In 2023, the laundering of cryptocurrencies witnessed a significant decline, as per recent research by Chainalysis. The findings indicate a notable drop of nearly 30% from the previous year, with crypto criminals managing to launder approximately US$22.2 billion, compared to the record high of US$31.5 billion in the preceding year.
Chainalysis, a blockchain data company, revealed that centralized exchanges continued to serve as the primary avenue for off-ramping illicit funds, accounting for 62% of all funds leaving illegal wallets. Kim Grauer, Director of Research at Chainalysis, emphasized the positive impact of increased compliance investments, including stringent KYC and AML measures, in enabling exchanges and law enforcement agencies to thwart attempts by bad actors to cash out their illicit gains.
However, the report highlights a concerning trend where crypto criminals are increasingly diversifying their money laundering tactics. This includes spreading illicit funds across a greater number of deposit addresses on centralized exchanges, potentially to evade detection and mitigate risks of frozen accounts due to suspicious activities.
Despite centralized exchanges remaining a focal point for laundering activities, the rise of DeFi protocols has attracted more sophisticated crypto criminals. Over the past five years, there has been a steady increase in illicit funds flowing into DeFi protocols, now constituting 13% of laundering activities.
Moreover, a subset of organized criminal groups, such as North Korea’s Lazarus Group, has been observed utilizing chain hopping via cross-chain bridges for money laundering purposes. This method, which involves moving funds across different blockchains, saw substantial growth in 2023, with bridge protocols receiving US$743.8 million from illicit addresses, compared to US$312.2 million in 2022.
Kim Grauer,
Director of Research at Chainalysis, emphasized the importance of understanding evolving money laundering strategies employed by crypto criminals and leveraging investigative solutions like those provided by Chainalysis to trace illicit activities effectively. The report underscores the necessity for law enforcement and compliance teams to stay vigilant and adapt to emerging laundering methods to combat crypto-related crimes effectively.
