Crypto money laundering tripled in first half: report

According to a report released Tuesday by CipherTrace, three times as many cryptocurrencies were stolen from exchanges in the first half of 2018 as in 2017, with a corresponding increase in crypto-related money laundering.

The results appear to confirm the fears of bankers staying away from cryptocurrency activity due to concerns about crime and money laundering.

“We’re basing this on things we’ve seen firsthand,” said Dave Jevans, CEO of CipherTrace, which monitors cryptocurrency transactions for signs of financial crime.

In the past two years alone, criminals have stolen $ 1.21 billion worth of cryptocurrency from exchanges, according to the report.

While outright theft tripled in the first half of 2018, money laundering has increased at a similar rate. In 2017, $ 266 million was laundered via crypto. So far in 2018, that figure stands at $ 761 million. This is only the laundering of stolen funds, not a full estimate of all black market transactions using crypto (which is more difficult to follow for sure).

“It puts us on track for this year to see probably around $ 1.5 billion stolen through cryptocurrency, based on trends,” Jevans said.

Bitcoin supporters argue that the cryptocurrency is not anonymous, that their transactions can be traced to the addresses they receive bitcoin at. If ever these addresses are linked to their personal identity, their cryptocurrency movements may be fully visible.

So how do crypto users manage to remain anonymous and launder their dirty digital currency?

One way is to use money laundering blending services, Jevans said.

“These allow people to contribute funds into a combined pool that will scramble them and try to use a different liquidity pool that is not trackable on the blockchain, so there is no connection between them to distribute. funds to receivers, ”Jevans said. “These are written by highly qualified people who may have doctorates, who are actively trying to avoid tracing. “
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Some money laundering mixing services ran paid advertisements on Google, he said.

“These guys are making quite a bit of money from these services,” Jevans said. “They usually charge around 3% to do a laundering operation.”

Another way is to use currency switching services like ShapeShift.io. These can have legitimate uses, but they can also be used to take bitcoin, convert it to Ethereum and another currency before turning it back into bitcoin. “You are creating this currency reversal between currencies that is extremely difficult to correlate and track,” Jevans said.

But in the majority of cases, the criminals just assume that the crypto exchanges don’t make any anti-money laundering detection and hope that no one is tracking their ill-gotten cryptocurrency so that they can bring it to a bank account and no one will deposit. a report of suspicious activity, Jevans said.

CipherTrace’s first customers were cryptocurrency exchanges subject to increasing regulatory compliance around the world (and therefore needing to monitor the users of their service). Other clients are hedge funds that handle crypto for clients, in order to verify the source of funds.

Some of CipherTrace’s banking clients are looking to provide custodial services to manage clients’ crypto assets alongside their traditional assets. Others want to provide services to exchanges and give them access to traditional payment networks.

A third category of bank customers do not want their customers to use crypto at all and need to know when they are doing it.

“It’s not intuitive, but whether you like it or hate it, you have to do something,” Jevans noted.

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