Money Laundering & Crypto

This is a notional diagram I developed to explain how crypto-based money laundering works. We are all familiar with the first part (illicit industries generate cash that criminal wants to park somewhere). Crypto provides that opportunity.

They buy “tokens” (just like at the county fair) from an exchange. They use the tokens to buy goodies. Then they find ways to have the money returned to themselves.

This is not to speculate on the FTX story in particular, only to explain in an oversimplified way the enforcement challenge of tracking hidden unregulated digital currency flows.

Learn more about the 3 stages of money laundering (placement, layering, integration) here: https://complyadvantage.com/insights/3-stages-money-laundering/

Here’s an article about FTX.

https://www.nerdwallet.com/article/investing/ftx-crash#:~:text=FTX%20is%20a%20cryptocurrency%20exchange,by%20volume%20as%20of%20Tuesday.

There is much more to this story, obviously. The above is only a beginning attempt to learn and share what this is.

By Dr. Dannielle Blumenthal (Dossy). All opinions are the author’s own. Public domain.