Key Points
- Illicit crypto activities decreased notably in 2023, with crypto laundering amounts dropping to $22.2 billion from 2022’s $31.5 billion.
- Lower trading volumes and more sophisticated evasion techniques, particularly those employed by the Lazarus Group, have caused this decline.
- Observers noted a shift towards using blockchain bridges and gambling services for laundering, moving away from centralised exchanges.
- Despite their inherent transparency, decentralised Finance (DeFi) protocols have become increasingly utilised for laundering.
- The US Treasury took significant action against illicit activities, sanctioning and shutting down the mixer Sinbad for its connections to North Korea.
The year 2023 witnessed a notable decline in illicit crypto activities, with the amount of money laundered through cryptocurrencies falling to $22.2 billion from $31.5 billion in 2022. This decline is particularly significant, considering it represents only about 1% of the estimated $2 trillion laundered annually worldwide. The decrease, notably due to the Lazarus Group, is largely attributed to lower trading volumes and advanced evasion techniques.
Launderers Pivot to Bridges, Gambling
A pivotal shift occurred in laundering methods, moving towards blockchain bridges and gambling services and away from the previously favorecentraliseded exchanges and services in 2022. This transition reflects the adaptability of illicit actors in response to the evolving digital finance landscape and the increased scrutiny of traditional laundering channels.
The New Laundering Frontier
Despite the transparency associated with decentralised Finance (DeFi) protocols, their use in money laundering activities has seen an upward trend. Despite DeFi’s openness that enables the tracing and shutting down of crypto accounts associated with illegal entities like Hamas, the paradoxical increase stands out. The inherent features of DeFi platforms that provide anonymity and facilitate cross-border transactions have been exploited to launder money.
Lazarus Adopts Mixers, Dodges $504M
The Lazarus Group, using mixers and cross-chain bridges, has sophisticatedly refined its strategies to obscure stolen funds’ origins. Mixers like YoMix have gained popularity among these actors for their effectiveness in disguising the trail of illicit funds. Despite this, funds sent to mixers from illicit addresses dropped to $504.3 million, nearly half of the previous figures, partly due to decisive actions by law enforcement agencies. In November 2023, the US Treasury sanctioned and shut down the Sinbab mixer linked to North Korea, fighting crypto laundering.
The 2023 crypto laundering, characterised by evolving digital finance crime and countermeasures, highlights ongoing battles against illicit activities. Through continuous monitoring and technological advancements, moreover, international cooperation enhances efforts to mitigate cryptocurrency misuse for money laundering.
