Decentralized Finance (DeFi) Services

• Criminals leverage DeFi protocols (e.g., Tornado Cash) for decentralized mixing, obscuring the source of funds.
• Liquidity pools and lending platforms allow layered transactions with little oversight, compounding anonymity.

• Criminals deposit illicit proceeds into non-custodial smart contracts that automatically shuffle funds among multiple participants, obscuring transaction links.
• The absence of centralized oversight and standard KYC processes allows perpetrators to bypass conventional AML checks, making it challenging to trace the origin of funds.
• By relying on peer-to-peer protocols and removing a single operator, these services further complicate investigative efforts and frustrate attempts to freeze or seize tainted assets.

• Criminals use DeFi protocols (including decentralized exchanges) to quickly swap newly minted tokens for other assets, often bypassing traditional KYC requirements.
• Leveraging wrapped tokens or stablecoins within DeFi deepens obfuscation, making transactional origins harder to track.
• The open, permissionless nature of many DeFi platforms allows funds to circulate rapidly, further complicating chain analytics.

• Users connect to DeFi protocols from unsecured public hotspots, layering multiple transactions to blur on-chain provenance.
• Coupling public WiFi with anonymity tools like Tor further hampers KYC measures reliant on IP data or device fingerprints.

• DeFi protocols lack a centralized intermediary, allowing criminals to exploit Tor+VPN to evade IP-based controls.
• The multi-layered anonymity channel significantly undermines investigative efforts, masking fund flows through smart contracts.

Smart-contract bots swap tokens through DEXs and liquidity pools, fragmenting flows and sidestepping exchange-level KYC entirely.

• Adversaries use DEXs to swap stolen or illicit tokens, evading freezes or oversight before integrating funds into virtual worlds.
• Pseudonymous frameworks enable multiple layering steps across DeFi protocols without robust AML controls.
• Liquidity pools, cross-chain bridging, and automated smart contracts make tracing the movement of suspect assets increasingly difficult.

• Criminals exploit decentralized exchanges and lending protocols within DeFi ecosystems to swap stolen tokens, bypassing controls that might flag or freeze suspicious funds.
• They engage in wash trading and manipulate asset values through code exploits, masking their transaction histories and true asset origins.
• The absence of centralized oversight and reliance on pseudonymous addresses complicate AML tracing, allowing illicit proceeds to move rapidly across different protocols.

• Facilitate pseudonymous token swaps, lending, and borrowing with limited or no central oversight, undermining KYC efforts.
• Smart contracts and decentralized platforms enable criminals to layer illicit proceeds without clear identifiable parties.

• Operate without centralized controls, enabling criminals to deposit, swap, or stake payment tokens with minimal customer identification.
• Automated smart contracts facilitate rapid layering, concealing fund flows behind pseudonymous addresses and pooled liquidity.

• DeFi protocols often remove traditional intermediaries or centralized oversight, permitting users to transact pseudonymously.
• Criminals exploit DeFi smart contracts to perform multi-hop transactions involving wrapped tokens, reducing AML visibility and impairing effective KYC controls.
• The inherently decentralized nature of these services, coupled with automated liquidity pools, facilitates rapid cross-chain swaps that layer illicit proceeds and confound investigators.

• Criminals integrate governance tokens into DeFi platforms (e.g., decentralized exchanges, lending protocols), adding layered transactions that complicate end-to-end tracing.
• Pseudonymous governance and staking activities reduce transparency, creating barriers for AML investigators tracking beneficial ownership.

• Enable criminals to leverage automated protocols (smart contracts) for lending, borrowing, and token swaps with minimal regulatory oversight, allowing them to hide and mix illicit funds.
• Operate within pseudonymous environments with few regulated intermediaries, facilitating multi-step layering and obscuring transaction trails.

• Criminals exploit automated lending, staking, and swapping protocols powered by utility tokens, layering illicit proceeds repeatedly without centralized oversight.
• Liquidity pools and smart contracts allow rapid, algorithmic transactions that obscure beneficial ownership and complicate regulatory reporting.

• Off-chain or Layer 2 platforms (e.g., payment channels) enable high-volume micro-transactions with reduced public visibility.
• Automated smart contracts allow continuous re-layering, often with limited centralized oversight or KYC requirements.

• Criminals move manipulated insurance proceeds into decentralized exchange protocols to obscure transaction trails.
• Limited KYC requirements and pseudonymous accounts hinder effective source tracing.
• Rapid cross-border transfers via decentralized platforms add extra layers of complexity, facilitating further layering of laundered funds.

• Pseudonymous participants can repeatedly trade tokens among their own wallets, creating artificial transaction volume or price momentum.
• Lack of centralized oversight facilitates pump-and-dump schemes or ‘rug pulls,’ with criminals inflating token values before disappearing with the profits.

• Pseudonymous DeFi protocols allow users to orchestrate repetitive swaps of tokens among wallets they control, simulating market demand and obscuring actual ownership.
• The lack of a centralized intermediary and inconsistent KYC requirements facilitate circular trading aimed at blending illicit proceeds with purported trading gains.

• Engage in lending, staking, or liquidity pooling using darknet-sourced crypto, bypassing centralized oversight.
• Employ pseudonymous smart contracts that do not require thorough user identification, facilitating layering and obfuscating illicit fund flows.

• Operate without central intermediaries, enabling rapid mirror trades or liquidity positions across multiple linked wallets.
• Smart contracts typically lack advanced AML monitoring, allowing criminals to layer funds through offsetting transactions undetected.

• Allow pseudonymous transfers and swaps without traditional intermediaries or robust KYC processes.
• Criminals can route funds through liquidity pools or automated protocols, creating multiple layering steps and hindering traceability.

• Operate without central intermediaries, allowing sanctioned actors to hold and transfer funds off traditional radar.
• Smart contracts and cross-chain possibilities limit the ability of authorities to freeze or track assets.

• Criminals introduce or market a token within DeFi platforms (e.g., decentralized exchanges) to attract investors.
• After gathering substantial liquidity, they remove or drain the liquidity pool, leaving investors unable to sell and holding worthless tokens.
• DeFi’s autonomous and lightly regulated protocols enable swift conversion or mixing of funds, impeding regulatory scrutiny.

• Fraudsters leverage decentralized exchanges and automated protocols to swap or redistribute stolen cryptocurrency.
• Such transactions are executed without traditional KYC procedures, enabling rapid layering that complicates tracking and recovery of illicit funds.

• Criminals can launch IDOs on decentralized platforms with limited or no KYC, raising funds from participants worldwide.
• The pseudonymous nature of DeFi protocols enables quick movement of newly raised or illicit funds across multiple wallets, complicating tracking and fostering anonymity for exit scams or layering activities.

• Perpetrators advertise high-yield DeFi products or tokens, then perform ‘Rug Pulls’ by abruptly withdrawing liquidity.
• The pseudo-anonymity of blockchain transactions and minimal regulatory constraints enable swift layering and hinder victims’ recovery efforts.

Attackers deposit proceeds into DEXs, lending pools, or mixers embedded in DeFi, mingling funds with legitimate liquidity and evading central oversight.