Virtual Asset Exchange

• Criminals or their money mules open exchange accounts using falsified or stolen identification to bypass KYC checks.
• They deposit illicit funds and engage in frequent trades or crypto-to-fiat conversions, embedding illegal proceeds within legitimate trading records.
• Rapid cross-border transfers and multiple account rotations create layering complexity, making it difficult to trace the original source of funds.

• Unlicensed exchanges trade digital assets outside regulated frameworks, enabling anonymous or pseudonymous transfers.
• Criminals use these platforms to swap cash proceeds for cryptocurrencies, circumventing customer due diligence and reporting obligations.

• By leveraging anonymity networks, criminals obscure IP addresses when opening and operating exchange accounts, undermining KYC and AML controls.
• Layered encryption and multiple hops further disguise transaction origins, complicating blockchain investigations and hindering law enforcement.

• Criminals can conceal their actual IP address and jurisdiction, preventing the exchange from identifying or blocking high-risk geolocations.
• This camouflage complicates cross-border compliance checks, as users may appear to be operating from a location with less stringent AML requirements.
• Law enforcement efforts to pinpoint the real origin or destination of digital asset flows are hindered by the VPN layers, easing layering attempts.

• Criminals use proxy servers to evade geographic or jurisdictional restrictions imposed by virtual asset exchanges, concealing their actual location.
• Frequent proxy rotations disrupt IP-based analytics, making it difficult to detect repeated or suspicious usage patterns, thus facilitating layering of illicit funds.

• Users establish or operate exchange accounts from public WiFi, undermining IP-based due diligence that would normally flag unusual login patterns.
• Deposits and withdrawals stem from shared IP addresses, concealing real user identity and complicating beneficial ownership tracing.

• Criminals chain multiple VPN connections to conceal IP addresses used for account registration, bypassing geoblocking or region-based compliance checks.
• By layering VPN hops, they hamper suspicious transaction monitoring reliant on consistent device or location data, complicating due diligence measures.

• Criminals can register and operate exchange accounts through multiple encrypted layers, preventing IP-based or geolocation checks.
• The usage of Onion over VPN hinders law enforcement’s ability to trace and link transactions to real-world identities, facilitating the layering of illicit proceeds.

• Criminals deposit illicit proceeds in repeated small increments to avoid higher scrutiny thresholds.
• They subsequently convert these fragmented amounts into various cryptocurrencies, making it harder to trace the overall transaction volume.

• Criminals convert illicit funds into cryptocurrency (or vice versa) before channeling them as charitable donations, bypassing traditional financial oversight.
• Rapid crypto-to-fiat conversions enable layering, making it difficult to track the original source of funds.

• Criminals covertly convert newly mined coins into fiat or other cryptocurrencies, severing on-chain links to the original dirty funds.
• Exchanges with weak AML controls may fail to detect the suspicious influx of newly generated assets, facilitating laundering under the guise of legitimate trading.

• Criminals exploit online KYC processes by submitting manipulated or stolen identity documents.
• Once accounts are established, they can convert or transfer cryptocurrency, obscuring beneficial ownership and transactional traces.

• Fraudulent KYC documentation allows criminals to create exchange accounts under fictitious identities, avoiding scrutiny.
• Once established, they convert illicit proceeds into virtual assets or move them across borders while concealing their true identities.

• Criminals rotate between different passports to bypass KYC measures when creating accounts.
• Allows rapid conversion of illicit funds into cryptocurrencies, further masking source and ownership.
• The pseudonymous nature of crypto transactions, combined with multiple national identity documents, accelerates layering and hampers AML compliance.

Trading bots rotate funds through multiple tokens and internal exchange transfers at high frequency, exploiting 24/7 markets to layer value before reconverting to fiat or stablecoins.

• Criminals execute minimal crypto deposits or trades to see whether exchange monitoring systems trigger alerts.
• Once the limits are understood, offenders can structure larger illicit transfers below detection parameters.

• Criminals conduct orchestrated trades (“wash trading”) to artificially boost or reduce token or NFT prices, creating a deceptive transaction history that obscures illicit funds.
• Rapid buy-and-sell cycles can be framed as normal market volatility, making it harder to trace the original criminal proceeds.

