Chainalysis reported that illicit addresses facilitated the transfer of $22.2 billion in cryptocurrency in 2023, marking a notable decrease from the $31.5 billion recorded in 2022. This shift shows the ability of illicit actors to quickly adjust their methods for moving funds in the Web3 environment.
Money laundering is the illegal process of disguising large sums of money obtained through criminal activities such as drug trafficking or terrorist funding to make them appear as if they originated from a legitimate source. Criminals engage in money laundering to legitimize their illicit funds and avoid detection.
Chainalysis reported a significant 29.5% decrease in money laundering activity, surpassing the 14.9% decline in total transaction volume. Despite traditional centralized exchanges remaining key recipients of illicit funds, the report highlighted YoMix as the new primary mixer for laundering funds in 2023, taking over from the now-defunct Sinbad.
Yomix replaces Sinbad
YoMix is a cryptocurrency mixing service that focuses on offering anonymity to users by blending their Bitcoin transactions with others, making it challenging to trace the funds’ origin. The service is user-friendly, enabling users to customize settings like service fee, distribution, delay, and more.
Sinbad, a similar service, was shut down due to sanctions linked to North Korean threat actor Lazarus Group. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Sinbad for processing “millions of dollars’ worth of virtual currency from Lazarus Group heists.” This action led to the shutdown of Sinbad’s website in a joint operation involving the FBI and the Dutch Financial Intelligence and Investigation Service.
Following the closure of Sinbad, the Lazarus Group switched its crypto laundering operations to YoMix, another cryptocurrency mixer, in response to the crackdown. This move demonstrates the group’s agility in adapting to stricter regulations and innovating under regulatory pressures.
Centralized exchanges and cross-chain bridges
Chainalysis has uncovered some key findings in the realm of cryptocurrency money laundering. They revealed that a considerable amount of illicit activity involves unsophisticated actors who transfer funds directly to exchanges.
For instance, the now-defunct iSpoof service was responsible for facilitating over £100 million in scamming activities by sending significant amounts of Bitcoin straight to a group of deposit addresses at a centralized exchange.
Furthermore, in 2023, cross-chain bridges received a staggering $743.8 million, more than doubling the $312.2 million reported in 2022.
In light of these discoveries, Chainalysis recommends that law enforcement and compliance teams remain vigilant in studying these evolving laundering techniques and understanding on-chain patterns to effectively combat illicit activities within the cryptocurrency space.
