The European Union's law enforcement agency, Europol, has warned that the increasing digitalization of financial systems and emerging technologies have significantly heightened the threat of money laundering.
In its latest report, Europol stated that cryptocurrencies, decentralized finance (DeFi) platforms, and AI-driven automation "facilitate greater anonymity" for criminals as they seek more efficient ways to obscure illicit transactions.
The agency even mentioned non-fungible tokens (NFTs) alongside dark web marketplaces, which complicate law enforcement efforts by creating "a digital cloak" that aids in concealing money laundering.
"Virtual currencies are increasingly used to launder money as they offer possibilities for borderless, instant, global transactions when layered through privacy-enhancing technologies," Europol said, adding that cash, for now, still remains central to traditional crime schemes.
The law enforcement agency provided an example of ChipMixer, a so-called crypto mixer that helps obfuscate crypto transaction history. Before it was taken down in 2023, Europol reported that investigations into this service suggested ChipMixer may have facilitated the laundering of 152,000 bitcoins (equivalent to $13 billion today).
"A large share of this is connected to dark web markets, ransomware groups, illicit goods trafficking, procurement of child sexual exploitation material, and stolen crypto assets," Europol stated.
The agency also highlighted a couple of techniques used by criminals, such as chain hopping and crypto-swapping. The former involves switching between different crypto assets to obscure the origin of funds, while the latter allows for the quick conversion of one asset into another by placing orders on behalf of users.
"These transactions are difficult to trace when well-known coins are exchanged for lesser-known ones or privacy coins like Monero, enhancing anonymity," Europol noted, adding that many of these services are registered in jurisdictions with loose anti-money laundering regulations and even advertise their non-compliance.
Meanwhile, Europol also stressed that AI accelerates crime and provides criminal networks with entirely new capabilities, as "these innovations expand the speed, scale, and sophistication of organized crime" and reshape how crime is planned, executed, and concealed. The law enforcement agency even mentioned quantum computing as a potential accelerator of crime, although this technology is still in development, and estimates vary on how many years it will take for a breakthrough.
However, on the other side of the debate, crypto advocates argue for neutral, censorship- and surveillance-resistant technologies that help preserve the privacy of regular people as well, stressing the need to find the right balance between fighting crime and protecting honest users.
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