Money Laundering

Money laundering is a technique used for illegal businesses to hide their money from the authorities.


What Is Money Laundering?

Typically, money laundering is done by those involved in scams and other criminal activities to conceal their cash flows and source of income. Money laundering schemes have been around since the 1930s and began as a practice to cover up alcohol sales during the Prohibition era in the United States. The main purpose of money laundering is to hide money from banks and the authorities using shell companies, offshore banks and other fraudulent fronts. Those engaged in money laundering may often purchase valuables, like art and luxury goods, to avoid having to declare their money. 

When it comes to cryptocurrencies, many politicians around the world have started to label cryptocurrencies as a form of money laundering. 

In 2021, President Recep Tayyip Erdoğan of Turkey banned crypto assets from being used as a source of payment, citing criminality and fraud. These anti-cryptocurrency AML laws have popped up in other nations, like North Macedonia, Bolivia and Algeria, as well in an increased effort from governments to regulate and restrict cryptocurrencies.
However, crypto is not good for money laundering. Cryptocurrencies are pseudonymous and are not considered a good vehicle for money laundering due to the transparency of the blockchain, which is an immutable public ledger that stores all transactions. Additionally, many exchanges are now starting to require KYC (know your customer) procedures in order to prevent money laundering and other criminal activities.

What Percentage of Crypto Is Used for Money Laundering?

It is difficult to accurately estimate the exact percentage of crypto being used for money laundering as illegal activity is often difficult to measure.

Famous Crypto Money Laundering Cases

BTC-e

The BTC-e money laundering case involved Russian national, Alexander Vinnik, and his involvement with the website, BTC-e, a bitcoin exchange and money laundering service. Vinnik was accused of laundering over $4 billion in Bitcoin through the platform.

QuadrigaCX

QuadrigaCX was a cryptocurrency exchange that shut down in 2019 after its founder, Gerald Cotten, died unexpectedly. It was later revealed that Cotten had been using customer funds to cover his own losses, misappropriating around $190 million in the process.