Data research firm Chainalysis pointed out in its 2023 Cryptocurrency Crime Report that while the scale of money laundering activities is gradually decreasing, criminals are becoming more adept at hiding their tracks in increasingly complex ways. This includes the North Korean hacking group Lazarus Group, which has turned to new mixing protocols and evaded detection by using more deposit and withdrawal addresses.
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Weakening scale of money laundering funds
Centralized exchanges remain the preferred destination for illicit withdrawals
Significant increase in money laundering addresses
North Korea adjusts money laundering strategy
Transitioning to new mixing protocol: YoMix
Frequent use of cross-chain bridges
Firstly, the amount of money laundered through cryptocurrencies in 2023 decreased from $31.5 billion in 2022 to $22.2 billion.
The report attributes the decrease in this figure to an overall decline in cryptocurrency market trading volume in 2023. However, it is evident that the decline in money laundering activities is greater, reaching 29.5%, while total trading volume decreased by only 14.9%.
Furthermore, the following chart shows that centralized exchanges (CEX) continue to be the primary destination for transferring funds to illegal addresses, a trend that has remained stable over the past five years.
However, over time, there has been a noticeable increase in illegal funds flowing into decentralized finance (DeFi) protocols, as well as funds being redirected to gambling services and cross-chain bridges. This is mainly due to the thriving development of the DeFi sector in recent years. Despite this, we are aware that the transparency of DeFi data generally makes it unsuitable for obscuring the flow of funds.
The report also highlights that in 2022, 40 addresses received over $10 million each in illegal cryptocurrencies, totaling less than $2 billion. However, last year, 109 exchange deposit addresses received over $10 million each in illegal cryptocurrencies, totaling $3.4 billion.
In other words, cryptocurrency criminals seem to be achieving greater complexity and diversification in money laundering and criminal activities through more online mixing services and a larger number of deposit and withdrawal addresses, in order to evade the pursuit of law enforcement agencies and compliance teams of exchanges.
Therefore, teams combating money laundering in cryptocurrency crimes may need a deeper understanding of online activities, as money laundering activities become more decentralized.
The report also mentions the notorious North Korean hacking group Lazarus Group, which has found new money laundering channels after protocols such as Tornado Cash and Sinbad were sanctioned or shut down.
Despite the escalating enforcement actions by regulatory authorities, the report states that cryptocurrency criminals are often able to immediately find many alternative solutions.
According to statistics, the usage of the new mixing protocol YoMix experienced significant growth in 2023, with an increase of over five times in funds flowing into it.
Chainalysis states, “Approximately one-third of YoMix funds come from wallets associated with cryptocurrency hackers. The surge in the protocol’s usage is closely related to the adoption by Lazarus Group, indicating that criminals can find alternative money laundering channels immediately when old mixing services are sanctioned.”
Furthermore, data shows that cryptocurrency criminals frequently utilize cross-chain transfers to obscure the flow of funds. The cross-chain scale of illicit funds reached nearly $744 million last year, more than double the amount in 2022.
Previously, the United Nations reported that North Korean hackers appeared to be funding the country’s nuclear missile program through extensive cyberattacks and fund theft, with total illicit earnings exceeding $3 billion within seven years.
Chainalysis
Lazarus Group
North Korea
Money laundering
Mixing
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