysis notes:

“We believe the growing concentration of deposit addresses receiving illicit cryptocurrency reflects cybercriminals’ increasing reliance on a small group of OTC brokers and other nested services specializing in money laundering. A significant share of money laundering in cryptocurrency isn’t flying under the radar at big services who can’t sift through transactions to spot it, but is being actively facilitated by nested services for whom money laundering is a key part of the business model.”

This bottleneck in money laundering is good news, according to the company.

Compared to three years ago, when criminal groups used a wider variety of services. This concentration means that crypto related money laundering field is now in a vulnerable position. Orchestrated law enforcement actions against these cryptocurrency operators can cripple the movement of illicit funds.

The entire report is an interesting read, with tons of details and charts.

Give it a scan.

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