Stay Secure: Protect Yourself from Online Fraud
Quppy will never ask you to transfer any funds in its name.
Any similar requests should automatically be considered as fraudulent.

aml blockchain bots crypto wallet

“Dirty” Cryptocurrencies: How to Avoid Problems with Digital Money

A Quppy Step-by-Step Guide on securing yopur Digital Funds and Digital Wallets

Cryptocurrency wallets of users can be compromised with bitcoins and other coins tainted by criminal activities. In such cases, all assets in the wallet end up on the blacklist on regulated platforms. Here’s how to mitigate such risks.

“Dirty” coins refer to digital assets stolen from exchanges or used for illicit purposes. Practically any type of coin can become “dirty”: Bitcoin, Ethereum, Bitcoin Cash, Litecoin, stablecoins, or ERC-20 tokens. While crypto platforms primarily focus on monitoring the “cleanliness” of BTC and ETH, the tightening of AML (Anti-Money Laundering) requirements means they will increasingly scrutinize other cryptocurrencies as well.

In 2023, the landscape of cryptocurrency crime experienced some notable changes. According to the 2024 Crypto Crime Report from Chainalysis, the total amount of cryptocurrency laundered dropped significantly to approximately $22.2 billion, marking a near 30% decrease from the previous year’s $31.5 billion. This reduction is attributed to a decline in the use of traditional laundering methods such as mixers, with funds sent to mixers from illicit addresses halving from $1 billion in 2022 to $504.3 million in 2023.

Moreover, there has been a shift in the patterns of money laundering, with increased funds being channeled through cross-chain bridges and gambling platforms, especially by ransomware groups. These tactics demonstrate the evolving sophistication of crypto criminals in response to regulatory pressures and the changing digital asset landscape.

Despite the overall reduction in illicit transaction volumes, certain types of crypto crime like ransomware and transactions involving sanctioned entities have seen increases. Sanctioned entities alone accounted for $14.9 billion or 61.5% of all illicit transaction volume in 2023. This indicates that while the absolute volume of crypto crime may be decreasing, its nature is diversifying with significant impacts still felt in specific areas.

These findings highlight the ongoing challenges and adaptations within the sphere of cryptocurrency crimes, underlining the importance of enhanced regulatory and monitoring efforts to keep pace with the advanced techniques used by criminals.

It’s difficult to determine the exact volume of these funds that exchanges have marked. However, billions of dollars could potentially end up in the wallets of unsuspecting users far removed from criminal activities.

How “Dirty” Coins Can End Up in Your Wallet

Regulated trading platforms and exchanges meticulously track the circulation of “dirty” coins. They flag assets involved in unlawful activities.

To obscure their trails and “clean” the coins, criminals put “dirty” assets through several rounds. They use crypto mixers, split transactions into smaller amounts, utilize unregulated platforms, gambling platforms, prepaid cards, and cryptocurrency ATMs. Often, compromised assets are sold at a significant discount.

As a result, “dirty” crypto assets might end up in the wallet of a law-abiding user. It’s impossible to buy “tainted” assets on regulated exchanges and exchanges adhering to KYC/AML policies — such coins simply don’t make it to their wallets, as platforms block them. However, a user can easily purchase “dirty” coins through an unregulated exchange, on a dubious exchange, or receive them as payment.

The Problems “Dirty” Coins Bring

If a user’s wallet receives “dirty” coins or tokens, all assets in it become compromised, and the wallet itself ends up on a blacklist. Trading platforms will not investigate which specific coins were used by criminals and will automatically consider all coins in the wallet as involved in unlawful activities.

If it’s an exchange wallet, it will be blocked until the investigation is completed, and the user will be required to undergo verification (if not done previously) and explain the origin of the funds. In some jurisdictions, such as the USA, users may face fines for “dirty” coins — it’s considered participation in money laundering. In Russia and the CIS, the use of “dirty” coins is not yet prohibited.

If it’s a user’s wallet, no regulated platform will accept the coins from it. Exchanges share data on stolen coins, compile a blacklist of stolen assets and compromised wallets. Selling “dirty” cryptocurrencies on unregulated platforms or to private individuals can also be challenging. If a buyer notices the coins are “dirty,” they may refuse the deal or ask for a significant discount.

How Platforms Track “Dirty” Coins

Regulated exchanges and exchanges closely monitor the use of compromised coins. This is a requirement from regulators: the Fifth Anti-Money Laundering Directive (AMLD5) took effect in January 2020, mandating platforms to track users’ crypto transactions, maintain their records, exchange data with each other, and report suspicious activities to authorities. National laws are often no less stringent, and FATF members also follow the organization’s recommendations on cryptocurrency regulation formulated last June.

