In February 2022, the United States Department of Justice reported their arrest of Ilya Lichtenstein and Heather Morgan, a husband and wife duo, for performing money laundering activities. The couple had attempted to launder 4.5 billion USD worth of cryptocurrency coins stolen from Bitfinex. This high-profile case is only the tip of the iceberg as illegal wallets had received cryptocurrencies with a total value of approximately USD 14 billion in the year 2021. It is clear that crimes in the cryptocurrency sphere are increasing as the amount of funds transferred to illicit wallets has nearly doubled, from the year 2020 to 2021. 


Introduction to Cryptocurrencies and Crimes in the Industry

Built upon blockchain technology, cryptocurrencies refer to decentralised digital money that is encrypted. The digital money could be utilised to purchase many goods or services or simply be held until they generate a profit. In recent years, many have increasingly utilised cryptocurrencies across the globe, resulting in the market value to be at an estimated USD 2.6 trillion as of 2021. Simultaneously, the amount and types of crimes committed in the cryptocurrency industry has been increasing exponentially. These include money laundering, theft, scams and funding of terrorist organisations or acts. The crimes are perpetuated by anonymity, ease of access to platforms, and the lack of regulation.


Process of Committing Cryptocurrency-Related Crimes

A majority of crimes carried out in the cryptocurrency space relate to laundering money. It is important to identify the three main stages in laundering cryptocurrencies for immediate intervention. The three stages are: 

    1. Placement: In the first stage, funds illegally obtained or from illegal sources are generated in the financial system via third parties, which include any businesses. Cash or other types of cryptocurrency, such as altcoins, can be used to purchase cryptocurrencies. Most exchanges are Anti-Money Laundering (AML) compliant, which means they must adhere to regulatory guidelines for identity verification and the source of funds. Customers must be aware of the Know-Your-Customer (KYC) policies and procedures of Virtual Asset Exchanges, which makes it possible to match transaction data to each customer. To introduce illegal funds easily, lawbreakers choose exchanges with lower levels of compliance with AML standards.


    3. Layering: Upon successfully completing the placement stage, the fraudsters may move on to layering or the hiding stage, where illegal sources of funds are concealed via conducting structured transactions. Due to the absence of traceability, the anonymity of transactions in the cryptocurrency field often allows criminals to operate more efficiently. A single version of the coin may be used to pay for another, blurring the digital currency’s origins and obscuring one’s identity.

    5. Integration: The last step revolves around driving the illicit funds into the economy. Money must now be in good standing to prevent being tracked, showing authorities it originated from a legitimate source. Illicit income is often justified by portraying it as the result of a successful business venture or another sort of currency appreciation. Criminals have devised a method of contacting thief-party over-the-counter (OTC) brokers in order to circumvent the KYC requirement. These brokers run legitimate businesses, making it challenging to identify money laundering. The final step is achieved through four key methods, which include cryptocurrency ATMs, cryptocurrency mixing platforms, online and gaming platforms, and peer-to-peer crypto networks.


Regtank: Solution Provider for Crimes Involving Cryptocurrencies

Around the world, the government and other authorities have realised the need to implement more stringent regulations surrounding cryptocurrencies and decrease the amount to which the field is decentralised. This situation applies to Singapore, where there have been suggestions to create more rules which govern the cryptocurrency space. 

Regtank Compliance Solution adheres to the highest standards of compliance regulations and is able to prevent crimes in the cryptocurrency space. For instance, our Know-Your-Transactions (KYT)  module can enable screening for any illicit transactions or detect suspicious patterns.  

Contact us at to understand more about our compliance solutions!