Chainalysis: Crypto Money Laundering Plummets as Transactions Fall

Reduced cryptocurrency activity last year helped lead to a corresponding decline in crypto money laundering.

That’s according to a recent report on crypto crime from blockchain data firm Chainalysis, which showed that illicit addresses sent $22.2 billion worth of cryptocurrency to services in 2023, a sharp drop from the $31.5 billion sent in 2022. 

“Some of this drop may be attributed to an overall decrease in crypto transaction volume, both legitimate and illicit,” the report said. “However, the drop in money laundering activity was steeper, at 29.5%, compared to the 14.9% drop in total transaction volume.”

The report also said money laundering tactics are changing, with more sophisticated crypto criminals using bridges and mixers.

It’s possible, Chainalysis said, that crypto criminals are diversifying their money laundering activity across more nested services or deposit addresses to better hide it from law enforcement and exchange compliance groups. 

“Spreading the activity across more addresses may also be a strategy to lessen the impact of any one deposit address being frozen for suspicious activity,” the report said.

“As a result, fighting crypto crime via the targeting of money laundering infrastructure may require greater diligence and understanding of interconnectedness through on-chain activity than in the past, as the activity is more diffuse.”

Last year saw crypto and FinTech companies receive $5.8 billion in fines due to lax financial controls, marking the first time penalties against these groups exceed those against traditional finance firms.

The fines were for things like failure to conduct proper money laundering measures or customer checks, as well as other issues related to financial crime. Meanwhile, traditional financial services companies paid $835 million in fines in 2023, the lowest figure in a decade.

However, Dennis Kelleher, CEO of regulation advocacy group Better Markets, told the Financial Times the numbers were an indicator of bad practices among crypto firms, not a signal that traditional banks had improved their behavior.

“The pervasive fraud and criminality in the high-profile crypto arena forced regulators and prosecutors to divert resources,” he said, calling it an effort to “stop the egregious conduct and try to deter it from getting even worse.”

Earlier this month, Cybera, a provider of advanced reporting and prevention tools, integrated with Chainalysis to offer government agencies and compliance teams insights to combat scams and prevent financial cybercrime.

“By integrating our scam crime intel sourced through our AI-driven platform with Chainalysis’ blockchain data, we’re elevating scam detection and prevention standards,” Nicola Staub, CEO of Cybera, said in the release. “Our joint efforts, focusing on speed and precision, will provide government agencies and compliance teams with unparalleled insights.”