This is the second part of this article. Here is the first part.
In this article, you will explore more about a report from Chainalysis about crypto money laundering that you should be aware of.
Non-Crypto Native Money Laundering & Identifying Suspicious Activity
Non-crypto, native money laundering, means laundering funds from traditional criminality. They include drug trafficking, fraud, etc., not crypto-associated crimes. With more money flowing through the blockchain, thieves use crypto to cover transactions.
We can see uncommon patterns if we keep an eye on blockchain transactions. These unusual patterns may mean money laundering. Here are some key things to watch for:
- Making Lots of Transfers Under the Amount Banks Have to Report
Deals under-reporting limits (like $1,000, $3,000, and $10,000) are typical ways to dodge checks. A jump in trades near these levels can point to efforts to stay hidden.
- Use of Many Intermediary Wallets
Money launderers rely on many intermediary wallets. Intermediary wallets enable them to cash out with ease. They move funds here before getting to platforms with strict KYC rules. The tricky layering of these wallets hides where the cash came from.
Source: Chainalysis
- Consolidation Wallets
They move funds through many intermediary wallets. Afterward, they move them to consolidation wallets and put them into a single address. From here, you can state that there was an attempt to hide laundering activities. Identifying major consolidation wallets can provide investigators with leads.
- Rounded Payment Amounts
Transfers in rounded amounts are sometimes associated with professional laundering activities. Frequent, high-volume transfers of rounded amounts may warrant further investigation.
- High Transaction Fees Using Mixers
If a particular address pays much higher fees for mixers, it points toward theft. Mixers hide transaction trails. Sharp rises in fees often happen as stolen funds come in.
Source: Chainalysis
Applying Traditional Money Laundering Techniques to Blockchain
Spotting fishy patterns on the blockchain is like catching traditional money laundering. You look at weird transactions and patterns. Even though blockchain is out in the open, launderers use old tricks in this new world. They try to slip by because of the user-privacy nature of blockchain transactions.
Regulatory Measures
It is worth enhancing new norms, tech, and international cooperation. It would help to prevent using cryptocurrencies for money laundering. To solve the issue of Crypto money laundering:
- Strict KYC and AML procedures
Strict KYC and AML rules will be beneficial for banks and crypto platforms. These include checking who people are and keeping an eye on their transactions.
- Smart Systems to Watch Transactions
These systems use AI and machine learning to spot weird transaction patterns. Tools like Chainalysis point out fishy activities right away.
- Promoting Teamwork across Borders and between the Public and Private Sectors
Countries must cooperate and exchange information in the fight against money laundering. The JMLIT, the private sector, and law enforcement assist in solving theft.
- Maximizing the Use of Technology and Innovation
Blockchain tracking tools and data analytics also help identify such tricks. Smart tech and deep number crunching boost AML power and reduce rule-following headaches.
Source: Chainalysis
Global Regulatory Frameworks
Several countries have put strict rules in place to fight money laundering:
- European Union
The EU’s 5th Anti-Money Laundering Directive (5AMLD) now covers crypto service providers. The updated Transfer of Funds Regulation (TFR) makes crypto transactions easy to track.
- Singapore
Singapore controls digital payment token service providers through the Payment Services Act. This law sets strict AML/CFT rules and covers more areas than before.
- Hong Kong
The Securities and Futures Commission (SFC) regulates virtual asset trading in Hong Kong. They make them abide by strict AML/CFT laws, such as identifying warning signs and others.
- United Kingdom
The UK Financial Conduct Authority (FCA) monitors crypto companies. FCA monitors crypto companies under the Money Laundering Regulations 2017. The FCA stresses the need to take action before problems arise. It also encourages teamwork between government and business sectors.
- United States
The FinCEN treats cryptocurrency businesses as MSBs under the Bank Secrecy Act (BSA). It suggests that these businesses must have AML programs and adhere to KYC standards.
Conclusion
As blockchain technology improves, the techniques of combating money laundering must also evolve. Cutting-edge technology, better rules, and collaboration would provide a cryptocurrency market.
Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright Altcoin Buzz Pte Ltd.
