Cryptocurrency Investment

By repeatedly investing or reinvesting illicit proceeds into multiple cryptocurrencies across various exchanges and wallet addresses, criminals introduce complex transaction chains, including chain-peeling, that obscure the original illicit source and hinder law enforcement tracing.

This technique primarily exploits the pseudonymous and easily transferable nature of cryptocurrencies. Criminals repeatedly trade, swap, or reinvest digital assets (including privacy-focused coins or mixing protocols) to create complex layering chains that obscure beneficial ownership and impede detection. These inherent product features—such as ease of cross-wallet movement and partial anonymity—are central to the laundering process.

Criminals deliberately use multiple cryptocurrency exchanges, including those in high-risk or lightly regulated environments, along with external wallet services. By continually moving funds across these channels, they exploit inconsistent KYC/AML controls and create elaborate transaction trails that undermine traditional monitoring systems. This approach leverages vulnerabilities in the delivery method, distinct from the underlying product itself.

• Consolidates information on AML/CFT laws, regulatory enforcement, and risk profiles by jurisdiction.
• Identifies high-risk or poorly regulated cryptocurrency exchanges used for layering and obfuscating beneficial ownership in this technique.

• Contains comprehensive records of financial transactions, including fiat-to-crypto conversions, timestamps, amounts, and counterparties.
• Reveals frequent, large-value conversions associated with layering intentions, aiding in uncovering suspicious fiat-to-cryptocurrency entry points for this technique.

• Provides detailed logs of user accounts, deposit and withdrawal records, wallet addresses, and transaction volumes across both regulated and unregulated exchanges.
• Facilitates the detection of repetitive or unexplained transfers among multiple wallets, the identification of newly opened accounts with minimal prior activity, and the recognition of high-risk crypto-exchange usage for this technique.

• Encompasses verified customer identities, beneficial ownership data, and transaction risk profiles.
• Detects newly created exchange or wallet accounts lacking legitimate business purposes, enabling scrutiny of account holders engaging in this cryptocurrency layering technique.

• Provides on-chain transaction details (addresses, timestamps, and amounts) used to trace digital asset movements across personal or external wallets, identify chain-peeling patterns, and detect mixing protocols or CoinJoin transactions.
• Supports investigations by pinpointing transactions linked to privacy services and illustrating cross-wallet transfers common in illicit layering strategies under this technique.

• Captures trading volumes, order details, settlement records, and timestamps from cryptocurrency and financial exchanges.
• Allows detection of repetitive swaps, minimal net gain/loss transactions, and cross-exchange layering, helping to expose suspicious reinvestment patterns aligned with this technique.

Apply extra scrutiny to customers conducting high-volume or complex crypto transactions by verifying the source of their digital assets and requiring transparent disclosures for large or frequent cross-wallet transfers. Investigate the use of unregulated platforms and monitor for repeated layering tactics such as chain-peeling or mixing.

Implement specialized scenarios to detect short-term or repetitive conversions between fiat and various cryptocurrencies, frequent cross-exchange movements without clear economic rationale, and the use of privacy-focused wallets or mixers. By analyzing transaction timing, volume, counterparties, and wallet addresses, institutions can expose layering or chain-peeling attempts that hide beneficial ownership.

Leverage on-chain analytics to trace digital asset flows, identify suspicious wallet clusters, and pinpoint mixing protocols or chain-peeling. Institutions can track funds across addresses in near real-time, flagging unusual patterns such as repetitive partial transfers or cyclical trading indicative of layered crypto investments.

Continually update risk ratings for customers frequently engaging with multiple exchanges or external wallets. Assign higher risk tiers to those relying on privacy coins, mixers, or engaging in repetitive reinvestment with minimal net gain. This enables focused scrutiny of such personas, mitigating cryptocurrency-based layering and obfuscation.

Limit or block access to products and channels that facilitate undisclosed cross-wallet transfers, anonymous deposits, or unregulated exchanges when repeated reinvestment or chain-peeling patterns appear. Temporarily freeze account activity for further review if necessary, curbing ongoing layering attempts within crypto-related services.