• Criminals funnel or cash out ransom proceeds on unregulated or foreign-based exchanges to circumvent tighter AML controls.
• These platforms enable quick conversions between fiat and cryptocurrencies, obscuring the origin of funds and frustrating investigation.

• Criminals exchange cash proceeds for cryptocurrencies or vice versa, exploiting the cross-border reach and pseudo-anonymity of digital assets.
• Rapid deposits and withdrawals across multiple wallets in various jurisdictions obscure the origin and beneficiaries of illicit funds.

• Convert proceeds from child exploitation into cryptocurrencies, adding layers of pseudonymity.
• Split transactions across multiple accounts or wallets, complicating law enforcement's efforts to trace and freeze illicit funds.

• Criminals convert in-game currencies or digital items into mainstream cryptocurrencies or fiat, adding an extra layer to obscure illicit funds.
• Weak KYC procedures on some exchanges allow offenders to blend illicit gains with legitimate user flows.
• Once converted to mainstream crypto or fiat, the laundered funds can enter traditional banking channels under less scrutiny.

• After layering funds through DeFi protocols and metaverse asset transactions, criminals convert their newly ‘clean’ tokens into mainstream cryptocurrencies or fiat via these exchanges.
• By appearing as ordinary trades or investments, the illicit origin is effectively concealed, allowing final integration into traditional financial channels.

• Facilitates the final conversion of illicitly obtained in-game or cross-chain assets into recognized cryptocurrencies or fiat.
• Criminals hide illicit origins by integrating these exchanges into layered trading patterns before cashing out.

• Enables conversion between cryptocurrency and in-game currency, particularly if operating with minimal identity checks or customer due diligence.
• Criminals deposit illicit crypto, exchange it for in-game currency, and later liquidate the in-game assets again as crypto or fiat, obscuring the original source of funds.

• Criminals exploit minimal or lax KYC procedures on certain platforms to convert illicit proceeds into various tokens and back, impeding law enforcement tracking.
• Rapid stablecoin conversions facilitate cross-border transfers with limited oversight, further obscuring the source of funds.

• Criminals can convert illicit fiat funds into payment tokens through repeated small transactions (smurfing), staying below detection thresholds.
• Exploiting exchanges with lax KYC measures enables rapid cross-border transfers that obscure the origin of funds and complicate investigations.

• Criminals exploit minimal or no-KYC features to rapidly swap governance tokens for more liquid cryptocurrencies, obscuring traceable links to illicit proceeds.
• Interspersing governance token trades among broader altcoin transactions creates a complex transactional chain, making it more difficult for investigators to identify the original source of funds.

• Criminals deposit or withdraw utility tokens under partial or inconsistent KYC measures, making it difficult to trace the original fund source.
• They convert illicit proceeds into a variety of tokens or fiat currencies, creating multiple transaction layers that obscure the money trail across jurisdictions.

• Criminals rapidly convert illicit funds between fiat and cryptocurrencies, repeatedly obscuring transaction trails.
• Cross-asset trades (“chain hopping”) across multiple exchanges or jurisdictions complicate investigators’ ability to track the ultimate source or destination of funds.

• Criminals register exchange accounts under stolen or synthetic identities, bypassing effective KYC.
• This enables laundering of illicit proceeds by trading crypto assets under a false persona, complicating traceability and ownership verification.

• Criminals exploit fully remote sign-up on these exchanges using forged or synthetic IDs, bypassing in-person checks.
• Repeatedly re-submit slightly altered documents from the same device or IP address, evading automated KYC filters.
• Once onboarded under a false identity, they freely convert illicit proceeds into or out of digital assets, obfuscating fund origin.

• Criminals can orchestrate wash trades by repeatedly buying and selling digital assets among linked accounts, artificially inflating trading volumes or boosting prices.
• They may conduct pump-and-dump campaigns in low-liquidity tokens, driving up prices through coordinated purchases before rapidly liquidating at inflated valuations.

• Criminals may create multiple exchange accounts under different identities and trade the same digital assets among these accounts, artificially inflating volume and obscuring the true origins of funds.
• The rapid nature of crypto transactions combined with minimal KYC in some jurisdictions enables repeated self-dealing trades, disguising illegal proceeds as legitimate trading gains.

