Study: Crypto Criminals Sent $2.8B To Exchanges In 2019

crypto crime

Fortune favors the bold, goes the saying.

And when it comes to crypto crimes, the bold get the fortunes — at pretty much everyone’s expense, as ill-gotten gains, in particular cryptos that are tied to funding terrorists, create a ripple effect of risks.

Chainalysis reported in a recent blog post that last year, $2.8 billion in bitcoin moved from criminal entities to crypto exchanges. A bit more than 50 percent of that tally went to just two exchanges, Binance and Huobi.

“While exchanges have always been a popular off-ramp for illicit cryptocurrency, they’ve taken in a steadily growing share since the beginning of 2019,” Chainalysis wrote. The firm also said the movement to those two exchanges may come as a surprise, as those two exchanges are among the largest, and are subject to know your customer (KYC) regulations. The data show that a bit more than 300,000 accounts at Binance and Huobi received illicit funds.

With an eye on terrorist financing, Chainalysis said that terrorist financing is in “early stages” but is “advancing quickly.”

And in tracking and stopping the flow of funds, challenges exist because authorities often cannot have crypto addresses shut down due to the decentralized nature of blockchains themselves, according to Chainalysis.

The schemes themselves are varied. In one example, in early 2019, the Izz ad-Din al-Qassam Brigades (AQB) — defined as the military wing of Hamas and another designated terrorist organization — “began soliciting donations in Bitcoin in one of the largest and most sophisticated cryptocurrency-based terrorism financing campaigns ever seen,” said Chainalysis. The ruse generated new addresses to which each donor sent funds. Using multiple addresses means its harder to track where the money is going.

“There’s just more sophistication,“ Kim Grauer, senior economist at Chainalysis, said, as quoted by Bloomberg. “This is obviously a growing homeland security problem that agencies need to be monitoring.”

The wily ways in which the bad guys use tech to cloak their funding efforts comes against a backdrop where KYC and anti-money laundering (AML) efforts are ramping up across the globe, and aiming at exchange operators. A week ago, on Jan. 10, the European Union’s 5th Anti-Money Laundering Directive came into effect. And the 28 member states of the EU (which includes the U.K.) must begin regulating cryptocurrency assets with the same regulations that govern banks and other financial firms.

As reported in this space, the definition of firms now included in “obliged entities” extends to currency exchanges and digital wallet providers. In recent mandates adopted by the United Kingdom’s Financial Conduct Authority (FCA), any companies the FCA’s purview that are tied to crypto assets must now assess their risk and exposure to possible money laundering and terrorist financing activities. They must have internal policies in place to address (and mitigate) those risks; and must apply “enhanced” due diligence on customers, that according to the authority, “may present a higher money laundering / terrorist finance risk. This includes customers who meet the definition of a politically exposed person.”



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.