Peer-to-Peer (P2P) Transfers

Criminals exploit P2P channels to engage in numerous small or rapid transfers across multiple user accounts and wallets, deliberately introducing complexity and obscuring the origin of illicit proceeds. The primary objective is to distance the funds from their criminal source through repeated layering steps.

Criminals rely on minimally regulated, informal P2P environments—ranging from mobile apps to decentralized platforms—with little or no face-to-face interaction or onboarding controls. They exploit weak or nonexistent KYC and rapid, direct peer-to-peer transfers across multiple accounts or wallets to fragment, layer, and reroute illicit funds virtually undetected. This is the central vulnerability upon which the technique depends.

Criminals deliberately select or operate in jurisdictions with lax AML enforcement or weak oversight, including informal or hawala-style networks, to evade scrutiny. They exploit cross-border inconsistencies and offshore corridors where P2P services are lightly regulated, bypassing tighter controls and complicating investigative efforts.

Captures IP addresses, device identifiers, and other technical details, enabling the detection of overlapping user fingerprints across supposedly unrelated P2P accounts.

Provides granular transaction data, enabling the detection of repeated peer-to-peer (P2P) transfers just below regulatory reporting thresholds, a common tactic for structuring.

Allows monitoring of P2P-specific transaction amounts, helping to identify patterns of structured transfers that remain below mandated reporting limits.

Tracks geographic metadata for each transaction, revealing inconsistencies when P2P transfers originate from diverse or improbable locations that contradict the account holder’s profile.

Apply more thorough identity and source-of-funds checks for P2P users flagged by transaction monitoring or risk profiling, such as those with high-velocity inbound and outbound P2P flows or cross-border layering patterns. Require additional supporting documentation and maintain continuous monitoring of high-risk accounts to prevent criminals from using multiple accounts to layer illicit funds.

Perform robust identity verification during P2P account onboarding by collecting official IDs, selfies, or biometric data. Cross-check identifying information for consistency and confirm beneficial ownership for high-volume or business-related P2P accounts. This measure addresses minimal or nonexistent KYC risk in P2P channels and reduces the anonymity exploited by criminals.

Deploy specialized detection rules or analytics focusing on small, rapid P2P transfers, cross-channel fund movements, and unusual spikes in account activity. Investigate patterns that suggest layering or funneling through multiple P2P accounts to prevent criminals from fragmenting illicit funds undetected.

Use dedicated blockchain analytics to trace digital asset flows passing through pseudonymous or ‘unhosted’ wallets and identify cross-chain transfers associated with P2P transactions. Pinpoint overlapping wallet clusters, rapid mixing, or bridging activity to disrupt attempts at obscuring the origin of illicit funds.

Provide targeted training on P2P-specific red flags, such as multiple ephemeral accounts, cross-chain bridging, and inconsistent customer statements. Teach staff to promptly escalate suspicious P2P transactions for deeper investigation, ensuring the institution can swiftly intervene in layering schemes.

Regularly monitor social media, online ads, and other public forums to identify unlicensed or lightly regulated P2P service advertisers. Cross-reference their claimed credentials and licensing status to flag or terminate relationships with entities operating outside required regulatory compliance.

Engage in public-private partnerships and data-sharing initiatives with regulators and peer institutions to exchange intelligence on newly emerging P2P laundering methods, unregistered exchangers, and suspicious account clusters. Collaboration accelerates early detection and coordinated disruption of criminal P2P networks.

Restrict or deny financial services to unregistered or suspicious P2P exchange operators, implementing transaction limits or account freezes for recurring layering patterns. This measure curbs the ability of criminals to move large sums across informal P2P channels that lack adequate oversight.

• Periodically reassess the risk profiles of P2P users to ensure that transaction patterns remain consistent with the stated purposes of their accounts.
• Update KYC records and require additional documentation if unusual activity, such as rapid, high-volume transfers, is discovered.
• This helps prevent the extended misuse of P2P channels for layering.

• Enhanced privacy features such as ring signatures and stealth addresses obscure transaction details.
• Criminals leverage P2P trades of privacy coins to conceal beneficial ownership, bypassing formal identity checks.
• Converting illicit funds into privacy coins on decentralized forums further anonymizes the trail before exchanging back to fiat or other assets.

• Unhosted or lightly regulated wallet apps allow criminals to store and transfer funds directly between individuals.
• Multiple pseudonymous wallets are created to break large sums into smaller increments for layering.
• Rapid, back-to-back wallet transfers fragment the trail, hampering effective monitoring or seizure.