• Convert illicit cryptocurrency proceeds from darknet markets into different digital assets or fiat currency, obscuring the original source of funds.
• Exploit weak KYC or cross-border operations to avoid robust AML controls, enabling cyclical layering to hide transaction trails.

• Enables near-instantaneous buy and sell orders in cryptocurrencies, allowing suspicious offsetting trades across multiple wallet addresses held by the same actors.
• Pseudonymous account structures and fragmented regulatory oversight can obscure the beneficial owners behind these trades.

• Enable rapid conversion between fiat and various cryptocurrencies, allowing criminals to exploit multiple currency pairs for layering.
• Provide pseudonymous trading features that obscure the source and destination of illicit proceeds by cycling funds through different digital assets.

• Criminals can rapidly convert mainstream cryptocurrencies into privacy-oriented coins through exchanges that have minimal or lax KYC requirements.
• These quick conversions hide the original source of funds and complicate chain analysis by breaking transactional links between deposit and withdrawal addresses.

• Criminals deposit illicit proceeds into exchange accounts to convert fiat into cryptocurrencies, exploiting often inconsistent KYC/AML controls.
• They perform frequent cross-exchange transfers to layer funds and obscure their origin, especially using platforms with lax oversight or high-risk jurisdictions.
• Repeated reinvestment into various cryptocurrencies makes it harder to trace the ultimate beneficiary or link the assets back to the original crime.

• Provide criminals a quick on/off ramp for illicit funds, enabling swift conversion between fiat and cryptocurrencies.
• Exploit pseudo-anonymous transactions to obscure both origin and eventual beneficiaries, bypassing traditional AML scrutiny.

• Criminals exploit remote or automated ID verification processes, providing counterfeit or stolen documents to open accounts under false identities.
• Through repeated submissions of slightly modified documents, they evade detection while the exchange’s system re-checks KYC credentials.
• Once established, these fraudulent accounts facilitate layering of illicit funds and hamper investigators’ attempts to trace beneficial ownership.

• Enables rapid, cross-border transfers of digital assets beyond conventional banking oversight.
• Can facilitate covert transactions with sanctioned entities, especially where AML/KYC protocols are weak or absent.

• Criminals convert drug cash into cryptocurrencies to leverage pseudo-anonymity and rapid cross-border transfers.
• Exchangers with lax or insufficient KYC/AML controls provide a channel to obscure transaction origins, enabling layering of illicit funds without traditional banking scrutiny.

• Facilitates the rapid conversion of illicit proceeds from narcotics sales into fiat currency (and vice versa), allowing criminals to finance precursor chemical purchases while obscuring the original source of funds.
• Exploits partial or lax KYC measures and blockchain anonymity features, further complicating detection of illicit transactions and beneficiaries.

• Fraudsters may list or promote their newly issued tokens on a centralized exchange to reach a broader pool of investors.
• Once enough funds are raised, they quickly convert or withdraw the assets into other cryptocurrencies or fiat, making tracing difficult.
• The exchange environment facilitates layering by allowing multiple transactions and transfers through various user accounts or wallets.

• Fraudsters pose as or direct victims to fraudulent trading platforms that appear to be legitimate exchanges, offering high returns on cryptocurrency investments.
• Once victims deposit fiat or crypto, perpetrators swiftly move the funds through multiple accounts or wallets, obscuring the true recipients and complicating law enforcement tracking.

• After a fraudulent token sale, offenders use exchanges to convert raised tokens into other cryptocurrencies or fiat, further obscuring the source of funds.
• By funneling large volumes of tokens through multiple transactions or different exchanges, they deepen the layering process and hinder investigators’ ability to trace the original criminal proceeds.

• Fraudsters lure victims to purchase tokens promising extraordinary returns, exploiting complex or opaque listing processes.
• After securing victim funds, perpetrators rapidly convert and move proceeds into various digital wallets or fiat off-ramps, concealing the illicit trail.

• Pirates convert ransom payments into cryptocurrencies to hide transaction trails, taking advantage of pseudonymous wallet structures.
• Subsequent cross-border transfers of digital assets thwart conventional bank monitoring, enabling rapid layering of illicit ransom proceeds.

Illicitly mined coins are consolidated and liquidated on exchanges; weak-KYC venues let attackers swap privacy-coins for BTC or fiat, completing layering and integration.