Cryptocurrency / Virtual Asset Laundering
Use of cryptocurrency and virtual asset services to layer and integrate illicit funds. Techniques include mixing/tumbling services, chain-hopping between blockchains, privacy coin conversion, and use of unhosted wallets to obscure transaction trails before converting to fiat currency.
What it is
Use of cryptocurrency and virtual asset services to layer and integrate illicit funds. Techniques include mixing/tumbling services, chain-hopping between blockchains, privacy coin conversion, and use of unhosted wallets to obscure transaction trails before converting to fiat currency.
Control objective
Detect and disrupt money laundering through cryptocurrency channels by monitoring on-chain risk indicators, fiat-crypto conversion patterns, and wallet risk scores, while complying with the Travel Rule and UK MLR requirements for virtual asset service providers.
Data required
- Wallet addresses (deposit and withdrawal)
- On-chain transaction history and risk scoring (e.g., Chainalysis, Elliptic)
- Mixer/tumbler exposure percentage on incoming funds
- Fiat-to-crypto and crypto-to-fiat conversion amounts
- Customer KYC tier and verification status
- Cross-blockchain (chain-hop) transaction traces
- Privacy coin usage (Monero, Zcash shielded transactions)
- Sanctions and darknet marketplace wallet matches
Related typologies (Money Laundering)
Rapid Movement of Funds
Funds received and immediately transferred onward with minimal dwell time, suggesting the account is being used as a pass-through to layer illicit proceeds and obscure audit trails.
Structuring / Threshold Avoidance
Deliberate splitting of transactions to remain below reporting thresholds or monitoring triggers. Commonly associated with layering proceeds of crime or avoiding CTR filings.
Behavioural Change Indicators
Sudden or unexplained changes in a customer's transaction behaviour relative to their established profile, such as new geographies, increased volumes, or different payment types, potentially indicating account takeover or use for laundering.
Mule Account Activity
Accounts used to receive and rapidly disburse funds on behalf of criminal networks. Mule accounts are often opened by individuals who are recruited, coerced, or deceived into facilitating the movement of illicit proceeds.
Shell Company Indicators
Use of corporate entities with no genuine commercial activity to obscure beneficial ownership, layer funds, or create false invoicing chains. Shell companies are commonly used in trade-based money laundering and corruption schemes.