• The pegged value allows criminals to maintain stable profits while trafficking funds through P2P channels.
• They rapidly purchase or sell stablecoins across multiple user accounts, effectively layering transactions without triggering large-value alerts.
• Minimal KYC on certain P2P stablecoin platforms facilitates cross-border transfers with reduced exposure to volatility.

• Criminals exploit minimal KYC on P2P platforms to buy or sell cryptocurrency directly with other users.
• They create numerous addresses on public blockchains, distributing illicit proceeds across multiple addresses to mask transaction origins.
• Repeated small transfers across user accounts hinder investigators’ efforts to link funds back to the source.

• Criminals use token-wrapping services to shift funds between blockchains in P2P environments.
• By converting crypto into wrapped tokens, they sever simple on-chain transaction trails and distribute proceeds through multiple wallet addresses.
• This cross-chain layering tactic complicates efforts to follow illicit funds, especially when using unregulated P2P exchangers.

• In hawala-style P2P networks, cash exchanges occur without formal AML checks or identity verification.
• Criminals deposit physical currency with informal intermediaries who route funds across decentralized channels.
• These face-to-face or offline transactions circumvent regulated channels, creating additional layering steps and obscuring paper trails.

• Criminals can acquire prepaid cards or e-wallet balances with false or minimal documentation.
• They then perform successive P2P transfers among multiple stored-value accounts, adding complexity to transaction tracing.
• Limited verification requirements accelerate layering, allowing criminals to quickly move funds beyond regulatory controls.

• 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.

• Offer direct user-to-user crypto trades with often minimal KYC, enabling funds to be moved off traditional finance rails.
• Criminals may split transactions across multiple wallets, blurring audit trails and frustrating investigative tracing.

• Criminals exploit minimal account-setup requirements to move illicit funds directly between users, bypassing more stringent banking controls.
• They create multiple accounts under various aliases, rapidly shuffling funds to layer proceeds and obscure the origin.

• Enable swift peer-to-peer transfers through mobile apps, sometimes lacking robust KYC.
• Frequent, small-value transactions obscure detection, and easy account creation allows criminals to rotate illicit assets quickly.

• Facilitates shifting digital assets across different blockchains, breaking transaction trails.
• Criminals exploit limited or no AML checks on bridging services to add layering complexity in P2P crypto laundering.

• Criminals set up numerous pseudonymous or unhosted wallets to receive, hold, and redirect illicit proceeds.
• Rapid transfers among these wallets create additional layering steps, hindering investigators’ ability to track beneficiaries.

• In jurisdictions with weak regulation, informal or hawala-style services bypass formal monitoring.
• Criminals deposit fragmented illicit funds and move them offshore via lightly regulated corridors, complicating AML enforcement.

• Provide rapid, user-controlled fund exchanges with relatively lower onboarding scrutiny.
• Criminals leverage these platforms to conduct quick, successive transfers among accounts, distancing illicit proceeds from their origin.

Criminals acting as virtual asset users exploit P2P transfers by:

• Creating multiple pseudonymous or unhosted wallets to bypass standard KYC.
• Rapidly moving funds across various accounts or blockchains to fragment illicit proceeds.
• Layering transactions through repeated small-value transfers, obscuring beneficial ownership.

These practices complicate financial institutions’ efforts to trace transaction flows or identify ultimate owners, as P2P channels often lack reliable identity verification and robust monitoring.

Peer-to-peer exchange operators, including platform operators, enable direct user-to-user trading of funds or digital assets with minimal oversight. Criminals exploit these services by:

• Relying on unregistered or lightly regulated online platforms that do not enforce robust KYC.
• Splitting and rotating transactions across multiple P2P operators to conceal illicit proceeds.
• Avoiding centralized controls and standard monitoring, making suspicious activity detection more difficult.

Financial institutions find it challenging to track or link these P2P trades to underlying criminal activity, as the transactions occur outside traditional banking rails with limited user identification.

Informal value transfer system operators (e.g., hawala-style networks) bypass formal banking channels by:

• Relying on personal or community trust rather than regulated financial infrastructure.
• Allowing criminals to deposit fragmented cash or crypto in one location and withdraw equivalent funds elsewhere with limited documentation.
• Obscuring transaction records and beneficial ownership, undermining AML and KYC controls.

These opaque networks challenge financial institutions when funds ultimately re-enter regulated channels, as the original source is difficult to trace.