The crypto tracing company's latest report shines a light on potential money laundering.
Crypto criminals aren't the only ones using blockchains to launder illicit funds, according to analytics company Chainalysis. Traditional money launderers – criminals working outside crypto – may be moving their cash on-chain as well.
A new report from Chainalysis shines a light on an apparently flourishing world of on-chain money transfers that aren't definitively illicit but nevertheless share the characteristics of transactions that would raise eyebrows in banks.
Traditional money launderers are setting up "large-scale money laundering infrastructure" to clean cash that originated outside crypto on-chain, Chainalysis Head of Research Kim Grauer told CoinDesk.
These transfers don't originate from the crypto scams, thefts and ransomware attacks that Chainalysis is famous for flagging on the blockchain, the transparent digital ledger of all crypto transactions. Their software and labeling systems help crypto exchanges and other entities avoid accepting funds from criminal activity and assist government investigators in tracking suspects down.
By contrast, this more opaque class of transaction comes from wallets that aren't known to be illicit. And yet they flow across blockchains and into exchanges following strategies that traditional financial compliance departments would likely flag. For example: splitting into rounded tranches sized just below know-your-customer reporting thresholds, and then sticking them back together later on.
Grauer said most on-chain investigators won't be surprised that this kind of thing has been a potential trouble spot for years. Still, she said the July report is Chainalysis' first attempt to document how big the trend is across the entire blockchain. The company found it was orders of magnitude larger than even the known illicit transaction base.
"This is trying to advance the conversation about how we in crypto think about compliance techniques to mirror what was developed in traditional banking," Grauer said.
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