Money laundering using cryptocurrencies follows the general pattern of placement-layering-integration but with some specific features:
Cryptocurrencies are anonymous at their point of creation therefore the placement stage of the money laundering process is often absent.
- It only takes a few seconds to create an account (“address”) and this is free of cost. It is only possible to use each account twice: to receive money and then transfer it elsewhere.
- It is possible to create a large money laundering scheme with thousands of transfers at a low cost and to execute it using a computer script.
- Due to rapid increases in exchange rates, with some cryptocurrencies showing 10,000% growth, it is very easy to justify unexpected wealth through cryptocurrencies.
To address these risks, UNODC is conducting a project on cryptocurrency and money laundering.
There are different types of technologies related to cryptocurrencies which can be misused for money laundering purposes:
Privacy coins
Privacy coins are cryptocurrencies which offer a higher level of anonymous blockchain transactions, thus making the currency even less traceable than “normal” cryptocurrencies. The higher level of anonymity can be achieved, for instance, by concealing details about user addresses from third parties, such as information relating to the balance and the source of origin of the coins. This contrasts with how “normal” cryptocurrencies work where anyone can see the balance of an address, as well as transactions between addresses. However, some coins, like Monero, are private by design.
Mixers
There are special mixing/blending services available on the market, as well as mixing/blending protocols with regards to “normal” cryptocurrencies.
There are several technologies that “mix” or “blend” potentially identifiable cryptocurrency funds with the purpose of obscuring the source of origin, thus making them untraceable. Cryptocurrency coins (the funds) from multiple sources are first sent to one address (the account). After the funds have been mixed/blended together in that one address, they are then split into several portions and sent to different addresses. This process may be repeated several times before the funds reach their final destination.
As a result, it is almost impossible to connect the funds to their original source.
To address the related risks, Member States need to introduce proper regulation and supervision of cryptocurrency markets.
