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Today marks the release of Elliptic “Report on typologies” – a unique resource to help equip compliance and law enforcement teams to fight the next frontier of crypto-crime.
It’s only been a year since we published the 2022 version of the report, but in that short time cryptoasset businesses and financial institutions have faced a rapidly changing landscape that places increasing demands on compliance teams to adapt.
The collapse of the FTX crypto exchange in November 2022 catalyzed a flurry of regulatory activity that led to stricter requirements for companies operating around the world.
New regulatory frameworks in jurisdictions such as Hong Kong, Dubai, the UK and the European Union are helping to provide clarity on the rules of the road. However, they also come with significant new requirements that create operational challenges for compliance teams.
U.S. regulatory enforcement efforts have significantly intensified, and the increased use of policy tools such as financial sanctions targeting cryptocurrency-related activities places additional demands on businesses to comply with regulations.
A year is a long time in crypto
As this regulatory change has proceeded at a relentless pace, the past year has also seen new developments in the financial crime risk environment impacting cryptoassets. for example:
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Threat actors such as North Korean cybercriminals and ransomware gangs now routinely seek decentralized finance (DeFi) services to engage in “jumping chain” money laundering typologies.
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Financial sanctions have been imposed on blending services – such as mixers Tornado Cash and Blender – leading to serious consequences if businesses facilitate transactions with them.
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Fraud schemes like “pig butcher” investment scams have proliferated as fraudsters try to take advantage of a volatile market.
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Hacks, fraud and other crimes are increasingly spilling over into new emerging environments, such as the world of non-fungible tokens (NFTs) and the metaverse.
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Criminals are increasingly able to launder funds between the world of traditional finance (TradFi) and the crypto ecosystem, creating additional challenges in detection and monitoring.
This combination of a heightened regulatory environment and an evolving threat landscape means that compliance teams face greater challenges than ever before to ensure that they can effectively and efficiently detect and mitigate financial crime risks.
Using the typologies report
Our goal with this report is to equip your compliance team with the actionable insights needed to ensure your business can successfully increase its ability to detect emerging financial crime risks.
We therefore designed the 2023 version of this report to reflect the changing landscape. For example, we have:
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provided additional insights into the use of DeFi, stablecoins, and other related innovations included in cross-chain laundering typologies;
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detailed the money laundering techniques being developed by ransomware gangs and their support networks;
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offered further insight into the proliferation of crimes such as pig slaughter and their use in money laundering typologies involving services such as Bitcoin ATMs;
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a chapter on money laundering activities related to the metaverse is included; and
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provided updated case studies and illustrations throughout the report to provide insight into the latest regulatory and legislative measures affecting the crypto space.
In addition to describing key risks, throughout the report we provide specific examples of compliance controls your team can implement to address the specific typologies of financial crime you encounter. This includes examples of how Elliptic’s holistic screening capabilities can be used to detect money laundering typologies at scale enabling the detection of illicit activity even when illicit funds are exchanged across different DeFi services.
In addition, this year we produced a special addition of the cryptoasset risk assessment matrix. This will help your compliance team to practically ensure that you have the oversight controls necessary to manage the risks identified in this report.
It is more important than ever for compliance professionals to understand the evolving nature of financial crime typologies in the cryptospace so they can scale their operations to ensure effective detection and disruption of risk. At Elliptic, we’ve always been committed to equipping compliance teams with the insights and capabilities needed to navigate a rapidly evolving landscape.
Click below to download the report and equip yourself with the insights needed to ensure successful financial crime compliance and risk management.
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