Continuously reassess high-risk crypto-investing customers by reviewing transactional and blockchain data for emerging layering methods, such as chain-peeling or repeated cross-exchange transfers. Update risk profiles promptly, adjust monitoring thresholds, and escalate anomalies to mitigate evolving obfuscation in cryptocurrency investments.

• Criminals deposit illicit proceeds into these accounts and then move funds into cryptocurrency exchanges as the initial step in placing funds into digital assets.
• By structuring deposits or using third-party/shell account details, they circumvent detection measures when converting fiat to cryptocurrency.
• Once fiat is converted to crypto, further layering via multiple trades and transfers becomes more challenging to trace back to the original illicit source.

• Criminals leverage built-in anonymity features like stealth addresses and ring signatures to conceal transaction origins and amounts.
• Combining privacy coin transfers with mixing protocols (e.g., CoinJoin) adds a layer of obfuscation, obscuring the wallet trail.
• This additional anonymity enhances the complexity of the layering process, making it significantly harder to link assets back to criminal activity.

• Self-hosted or custodial wallets enable criminals to control private keys and shuffle illicit proceeds across numerous addresses.
• Repeated wallet-to-wallet transfers create complex transaction chains, complicating law enforcement efforts to establish beneficial ownership.
• Privacy-focused wallet features, such as masking IP addresses or integrating mixing protocols, further hinder investigators' ability to link criminal funds to real-world identities.

• Criminals convert holdings into stablecoins (e.g., USDT or USDC) to maintain value without the risk of volatility, allowing continued layering and movement.
• Rapid cross-exchange transfers of stablecoins obscure transactional patterns, diverting investigative attention across multiple platforms.
• Platforms with lax KYC requirements enable criminals to exploit stablecoins for frequent reinvestment, further concealing beneficial ownership.

• Criminals exchange illicit funds for various altcoins classified as utility tokens, particularly on decentralized or lightly regulated platforms.
• Frequent conversions between multiple token ecosystems obscure the path of funds, contributing to a prolonged layering process.
• This repeated reinvestment into different tokens impedes the clear tracing of illicit proceeds, distancing assets from the underlying crime.

• Criminals exploit transparent blockchains (e.g., Bitcoin) by conducting high volumes of transactions across multiple addresses to create layered transaction chains.
• Chain-peeling, using systematic partial transfers to new addresses, further obscures the final recipient of illicit proceeds.
• Repeated cross-exchange movements of these public ledger coins distance illicit funds from their original source.

• 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.

• Illicit funds are routed among multiple personal or external wallets, creating complex transaction chains that hinder law enforcement’s ability to identify the end owner.
• Privacy-focused wallet features and mixing protocols further obfuscate transactional flows, masking links between senders and recipients.
• Frequent wallet-to-wallet movements with no economic rationale enable extended layering and conceal beneficial ownership.

Criminals exploit cryptocurrency exchanges to convert illicit fiat into digital assets or to swap between different cryptocurrencies.

• They often open accounts under inconsistent KYC/AML regimes or in high-risk jurisdictions, depositing funds to obscure their origin.
• Frequent cross-exchange transfers create a complex transaction trail, challenging financial institutions' capacity to detect suspicious flows or identify ultimate beneficiaries.

Illicit operators funnel unlawful proceeds into cryptocurrency investments, taking advantage of the pseudonymous environment to obscure beneficial ownership.

• They move funds across multiple exchanges and personal or external wallets, employing techniques such as chain-peeling and privacy protocols.
• These repeated transfers hamper law enforcement and financial institutions' efforts to link assets to the original offense, complicating transaction monitoring and beneficial ownership checks.

Criminals use mixing protocols or CoinJoin transactions to commingle illicit proceeds with legitimate funds, breaking the direct chain of transactions.

• By consolidating multiple participants’ coins into pooled transactions, mixers introduce significant obfuscation, hindering investigators' and financial institutions' traceability.
• This technique disguises beneficial ownership and complicates monitoring systems, impeding the detection of underlying criminal activity.