Over 40% of all Bitcoin (BTC) transactions are believed to be criminally sourced.
Laundered cryptocurrencies can be identified through checks.
There is cryptocurrency tracking software that allows you to buy bitcoin with a card and do anti-money laundering verification at the same time.
Some researchers claim that over 40% of all Bitcoin Millionaire transactions are fraudulent. Owning criminally-sourced cryptocurrencies can cause you serious trouble even if you haven’t participated in any illegal activity. Could this be something you should be worried about? If so, how can you perform an anti-money laundering (AML) check on your cryptocurrency?
What is criminal bitcoin?
Cryptocurrency is considered to be of criminal origin if it has been involved in illicit money laundering activity such as:
The bitcoins „dirty“ can be identified by anti-money laundering controls (AML). Note that a cryptocurrency can be considered laundered even if it does not come directly from an illegal or fraudulent source. For example, BTCs from unregistered exchanges or mixing services will be flagged by any established AML crypto program.
What are the risks of money laundering?
The bad news is that even if you have no idea that some of your cryptocurrencies have been laundered, you can still incur losses. Here are some possible consequences of not performing an anti-money laundering check:
Not being able to sell your cryptocurrencies at current market prices. Reputable exchanges do not convert suspicious coins into USD and other fiat currencies. To sell laundered cryptocurrencies, you will need to use a peer-to-peer (P2P) platform or a miner exchanger that will charge a higher commission. Sometimes laundered bitcoins are even sold at a 10% to 20% discount or even more.
Being blocked on an exchange. Most of the major exchanges – knowing that all exchanges are regulated – use special tracking software to detect laundered cryptocurrencies. Once you try to deposit them, the exchange will prevent you from making further transactions until you can prove the origins of the asset. This is a real issue that is often discussed on Reddit:
Losing your cryptocurrency. If you cannot provide supporting documents regarding the source of your funds, the exchange will not only block the account permanently, but also will not allow you to withdraw the coins from your balance. Say goodbye to your bitcoins!
Having to deal with the police. Stock exchanges can report any evidence of a crime to the financial police, who will likely want to question you. Even if you can prove that you did not commit the crime your bitcoin was involved in, you will still lose the coins. Usually, laundered assets are confiscated.
Serious legal issues. In the worst case scenario, you can be sued as an accomplice or accomplice in a financial crime.
How does AML software detect laundered bitcoins?
Anonymity and privacy are the two benefits of cryptocurrency that people are generally interested in. This is because bitcoin is anonymous in the sense that you don’t have to enter your personal information when you create a wallet.
However, bitcoin is also highly traceable – every bitcoin transaction leaves a digital trail, allowing its activity to be tracked. You can easily trace the majority of cryptocurrencies, with the exception of privacy-focused ones like Monero (XMR), although even these are not immune.
If you are wondering if you can verify the origin of the received parts yourself, without using dedicated AML software, the answer is no. You can do some preliminary research using a blockchain explorer like BTC.com or Etherscan to see a list of all transactions associated with the address of the wallet that sent you the cryptocurrencies.
Keep in mind that these tools will not reveal the person behind the addresses. Additionally, criminals usually use dozens or hundreds of fake wallets to cover up their tracks, so you will need considerable processing power and special algorithms to find them. Blockchain analysis software is also a booming industry!