As cryptocurrency businesses continue to thrive, they also begin to show some form of susceptibility to crime and make headlines for the wrong reasons. To emphasize, they are a vehicle for money laundering activities. In 2018, several hackers stole $560 million US dollars worth of XEM and other major cryptocurrencies off Coincheck, a Tokyo-based exchange. Followingly, in 2021, 30 persons were caught attempting to complete a money laundering scheme by exchanging US$100 million worth of stolen cryptocurrencies on unlawful websites. 


Alas, the situation has evolved in such a way that renders it unnecessary for money launderers to go through illicit platforms, since they can simply launder money through popular and approved cryptocurrency service providers. Then, how is money laundered through such platforms? What are the implications for cryptocurrency businesses that fail to make an evident attempt in preventing money laundering through their platforms? 

Indicators of Money Laundering in Cryptocurrency Businesses

Red flag indicators guide virtual assets (VAs) such as cryptocurrencies in reporting transactions and entities that behave in a suspicious manner, through the application of a risk-based approach which complies with customer due diligence (CDD) requirements. They enable the aforementioned organizations to examine or look into Suspicious Transaction Reports (STRs) and work on bettering the detection methods presently in place for money laundering activities.


Similarly, cryptocurrency businesses would look out for such issues that arise. To elaborate, these are some of the most common indicators of money laundering activities occurring in all businesses, which include cryptocurrency businesses: 


  1. Irregular or Unusual Transactions: The money launderer may make transactions that are extremely large, to others who have no known association with them or at odd intervals. For example, consider an extremely young investor without much income that makes a huge transfer of funds to someone of a much older age whereby they have no known links.
  2. Combination of Many Services: This point regards where the sender receives or sends the funds to. For instance, if cryptocurrency is spent in the darknet or gambling websites, then money laundering is suspected to have taken place.
  3. Constant and Repetitive Transactions: Such transactions are characterized by a money launderer making small, repetitive transactions to avoid detection. In this scenario, an individual may constantly transfer US$900 so that it does not trigger the cryptocurrency business to gather or share information on their transactions.
  4. Suspicious User: This is indicated by a user who provides unreliable sources of documents or unexplained funds. They may also constantly change their information and contact details so as to avoid getting caught. For instance, they may always be changing their bank account information linked to their cryptocurrency trading account.


Penalties for Failure to Comply with Anti Money Laundering (AML) Regulations

When there is failure in complying with AML regulations, especially in cases where an attempt is not even made, there are steep penalties that tend to be incurred. In countries with stricter regulations such as Singapore, the fines for failing to prevent or comply with AML standards could amount between a range of US$2,000 to US$185,000. Consequently, companies would like to avoid such a heavy price to pay, if possible. 


Preventing Money Laundering in Cryptocurrency Businesses

For the purposes of ensuring that money laundering is not taking place within the business, cryptocurrency product and service providers would have to take three distinct measures. In fact, taking the effort to ensure compliance to AML regulations would lighten any consequences, even if the business accidentally onboards a money launderer. As such, they would firstly need to install a Know-Your-Customer (KYC) system to find out how much money laundering risks each individual onboarded poses. Secondly, they also require a Know-Your-Transaction (KYT) mechanism to detect and monitor the main bulk of any money laundering transactions that may take place. Lastly, the travel rule should be abided by in which gathering and sharing of data for transactions exceeding $1,000 in US dollars or Euros should proceed. 


In this case, RegTank provides KYC and KYT solutions which would aid cryptocurrency businesses as well as other other organizations in fighting against money laundering activities. 


Contact us at for more information!