Criminals and criminal organizations have long sought to launder their illicit financial gains in an effort to avoid detection and prosecution, and to make those funds available for legitimate uses. Cryptocurrency transfers have less transparency than fiat currency transfers, and as such have provided a new vehicle for such activity, whether the illicit funds are initiated as cryptocurrency, such as in the case of ransomware payments or illegal merchandise sales on the Dark Web, or when criminals move fiat currency into cryptocurrencies to facilitate movement and laundering.
The researchers used public cryptocurrency transaction information (the “blockchains”) to identify patterns of illicit cryptocurrency usage, such as money laundering. The researchers developed indicators that can be extended and used to estimate a lower bound of the extent of money laundering over a large number of available cryptocurrencies. Most importantly, the researchers considered how such observations could be used to develop automated probabilistic tools which investigators might leverage to identify accounts that are likely involved in illegal activities. Law enforcement can use this information to help trace illicit funds through cryptocurrency systems, and to detect and disrupt illicit transactions. Such capabilities will also support efforts to identify criminal actors and to disrupt the underlying criminal activities. The research activities and results have been presented to DHS components and industry stakeholders working to fight money laundering and transnational criminal organizations.