Remote Mining

Criminals pay for remote mining services with illicit funds, receiving newly generated coins that appear unlinked to the original dirty money. This setup adds an extra layering step, obscuring the transactional trail and distancing proceeds from their criminal source.

This technique primarily exploits the vulnerabilities inherent in remote or cloud-based mining services. Since these services often lack or have minimal AML controls, criminals can easily disguise illicit funds as hosting, equipment, or energy fees. Once newly minted coins are generated, they appear decoupled from the original dirty money, further complicating detection and undermining AML efforts.

Criminals exploit the cross-border nature of remote mining by routing new coins and payments through jurisdictions with weak AML enforcement or sanctions concerns. This intentional selection of high-risk or sanctioned regions further obscures ownership and severs on-chain links to the original illicit funds.

• Contains information on high-risk or sanctioned jurisdictions, including those known for lax AML/CFT controls.
• Helps identify and flag mining-related transactions linked to countries where remote mining services might facilitate sanctions evasion or added anonymity.

• Contains details on formal contracts, invoices, payment terms, and involved parties.
• Permits verification of legitimate hosting, hardware, or energy costs related to remote mining, highlighting any fabricated invoices or inflated contracts fueling illicit transactions.

• Provide comprehensive records of financial transactions, including timestamps, amounts, parties, and referencing accounts.
• In the context of remote mining, these logs help detect large or repetitive payments to hosting providers and unusual returns from unknown wallets, indicating potential laundering of newly mined assets.

• Details a company’s operational metrics, including revenue streams, production capacity, and allocated resources.
• Helps compare reported mining hash rates or production levels with financial inflows/outflows to detect inconsistencies suggesting money laundering.

• Records digital asset and related fiat deposits, withdrawals, and transaction details, including timestamps, amounts, and counterparties.
• Supports the detection of suspicious or high-volume transfers connected to remote mining, including payments for mining contracts and subsequent flows of newly generated cryptocurrency.

• Contain verified customer identities, beneficial ownership details, and documented business profiles.
• Facilitate verifying a customer's claimed involvement in remote mining and identifying discrepancies, such as inadequate industry knowledge or contradictory background details.

• Encompasses on-chain records of wallet addresses, transaction amounts, timestamps, and counterparties from public blockchain ledgers.
• Allows tracing of newly mined cryptocurrency flows from remote mining providers to multiple wallets, identifying potential layering or obfuscation attempts.

• Provide official records of legal entities, including shareholders, directors, and beneficial owners.
• Useful for uncovering shell entities or obscured ownership structures behind remote mining providers or intermediary companies in high-risk jurisdictions.

When customers pay significant fees or rent capacity from remote or cloud-based mining providers, verify the provider’s legitimacy, confirm the physical location of mining operations, and scrutinize contract terms and expected returns. Request documentation validating equipment procurement, energy consumption, or hosting agreements to mitigate layering and cross-border obfuscation risks.

Implement targeted rules to detect payments labeled as 'hosting fees,' 'equipment costs,' or 'hash-rate contracts' to remote mining services. Flag abnormal volumes, inconsistent frequencies, or unexplained cross-border flows for investigation, especially when dealing with high-risk jurisdictions or unknown providers, to uncover attempts to layer illicit funds.

Regularly screen remote mining providers, associated wallet addresses, and cross-border payments for sanctions or watchlist matches. Institutions should block or restrict transactions involving sanctioned entities or jurisdictions to prevent the use of these services for layering illicit funds.

Leverage specialized blockchain analytics to trace newly mined coins originating from remote mining pools. Identify large deposits moving to multiple wallets across different jurisdictions or patterns inconsistent with normal mining outputs. By exposing these flows, institutions can identify layering attempts that rely on creating distance between illicit funds and their criminal origin.

Investigate remote or cloud-based mining operators using open-source intelligence, such as public corporate registries, media reports, and industry publications, to confirm the existence and capacity of claimed mining facilities. Identify any negative information that indicates substandard or nonexistent AML/KYC programs, which may reveal providers likely used for layering and sanctions evasion.

Restrict or prohibit transactions involving high-risk or sanctioned remote mining providers, or those lacking verifiable AML controls. By denying these services to suspicious operators, institutions reduce opportunities for criminals to layer illicit proceeds using cross-border hosting or hash-rate contracts.

• Remote mining produces freshly minted coins that appear unrelated to the original criminal funds.
• By using illicit proceeds to pay for mining capacity, the newly generated coins lack any direct on-chain trail connecting them to the initial illicit transactions, effectively breaking traceability.

• Criminals route newly mined coins directly into wallets under their control, often in separate jurisdictions, to evade KYC requirements.
• These funds can be repeatedly transferred across multiple wallets, further distancing them from the original illicit source and hindering investigators' tracing efforts.

• Criminals funnel illicit fiat payments to remote mining providers under the guise of legitimate hosting or equipment fees, masking the true source of funds.
• These cross-border transactions leverage providers with weak AML protocols, allowing the illicit proceeds to be layered into routine business payments and obscuring their criminal origin.

• Remote mining proceeds can be exchanged directly with counterparties, often with limited or no KYC procedures.
• This decentralized approach bypasses conventional monitoring, letting criminals obscure the origins of newly minted coins by spreading them across multiple trades.

• 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.

• Newly minted cryptocurrency from remote mining is funneled into digital wallets in separate jurisdictions, obscuring transaction trails.
• Criminals often use multiple or transient wallets to further hinder investigators’ ability to connect proceeds back to original illicit sources.

• Criminals can route illicit funds across jurisdictions by disguising them as legitimate hosting, equipment, or energy payments for remote mining setups.
• Large and frequent cross-border transfers complicate oversight, especially when the receiving mining provider lacks robust KYC or AML measures.

Cryptocurrency exchanges enable criminals to:

• Convert newly mined coins into fiat or other cryptocurrencies, severing on-chain trails.
• Leverage weak AML controls at certain exchanges to mask unexplained inflows of freshly minted coins.

By mixing funds with legitimate trading volumes, illicit proceeds appear lawful.

Illicit operators exploit remote mining services to launder criminal proceeds by:

• Paying hosting or capacity fees with illicit funds disguised as legitimate mining expenses.
• Routing newly generated coins to wallets in other jurisdictions, breaking on-chain links to the original source.

This approach obscures the origin of funds and complicates financial institutions' monitoring efforts.

Peer-to-peer exchange platforms allow:

• Direct conversions of remote mining proceeds with minimal or nonexistent KYC restrictions.
• Criminals to fragment and distribute coins across multiple trades, obscuring the true source.

This decentralized mechanism hinders investigators’ ability to track laundered funds.

Financial institutions unwittingly process cross-border payments related to remote mining by:

• Handling wire transfers labeled as legitimate hosting, equipment, or energy costs.
• Receiving or sending substantial amounts that may originate from illicit sources.

These transactions complicate detection efforts, especially if the receiving mining operator lacks AML controls.