Multiple Currency Conversions

Criminals repeatedly convert illicit funds across multiple currencies—whether fiat or crypto—using various platforms to mask their origins. This added complexity is a classic layering tactic, making it harder for investigators to link the funds to their criminal source.

Criminals exploit multiple FX providers, money service businesses, and online trading platforms to perform frequent, small-scale cross-currency conversions. By fragmenting transactions across channels—often below reporting thresholds or during busy periods—they create gaps in AML oversight and obscure the illicit origins of funds. This is the core vulnerability that enables the layering strategy.

Multiple currency conversions are routed through different jurisdictions with varying AML enforcement, including black market exchanges. Criminals deliberately choose locations with weaker controls to reduce scrutiny and capitalize on regulatory arbitrage, further obscuring the trail of illicit funds.

• Contains records of all currency conversion activities (spot trades, forward contracts, swaps), including timestamps, involved parties, exchange rates, transaction volumes, and settlement details.
• Facilitates detection of repeated cross-currency trades or suspicious layering patterns.
• Helps identify incremental or small-denomination transactions structured below thresholds.
• Supports investigation of transaction flows inconsistent with usual hedging or routine business activities.

• Provides official information on licensed money service businesses, including their licensing status and operational details.
• Assists in confirming whether customers are using unlicensed or lesser-regulated MSBs.
• Aids in detecting structured transactions and the frequent use of unregulated entities for repeated currency exchanges.

• Includes verified customer identities, financial statements, and risk metrics.
• Enables comparison of declared financial profiles with large or frequent currency conversions.
• Assists in detecting cumulative activity that exceeds normal client expectations or risk parameters.

• Provides details from public blockchain ledgers and related analytics, including transaction IDs, timestamps, wallet addresses, and amounts.
• Enables tracing of cryptocurrency funds across multiple addresses or wallets, detecting repeated cross-currency layering between fiat and crypto that obscures transaction origin.

• Encompasses trade details on regulated trading platforms, including timestamps, trade volumes, prices, counterparties, and compliance checks.
• Helps uncover repeated or rapid multi-currency trades that mask beneficial ownership.
• Facilitates identification of layering patterns through interlinked trading accounts or various currency pairs on exchanges.

• Covers cross-border financial transactions with details on amounts, currencies, jurisdictions, settlement chains, and account relationships.
• Helps identify repeated cross-border layering or jurisdiction mismatches in currency conversion flows, supporting the investigation of structured transactions routed through multiple countries.

• Provides geolocation details of financial transactions, including origin, destination, amounts, and related jurisdictional metadata.
• Enables detection of mismatched currency flows involving locations not aligned with the customer’s declared business or residence.
• Assists in identifying high-risk or unusual cross-border routes used to layer illicit funds.

Conduct deeper reviews of customers who frequently engage in multi-currency transactions, verifying the legitimate business or investment rationale for such activity. Confirm licensing or registration for any money service businesses involved, cross-check transactional volumes with declared business operations, and scrutinize any foreign exchange flows passing through high-risk or unregulated jurisdictions to expose layering tactics.

Implement advanced analytics to identify repeated currency conversions across multiple accounts or jurisdictions within short time frames. Specifically, track the frequency, volume, and pattern of currency pair conversions that deviate from typical hedging or commercial usage. Use geographic and transactional data to flag structuring below thresholds or funneling through unregulated MSBs, ensuring rapid detection of layering attempts.

Perform robust due diligence on foreign exchange and money service business partners by verifying their regulatory licenses, AML controls, and monitoring practices. Cease relationships with partners that demonstrate poor compliance or recurring suspicious transaction patterns to prevent criminal exploitation through cross-currency layering.

Use specialized analytics tools to trace cross-currency crypto conversions, such as movements between different cryptocurrencies or shifts from fiat to crypto and back. Identify repeated layering attempts by monitoring wallet clusters, transaction chains, and potential mixing or bridging services to detect the rapid cycling of illicit funds across digital assets.

