Blockchain Technology has started a new area in FinTech technologies, and all new discoveries can be used for good as well as evil. Terrorists as well as criminals have a possibility to use bitcoin for illegal activities to try to hide their activities, they hope that states will not adopt regulations globally and that law enforcement isn’t efficient and will not look at such kinds of funds. Also of note is because of the lack of regulations there is lucrative business of stealing cryptocurrency i.e. in incredibly big amounts nearly One billion USD in 2019.

Said individuals are taking advantage of this situation as regulations are still weak and compliance even weaker so they use today’s trend of growing cryptocurrency and hide from Anti-Money Laundering (AML) laws and convert tainted blockchain funds into clean and spendable money on third markets.

  • There are positive signs that new AML laws are having a positive impact
    Today’s research shows that there is reasonable doubt that criminals use large amounts of bitcoin for their activities, and then send it to countries where countries are lacking cryptocurrency AML regulations and via local exchanges convert it to local currencies. In fact data analysis shows that the top exchanges have laundered more than US$2 billion worth of bitcoins.

    Our conclusions points on two things:
    • 1) Criminal use of bitcoin is significant
    • 2) New set AML laws are managing to scare criminals and have redirected more than 90% to cryptocurrency exchanges in countries with unregulated crypto-AML.
  • Pic 1. - Amount received by exchanges in unregulated markets is bigger than 300k bitcoins from 2009 to 2019. While unregulated countries receive more than 30% tainted bitcoin then regulated ones.

  • Research has shown that direct payment as main model how tainted bitcoins are being transferred to exchange. In much smaller amount this is done via indirect payment(by using one or more addresses) before moving to local fiat currency or another cryptocurrency.

    This is possible to deduce by using the forensics of our flow and group modes to reveal and group criminals. We in our system are applying machine learning, and advanced analytics, grouping technologies, and deliver results via our APP or by our API. Our Forensics team is doing active intelligence gathering, public and private intelligence sources, and open-source intelligence (OSINT) to reveal tainted bitcoins to track bitcoin addresses to reveal associations.

    We know also that if market is poorly regulated then criminals use mixers, where they mix clear bitcoins and tainted and then dexchane it in local exchanges. After this is done there is very small possibility for them to be discovered by non-crypto financial institutions.

    However, for governments and regulators around the globe, the positive impact AML cryptocurrency laws revealed is a welcome news.
    • - This is reducing criminal and terrorist activity.
    • - Funds that they can use are much lower and can finance less illegal activities.

  • Become secure and safe crypto economy
    This kind of direct correlation between policies and success of their enforcement is of essential importance to governments as it enables them to follow the effectiveness of new regulations and monitor criminal activity so they can supervise crypto economies. This includes that cryptocurrencies are use in their jurisdiction is secure and untainted by criminal activity. This will create as consequence a trustworthy cryptocurrency currency financial market.

    Is US FinCEN, has published that it will be strict and will put in place renewed inspections on crypto-to-crypto services such as mixers. The agency made instructions and guides for exchanges and other DABs(digital assets businesses) and joined with the IRS to audit exchanges in the US.

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