In this article, we’ll look at the 270 service deposit addresses that laundered 55% of the illicit cryptocurrency funds. These are not only legitimate businesses that failed to comply with AML/CTF regulations, but also those associated with cyber-criminal activity. Let’s examine the reasons these service deposit addresses are associated with illicit cryptocurrency activity. What can be done to stop them? And how can we stop these 270 service deposit addresses from laundering funds?
270 service deposit addresses laundered 55% of illicit cryptocurrency funds
A report published last year by Chainalysis identified the 270 largest cryptocurrency laundering service deposit addresses. These money laundering services were used by cybercriminals to launder large amounts of funds. Some of these companies were operating despite being shut down by law enforcement agencies. Other money laundering services operated on exchanges where the volumes of funds were high. Approximately 19% of all Bitcoin and stablecoin deposits went to the top twenty money laundering deposit addresses, and a further 67% went to Ethereum and altcoins.
The majority of money laundering activities in cryptocurrency have been concentrated in a small number of wallet addresses and service providers. The study by Chainalysis found that 270 service deposit addresses laundered 55% of all illicit cryptocurrency funds in 2020, equivalent to nearly $1.3 billion. Another 24 smaller groups received an estimated $500 million worth of illicit cryptocurrency. This suggests that these services may be used as a front by cybercriminals to launder the funds through multiple exchanges.
These services are largely third-party ‘nested services’ that tap into larger trading pairs. These ‘wallets’ are known as whales, but only a small proportion of them are used for legitimate purposes. In addition to facilitating money laundering, these services actively facilitate the money laundering of cryptocurrency by providing a safe haven for illicit funds. Identifying the deposit address owners may slow down the conversion of cryptocurrency to cash.
270 service deposit addresses are legitimate businesses with AML/CTF compliance failures
Whether 270 service deposit addresses are truly facilitating money laundering is debatable. While the vast majority of such transactions are legitimate, a significant percentage of them facilitate illicit activities. Further, even if an address receives less than $10 million, it is still much more likely to facilitate money laundering than a $10 million address. This suggests that compliance programs for legitimate businesses may be lacking, which may be allowing some of these companies to continue operating while others aren’t.
270 service deposit addresses are associated with cyber-criminal activity
The amount of cryptocurrency received by 270 service deposit addresses is more concentrated than the amount of funds sent to a single illicit address. In the year 2020, these 270 service deposit addresses will receive at least $1 million from illicit addresses. That is just under $2.5 billion. Another group of 45 service deposit addresses will receive less than $1 billion, or two percent of the total value of illicit cryptocurrency. Regardless of the number of service deposit addresses, these 270 address groups are associated with cyber-criminal activity.
According to a report by Chainalysis, 270 service deposit addresses are associated with cybercrime, accounting for up to 55% of all cryptocurrency money laundering. These funds represent $1.3 billion in digital assets. Some of these addresses are directly controlled by cyber-criminals, while others are nested within larger exchanges. By using these 270 service deposit addresses, cybercriminals are able to launder money from many different exchanges.
One of the most concerning findings in the report is that a small group of cryptocurrency services and wallet addresses facilitate the vast majority of illicit cryptocurrency money laundering. According to the report, 270 bitcoin wallet addresses received approximately 55% of all illicit digital currency transactions in 2017. That’s more than $1 billion. And this is only the beginning. There are more service deposit addresses associated with cyber-criminal activity than most people realize.