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Money Laundering in Crypto-Currency Spurs New Watch Dogs

Sharp Increase in Money Laundering in Cyberspace 

Law enforcement agencies have served as big watch dogs that have surveilled the rise of crypto and cyber crimes for quite some time. Money laundering in crypto-currency has grown by over 30% in the last year, totaling $8.6 billion in 2021, says a report from Chainalysis.  This represents a sharp increase in money laundering in cyberspace in the last few years.

With this sharp increase in money laundering in crypto-currency, the Federal Bureau of Investigation announced it is forming a new specialized team called the Virtual Asset Exploitation Unit (VAXU). The team comprises a dozen experts in the fields of Anti-Money Laundering (AML) and cybercrime, who are committed to tackling growing cryptocurrency crimes and tracking criminals that launder illicit funds. 

DOJ’s Largest Financial Seizure, Totaling $3.6B

What exactly catalyzed the creation of this individual task force and crypto crime fighting unit? Although crimes among cyberspace have continued to grow exponentially in preceding years, the Department of Justice (DOJ) recently completed its largest financial seizure to date, totaling $3.6 billion in stolen funds. The couple charged was not laundering US dollars but instead Bitcoin they had hacked and stolen in 2016. This major coup highlighted a major oversight and proved that these blockchains need to be investigated at greater depth and efficiency. The new team is equipped to conduct advanced blockchain analysis to not only track, but seize digital funds associated with illicit activity.

The task force also hopes to create an international virtual currency initiative to collaborate with global law enforcement agencies to help sharpen cryptocurrency investigations. Moreover, VAXU is currently in the midst of innovating its own crypto tools to prevent and capture more crimes in the future.

Forever Playing Catch-Up

However, there’s a highly complex threat in the space known as “decentralized finance” (DeFi), that keeps criminals always just a few steps ahead. DeFi encompasses various protocols that criminals utilize to hide funds and attempt to make them untraceable. Many of these protocols allow for speedy swapping between different types of cryptocurrency, which allow for simple and effective money laundering, making it highly attractive to hiding illicit funds.

The same Chainalysis report noted that these protocols were widely used with North Korea-affiliated hackers responsible for $400m worth of cryptocurrency hacks last year. Criminals are “always early adopters of technology and they embraced cryptocurrencies a decade ago.” That means as law enforcement is just now starting to crack down on these crimes, there’s a large amount of sophistication that’s grown during that time and has been entirely unaccounted for, leaving anyone trying to investigate laundered money’s origin playing the game of catch-up. 

However, these developments made by law enforcement are at least helping disprove the narrative that cryptocurrency is an untraceable asset perfect for crime. Hopefully having the knowledge that their assets in crypto are entirely capable of being seized by officials, can deter cybercriminals from using it in the first place. 

Growing Need to Have KYC/AML Procedures in Place

Now more than ever as these cyber crimes continue to sky-rocket and money laundering along with it, is it important for your company or institution to have effective Anti-Money Laundering/Know-Your-Customer solutions in place to mitigate risk exposure. Luckily, Truth Technologies is the most trusted and premier compliance provider on the market and our sanctions expertise can help your company efficiently screen transactions, entities, and third-party relationships. Click here to learn more about our multi-service compliance ecosystem and how Truth Tech can help you prevent conducting business with any entity that poses a risk to your reputation. 


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