Emily Clarke

What are Criminal Typologies in Crypto?

Cryptocurrency has opened up a world of possibilities for decentralized finance. However, it's also opened up a can of worms regarding risks. This technology is ripe for financial crimes, making compliance for crypto companies more paramount than ever.

A big part of complying with anti-money laundering regulations is knowing how to spot red flags as they occur. That requires understanding criminal typologies.

Cryptocurrency Money Laundering Typologies

Simply put, typologies are a form of criminal profiling. It's a set of actions, attitudes, and behaviors that offenders typically have when engaging in criminal activity. Every industry has criminal typologies, but here are some of the most common for cryptocurrency.

Dusting

Dusting is a technique that aims to overwhelm monitoring systems. The idea is that triggering systems for non-criminal activity can pull attention away from the actual nefarious action. For example, a money launderer might perform many crypto transactions to drum up AML and CFT noise. When those monitoring systems are overwhelmed, they do the real laundering schemes.

Mules

With this technique, criminals will use third-party individuals to perform their illegal acts. In most cases, they coerce financially vulnerable people with the promise of money or safety. The third-party conducts risky transactions, avoiding identification verification systems.

Layering

Layering is one of the oldest tricks in the money-laundering book. However, it's even more challenging to spot with blockchain technology. Criminals will move assets through different layers to disguise illegal activity. They might exchange currencies several times and blend transactions across exchanges. The goal is to muddy up the digital paper trail and make it harder to prove that laundering occurred.

Off-Chain Transactions

Sometimes, criminals will perform transactions off the blockchain. They go to places where compliance for crypto companies doesn't exist. They can also exploit disparities between blockchains to disguise illegal activity.

Those are just a handful of examples of crypto criminal typologies. Protecting your bottom line is challenging when dealing with blockchain technology. But if you understand how criminals act and know their techniques, you can spot issues and take action.

Author Resource:-

Emily Clarke writes about identity verification and business verification service. You can find her thoughts at online ID verification blog.