Restrict or block the use of unlicensed or high-risk currency exchange services and set tighter transaction limits for customers exhibiting repeated multi-currency flows with no clear commercial basis. By controlling access to suspicious exchange channels, institutions limit opportunities for structured currency layering below detection thresholds.

Regularly review customers' multi-currency transaction habits and update risk assessments when rapid or disproportionate conversions occur across various platforms or jurisdictions. Escalate significant shifts in transaction velocity, currency pair usage, or patterns of structuring to identify and disrupt emerging layering schemes.

• Criminals quickly convert fiat funds into cryptocurrencies through online exchanges or peer-to-peer platforms, then move between various crypto assets to disguise the trail.
• These cross-currency conversions are presented as routine crypto trades or speculative activity, allowing criminals to ‘layer’ funds across multiple blockchains.
• Less regulated exchanges or smaller transaction sizes further complicate AML controls, making it harder to link back to the original illicit source.

• Once a CBDC is introduced, criminals can convert funds between CBDC and traditional fiat or other digital currencies, adding another layer of currency movement.
• If oversight frameworks are still maturing, they exploit regulatory gaps by splitting the illicit volume into smaller, rapid CBDC transactions that appear as typical digital payments.
• Converting back to fiat or other assets through different platforms makes it even harder to detect the original illicit source.

• Criminals place illicit proceeds into traditional bank or MSB channels and perform multiple FX conversions (e.g., USD to EUR, EUR to GBP) under the guise of legitimate business or hedging.
• They maintain accounts denominated in different currencies, orchestrating frequent cross-currency transfers that obscure the origin of funds.
• Splitting transactions below reporting thresholds across multiple providers or jurisdictions further conceals the layering scheme from regulators.

• Criminals repeatedly deposit or exchange physical cash in small denominations at various currency exchange counters or MSBs, minimizing scrutiny by staying below reporting thresholds.
• By timing transactions during busy hours and distributing them across different locations, they obscure the paper trail and make each individual exchange appear routine.
• Converting the cash into multiple fiat currencies at physical counters adds extra layers, complicating law enforcement's ability to trace the original illicit source.

• Allow direct and often anonymized exchanges of cryptocurrencies among users, bypassing traditional oversight.
• Support rapid, micro-scale conversions across multiple crypto assets, reducing transparency and complicating AML checks.

• 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.

• Present currency trades as normal hedging or speculation, enabling repeated cross-currency conversions to layer funds.
• High-volume or algorithmic trading patterns mask illicit proceeds by blending them with legitimate market activity, hindering AML efforts.

• Function as money service businesses, allowing frequent cross-border transfers in different currencies.
• Facilitate structured layering by breaking transactions into smaller amounts, often below reporting thresholds and during high-traffic periods, complicating the tracing of illicit origins.

Money services businesses are frequently exploited, knowingly or unknowingly, for multiple currency conversions. Criminals:

• Deposit or exchange small amounts at various MSB locations, often below reporting thresholds, to layer illicit proceeds.
• Exploit MSBs with weaker AML oversight or complicit staff to carry out repeated cross-currency transactions.
• Create downstream challenges for financial institutions, as these layered funds appear to arise from ordinary MSB operations.

Illicit operators carry out repeated multi-currency conversions to hide the origin of their unlawful proceeds. They:

• Cycle funds through various MSBs, virtual asset platforms, and currency exchange services.
• Split transactions into small increments, timing exchanges during high-traffic periods to minimize scrutiny.
• Conceal illicit proceeds beneath normal commercial or trading activities, complicating financial institutions’ tracing efforts.

Criminals exploit virtual asset service providers, including both centralized and peer-to-peer cryptocurrency exchanges, to convert funds across various fiat and digital currencies. They:

• Break larger sums into smaller transactions on less-regulated VASPs, making it harder to detect suspicious activity.
• Rapidly switch between different crypto assets and fiat currencies, obscuring transaction flows.
• Weaken financial institutions’ ability to trace beneficial ownership or flag illicit origins.