Executive Summary
It’s been exactly one year since we published the 2023 version of Elliptic’s Typologies Report, and in that short time we’ve seen important and rapid developments impacting the nexus between cryptoassets and financial crime.
In January 2024, the US Treasury’s Financial Crimes Enforcement Network (FinCEN) kicked off the year by issuing a finding that cryptoasset mixers are a primary money laundering concern owing to their frequent use in money laundering, and issued a proposed rule that would require stringent reporting requirements for US crypto businesses and financial institutions where they identify transactions involving mixers. Additionally, across the first half of 2024, the Treasury’s Office of Foreign Assets Control (OFAC) continued its intensive use of financial sanctions to target cryptoasset activity involving a range of threat actors, from cybercriminals, to Russian-affiliated entities involved in sanctions evasion, to the financial support networks of designated terrorist organizations such as Hamas and Hezbollah.
These developments were accompanied by other important developments in the financial crime risk landscape impacting the cryptoasset space. For example:
- Stablecoins, and in particular Tether (USDT) on the TRON network, have featured increasingly in financial crime typologies, including in so-called “pig-butchering” scams, and in sanctions evasion activity involving jurisdictions such as Russia, Iran, and North Korea.
- Professional money launderers associated with Chinese organized crime groups have looked to cryptoassets as a method for moving illicit funds across borders.
- Cryptoasset exchanges located in high risk jurisdictions, such as Russia, continue to offer an important lifeline to criminal actors seeking to convert funds from crypto into fiat currencies.
- Illicit actors such as ransomware attackers and North Korean cybercriminals continue to utilize complex money laundering schemes, relying on numerous methods of obfuscation, such as mixers, cross-chain services, and “peeling-chain” techniques - often in tandem.
- Criminals are leveraging developments in artificial intelligence (AI) when perpetrating crimes involving cryptoassets, enabling them to scale their illicit operations, particularly related to crimes such as fraud and ransomware.
These ongoing trends require that analysts and investigators not only understand underlying typologies of financial crime, but that they have access to solutions that can enable them to identify associated behaviors and red flags. To that end, at Elliptic, we’ve been working to ensure that our best-in-class blockchain analytics capabilities enable our customers to detect these and other emerging risks.
Our aim with this report is to equip analysts and investigators with the practical insights needed to ensure they can continue to detect new financial crime risks with success. Therefore, we’ve designed the 2024 version of this report to reflect the changing landscape. For example, we’ve:
- Included a brand new chapter on how the convergence of AI and cryptoassets is impacting criminal activity.
- Updated the chapter on stablecoins to reflect the recent significant changes in this component of the cryptoasset ecosystem.
- Included guidance on how you can leverage new functionality within the Elliptic product suite - such as our behavioral detection capabilities and Entity Due Diligence data - to enhance your detection of financial crime typologies; and
- Added additional, updated case studies throughout the report based upon major law enforcement and regulatory actions that have occurred across late 2023 and the first half of 2024.
David Carlisle VP of Policy and Regulatory Affairs, Elliptic