Hello everyone!
I am Yudong!
Let’s answer the first question first: What is money laundering?
Money laundering refers to the process of disguising funds from illegal sources as legal income through various means. Its core purpose is to conceal the true source of funds and make illegal funds look legal.
Money laundering is usually divided into three stages:
1. Placement phase: injecting illegal funds into the financial system, such as depositing them in a bank or purchasing assets.
2. Layering stage: Disperse funds through multiple transactions, cross-border transfers or purchases of virtual assets, cutting off their connection with the original source.
3. Integration stage: reinvesting the laundered funds into the legal economy, such as purchasing real estate, investing in businesses, etc.
Why is USDT (Tether) in the cryptocurrency world easily used for money laundering?
USDT is the most commonly used stablecoin in the cryptocurrency world. Its characteristics of being pegged to the US dollar and its high liquidity make it a "hot tool" for money laundering. The following are the main reasons:
1. High liquidity
Widely used: USDT is the most widely used stablecoin on exchanges and can be quickly converted to other crypto assets or directly withdrawn to fiat currency.
Cross-border convenience: USDT can be easily transferred around the world, bypassing the cross-border restrictions of the traditional banking system.
2. Difficult to track
Anonymity: Although blockchain transactions are public, addresses using USDT are often not directly linked to real identities unless KYC (identity verification) is completed through a regulated exchange.
Coin mixing tools: Money launderers can further conceal the flow of funds through coin mixing services or smart contracts.
3. Regulatory loopholes
Some exchanges are not compliant: Some exchanges do not implement KYC and AML (anti-money laundering) policies properly, providing convenience for money launderers.
Peer-to-peer transactions (P2P): In P2P transactions, funds can be transferred directly from one user to another without going through an exchange, which increases the difficulty of supervision.
4. Large transaction volume, difficult to detect
Frequent cryptocurrency transactions: USDT’s daily trading volume usually exceeds 10 billion US dollars, and the huge transaction flow makes individual abnormal transactions more difficult to detect.
Large withdrawals are easy to conceal: Using USDT to transfer large amounts and then withdrawing them in batches to multiple accounts can easily conceal the source of illegal funds.
5. Cross-border characteristics
Bypass foreign exchange restrictions: Some countries have restrictions on cross-border capital flows, and USDT can bypass these restrictions and provide a covert transfer channel for funds.
Avoid traditional bank monitoring: Traditional banks’ anti-money laundering systems cannot directly monitor transactions on the blockchain.
Typical money laundering methods
1. Cross-border transfers:
o Criminals convert illegal funds into USDT, send them to other countries through cross-border transactions, and then withdraw them into legal currency.
2. With OTC (over-the-counter) trading:
o Use over-the-counter trading platforms to exchange large amounts of USDT for cash or other assets, bypassing the exchange's anti-money laundering monitoring.
3. Purchase high-risk assets:
o Use USDT to purchase other high-volatility assets (such as altcoins or NFTs) and diversify funds through multiple transactions.
4. Wash Trading:
o Transferring USDT back and forth between multiple accounts and concealing the source of funds by falsifying transaction records.
Anti-money laundering challenges in the cryptocurrency world
1. Conflict between anonymity and privacy protection: There is a contradiction between the anonymity of blockchain technology and the transparency required by regulators.
2. Cross-border supervision is difficult: Crypto asset transactions are global, but supervision is usually based on countries, which makes it difficult to coordinate and unify.
3. Popularization of decentralized tools: Tools such as decentralized exchanges (DEX) and currency mixing services further increase the difficulty of tracking.
Typical cases of money laundering using virtual currency in the country in the past two years
Case 1: Lanzhou police cracked a virtual currency money laundering fraud case
In May 2024, the Anning Branch of the Lanzhou Public Security Bureau of Gansu Province successfully cracked a series of fraud cases using USDT for money laundering. Under the inducement of her "officer boyfriend", the victim, Ms. Liao, exchanged 2 million yuan for USDT and transferred it to the so-called financial management platform. Through investigation, the police arrested 15 criminal suspects including backpackers and members of upstream fraud gangs, and the funds involved amounted to more than 35 million yuan.
Case 2: The Ministry of Public Security cracked down on money laundering activities using USDT
In April 2022, Liu Zhongyi, director of the Criminal Investigation Bureau of the Ministry of Public Security, pointed out at a press conference that fraudsters used the USDT running point platform to conduct money laundering activities, which was the most serious harm. These criminals converted illegal funds into USDT through the running point platform, and then used multi-level transactions to conceal the source of funds and evade supervision. The public security organs have cracked down on such activities and solved many related cases.
USDT has become the "tool of choice" for money launderers due to its strong liquidity, cross-border convenience and low regulatory threshold. However, money laundering not only disrupts the financial market, but also brings risks to the long-term development of the cryptocurrency industry. In the future, with the strengthening of global supervision, anti-money laundering measures for USDT and other crypto assets are expected to be gradually improved.
