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Hundreds of millions of dollars worth of criminal proceeds have been sent through privacy wallets such as Wasabi Wallet
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At least 13% of all criminal proceeds in Bitcoin were sent to privacy wallets in 2020 – up from 2% in 2019
Elliptic, a leading provider of cryptoasset risk management solutions for crypto businesses and financial institutions published new research into the methods used by criminals to launder proceeds of crime in cryptocurrencies such as Bitcoin. Among more than 35 money laundering and terrorist financing typologies, the research highlights the growing use of “privacy wallets”, which allow users to hide their trail on the blockchain.
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The new guide compiled by Elliptic, titled “Financial Crime Typologies in Cryptoassets” serves as a comprehensive reference guide for compliance analysts to help them to identify and prevent money laundering and other criminal activity. The research is based on a review of criminal cases, interviews with cryptocurrency compliance professionals, and Elliptic’s analysis of blockchain transactions linked to criminality.
“As the technology evolves and new regulations come into force, our research shows that criminals are seeking new ways to launder dirty cryptoassets” said David Carlisle, author of the report and Head of Policy and Regulatory Affairs at Elliptic. He adds, “The most significant trend we observed was the increasing use of privacy wallets such as Wasabi Wallet in the laundering process. In 2020 at least 13% of all criminal proceeds in Bitcoin were sent through privacy wallets, which is up from just 2% in 2019”.
Privacy wallets were used to launder the proceeds of some of the highest-profile cybercriminal activity of 2020:
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July’s hack of Twitter, where over 130 high-profile accounts were compromised in order to promote a scam, raised more than $120,000 in Bitcoin, much of which was subsequently sent through a Wasabi Wallet.
- In September over $280 million in cryptoassets were stolen from KuCoin, an Asia-based exchange. Wasabi Wallet was again used to aid in the laundering of these funds.
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“The use of privacy wallets does make it challenging to follow illicit funds flow through the blockchain but that does not necessarily make them effective money laundering tools.” said Dr Tom Robinson, Chief Scientist at Elliptic. “When it comes to cashing out, crypto exchanges can use blockchain analytics tools like Elliptic’s to identify the use of privacy wallets by their customers, to help ensure that they aren’t depositing proceeds of crime.”