Large platforms have a dedicated department for tracking suspicious transactions. “Dirty” coins are detected using bots, automatic alert systems, and manual checks.

The use of mixers — programs and services for transaction anonymization — is also perceived by regulated platforms as an attempt to launder funds and is a reason for account blocking. The exchange doesn’t care why the user used the mixer. According to Chainalysis statistics, 90% of mixer users utilize them for privacy, not illegal activities. Mixers aren’t prohibited by international AML directives, but exchanges err on the side of caution. They may not necessarily block an account noticed using coins that have gone through a mixer, but such a wallet will definitely be monitored.

To track suspicious transactions, exchanges primarily use third-party solutions to optimize AML processes. Solutions from Chainalysis, CipherTrace, and Elliptic are most popular. They are used by regulated exchanges and exchanges, as well as law enforcement agencies.

What to Do If Your Wallet Is Blocked

If a platform blocks a wallet for compromised coins, it’s crucial to cooperate fully with support. First and foremost, complete full verification (if not done previously): provide photos or scans of documents verifying identity and the source of the funds in the account.

Proving innocence can be done in several ways. For example, provide screenshots showing the transfer or purchase of “dirty” coins. It’s easier for the exchange to check if “dirty” coins were bought with a bank card or through an electronic wallet. Cash purchases are impossible to track.

Arguing is ineffective — threats won’t convince the security service of innocence. But a transaction screenshot might.

Each case is individually reviewed by the platform’s AML officer. If the user’s innocence is proven, compromised assets will be returned to the original wallet or another address of the user.

How Not to Become an Owner of “Dirty” Coins

There are several ways to reduce the likelihood of accidentally receiving “dirty” coins in your wallet:

  • Check the origin of coins through special services and applications.
    The AML Quppy Bot offers an innovative solution tailored for individual users to minimize the risk of receiving tainted cryptocurrencies. This tool is designed to seamlessly integrate with your digital wallet, providing real-time monitoring and analysis of incoming transactions.

The AML Quppy Bot utilizes a comprehensive database that cross-references with known blacklists and suspicious activity patterns similar to services provided by Chainalysis, CipherTrace, and Etherscan’s ETHProtect feature. This enables it to alert users immediately when potentially compromised coins are detected, giving them an opportunity to take preventive actions before accepting such transactions.

By employing advanced algorithms and continuously updating its database in line with the latest in blockchain forensics, the AML Quppy Bot ensures that individuals can maintain a clean transaction record. This proactive approach is essential not only for personal financial hygiene but also for complying with increasingly stringent global anti-money laundering regulations. Incorporating such a tool into your cryptocurrency management routine can significantly reduce the likelihood of inadvertently handling illicit funds and help maintain the integrity of your digital financial dealings.

  • Purchase digital assets only on regulated trading platforms. In this case, you can be confident in the “cleanliness” of the purchased cryptocurrencies.
  • Use two wallets: one for “clean” coins from regulated platforms and mining, another for unverified coins from unreliable sources. All coins from exchanges on the popular site, little-known exchanges, or private individuals should first be transferred to the second wallet. Then, if compromised assets end up in it, the coins in the first will remain untainted.
  • Check the transactions of senders and buy assets in parts. You can ask to make a test transfer to a special wallet and check the coins in it.
  • Record all your cryptocurrency actions: transactions, recipients, time and date, platform. Then, in case of an accidental purchase of “dirty” coins, you can prove your own innocence.

In conclusion, the cryptocurrency market continues to grapple with the challenge of “dirty” coins, a term referring to cryptocurrencies associated with illicit activities. As the landscape of cryptocurrency crimes evolves, the risks to unsuspecting users increase, necessitating stronger regulatory responses and advanced monitoring technologies. The 2024 Crypto Crime Report from Chainalysis shows a significant decrease in the total amount of cryptocurrency laundered, yet highlights the shift towards more sophisticated laundering methods, which underscores the dynamic nature of this threat.

To mitigate these risks, the AML Quppy Bot stands out as a crucial solution. It leverages a vast database and advanced algorithms to detect potentially compromised coins in real time, offering users preemptive warnings and detailed transaction analysis. This not only aids in maintaining a clean transaction record but also aligns with the stringent requirements of global anti-money laundering regulations. The AML Quppy Bot exemplifies the type of proactive technology that can empower individuals to secure their digital wallets against unwanted exposure to criminal activities.

Thus, while the threats posed by “dirty” coins persist, innovative solutions like the AML Quppy Bot provide effective tools for users to safeguard their assets. By staying informed and utilizing these advanced protective measures, users can navigate the complexities of the cryptocurrency market with greater confidence and security.

This website uses cookies to ensure you get the best experience on our website. Learn more
Got it!