Report finds 30% increase in crypto money laundering

A report by blockchain data company Chainalysis has discovered that criminals laundered $8.6bn of cryptocurrency in 2021. This was a 30% increase in the amount laundered in 2020. However, the total remains slightly below the five-year peak of $10.9bn in 2019.   

In the report, Chainalysis said that police could strike a ‘huge blow’ to these criminals by targeting the key services that are used to launder cryptocurrency. The report itself noted that “while billions of dollars' worth of cryptocurrency moves from illicit addresses every year, most of it ends up at a surprisingly small group of services, many of which appear purpose-built for money laundering.”

It added that “law enforcement can strike a huge blow against cryptocurrency-based crime and significantly hamper criminals' ability to access their digital assets by disrupting these services.”

Chainalysis says it tracks cryptocurrency wallets controlled by criminals such as ransomware attackers, malware operators, scammers, human traffickers, dark net market operators, and terrorist groups. By following flows of cryptocurrency from addresses associated with criminal activity, Chainalysis was able to estimate the amount ‘laundered’.

Europol issues similar findings

The study from Chainalysis was also backed by a report from Europol, which was published at the end of January. This report highlighted how criminal networks that specialize in large-scale money laundering “have adopted cryptocurrencies and are offering their services to other criminals”.

Europol also stated that “the use of cryptocurrencies in money laundering schemes has been increasing, and many criminal networks relied on cryptocurrencies as a payment medium during the Covid-19 pandemic.”

Criminal behavior is changing

Within their report, Chainalysis outlined how the behavior of criminals is changing. As part of this, Chainalysis highlighted how decentralized finance (DeFi) protocols have become more important to criminals trying to hide cash - receiving 17% of all funds sent from illicit wallets in 2021, up from 2% the previous year.

It’s thought that this is because DeFi protocols allow for quick swapping between different types of cryptocurrency, which is attractive for launderers.

As part of this, Chainalysis highlighted how DeFi protocols were widely used by North Korea-affiliated hackers, who were responsible for $400m worth of cryptocurrency hacks last year.

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