Cryptocurrencies Have Been Used to Launder $2.35 Billion: Report

CryptoGlobe Staff Writer
  • CipherTrace published data showing that more than 300,000 BTC has been ‘washed’ on crypto exchanges.
  • Its data shows that exchanges in jurisdictions with ineffective or nonexistent AML/KYC regulations received up to 36 times more BTC from dubious sources.

Data security company CipherTrace has published a report revealing that $2.5 billion worth of bitcoin has been laundered through cryptocurrency exchanges, with a huge chunk of it ending up in countries with weak anti-money-laundering (AML) regulations.

Ineffective Jurisdictions

In a bid to unravel the prevalence of use of crypto for criminal activities - chiefly money laundering and fraud - CipherTrace monitored some 45 million transactions from the top 20 cryptocurrency exchanges in the world between January 2009 and September 2018.

 It found that 97% of crypto funds laundered through these exchanges ended up in countries with weak, permissive or inefficient anti-money laundering laws. It also found that exchanges in countries with these inefficient AML regulations received 36 times more bitcoin from suspicious individuals or groups.

In such jurisdictions, it is possible for cybercriminals to channel funds through platforms that likely don’t identify their customers through KYC/AML checks, potentially making transactions going through them untraceable.

The report shows that about 380,000 BTC (about $2.35 billion) was laundered through unregulated exchanges. Being easier to access, unregulated exchanges now happen to be some of the biggest in the world and 95% of outgoing payments to criminals have been reported to come from them.

In the crypto space the trend has been seemingly growing. In July, CipherTrace revealed hackers managed to take over $760 million from crypto exchanges. At the time, the firm noted there had been a “dramatic increase” in crypto money laundering this year.

Owing to its clandestine nature, it is difficult to determine the actual amount of money that goes through this process, but a whopping 2-5% of global GDP - between $800 billion and $2 trillion - is estimated as the amount of money laundered globally according to a 2018 UNODC report.

Regulatory Responses

As a result, a number of governments have taken action towards ensuring ‘cleaner’ financial services sectors through stiffer laws, rigid regulations and strict compliance. In the U.S., the Financial Crimes Enforcement Network (FinCEN) and other financial industry regulators have also affirmed their commitment to tackling money laundering.

Japanese regulators, for example, have insisted that local exchanges must ensure complete identification processes prior to trading. Some major exchanges have now enforced full compliance with the identification process.

ShapeShift and Changelly are among them. As CryptoGlobe reported, Changelly revealed earlier this year it may withhold users’ XMR if it deems it necessary. ShapeShift itself has been introducing a membership model that required personal information.