A suitcase of cash was once the stock‑in‑trade image of money laundering, but nowadays it’s less tangible and far more insidious: a tangled web of wallet addresses on a blockchain. Crypto‑enabled laundering is no longer a niche concern reserved for the fringes of financial crime, it’s swiftly becoming a mainstream risk for businesses and a growing preoccupation for regulators across the UK and EU. In this article, we’ll unwind exactly how such laundering schemes are evolving, from NFTs to mixers, and explore the bold, tech‑driven measures that the EU’s new Anti‑Money Laundering Authority (AMLA) and the UK’s Financial Conduct Authority (FCA) are deploying to stay ahead of the game.

From Silk Road to Stablecoins

The saga of crypto‑enabled money laundering began in earnest with the Silk Road dark‑web marketplace (2011–2013), where Bitcoin was the currency of illicit choice. It instantly demonstrated how digital currencies could revolutionise cross‑border crime. As regulators surged to keep pace, criminals shifted tactics, embracing privacy coins such as Monero and Zcash that cloak transaction data more effectively.

Today, laundering has evolved yet again: sophisticated actors exploit stablecoins like USDT to transfer value seamlessly across borders and evade sanctions, as the UN has documented in emerging “pig‑butchering” scams. Meanwhile, mixers and bridges, tools like Tornado Cash’s ‘crypto washing machine’, fragment and obscure illicit funds, even as largest ones face mounting legal pressure.

The world of NFT laundering adds another twist: criminals engage in wash‑trading cartoon apes and digital art collections, bidding them up artificially to sanitise dirty money. The throughline? Crypto-laundering is never static and mutates rapidly, poly-layered and endlessly inventive.

Washing the Blockchain Today

In the modern laundering playbook, criminals have mastered blockchain-based methods that are fundamentally different from traditional tactics. They favour mixing or tumbling services which can be thought of as crypto “washing machines” that blend illicit funds with clean ones to obscure the money trail. A notorious example is Tornado Cash, which reportedly laundered over $7 billion, including funds stolen by North Korea’s Lazarus Group, before being sanctioned and disrupted by authorities.

Next comes DeFi “layering”, where illicit actors run funds through multiple decentralised protocols, exchanging, staking or swapping to create a tangled web of transactions. This complexity makes it difficult for compliance teams to trace origins or destinations.

Then there’s chain-hopping where criminals move assets across different blockchains via bridges, like Ethereum to Tron, to further blur the transaction history. This tactic is increasingly popular due to its speed and opacity.

Even gaming environments aren’t immune. Launderers exploit gaming tokens, in‑game assets and microtransactions, converting dirty money into virtual goods before cashing out, often through complex chains of small trades.

Adding a futuristic twist, emerging tools now leverage AI to automate “smurfing” patterns. This means splitting illicit funds into smaller parcels and recombining them in ways that evade detection thresholds. AI-driven analytics now flag these fragmentation patterns before they become irreversibly mingled with clean funds.

In essence, today’s crypto laundering is not about hiding bricks of cash, it’s about layering, looping and gaming the system with tech-savvy precision.

The Cross-Border Puzzle

Despite the transparency of blockchain, laundering operations today exploit regulatory gaps between jurisdictions to obscure illicit money flows. A typical chain might begin in Estonia, perhaps routed through a crypto exchange that once operated there, then hop via intermediaries in Nigeria before ending up in Dubai’s bustling markets or real estate sphere. These cross-border manoeuvres enable criminals to layer and fragment funds across multiple legal systems, making financial investigations slow and cumbersome.

The paradox is acute: while every blockchain transaction is permanently recorded, fragmented regulation across countries turns those very public ledgers into a forensic nightmare, requiring multilateral cooperation to trace and prosecute. For investigators, the challenge isn’t the lack of data but piecing together disparate jurisdictional threads to follow the digital breadcrumbs.

The Fight Back

In recent years, the EU and UK have taken bold regulatory strides to stem the tide of crypto-enabled laundering. On the EU side, the Markets in Crypto‑Assets Regulation (MiCA) now mandates licensing for crypto asset service providers, while the freshly minted AMLA has identified crypto as the continent’s top money‑laundering threat and plans to directly supervise around 40 major institutions from 2028 onwards .

Meanwhile, the UK’s Economic Crime and Corporate Transparency Act 2023 has significantly augmented the powers of the FCA and the National Crime Agency, enabling seizure, freezing and recovery of crypto-assets involved in crime under strengthened asset recovery regimes .

Cross-border cooperation has ramped up too. Europol’s Project A.S.S.E.T., the largest-ever operation of its kind, brought together experts from 28 countries and the private sector to identify and seize criminal assets, including crypto-linked ones.

On the enforcement front, regulators increasingly rely on blockchain analytics tools such as Chainalysis and Elliptic to detect suspicious flows and flag patterns of “dirty coin” laundering. Pilot projects are already under way to harness AI and machine learning for spotting fragmentation patterns in funds structured to evade traditional thresholds.

For businesses, from exchanges and fintechs to traditional banks, these developments mean compliance has suddenly become more complex, demanding sharper controls and greater transparency or face serious regulatory consequences.

The Paradox of Traceability

Blockchain’s public ledger ensures every transaction is forever recorded, offering transparency in principle. Yet, as EU and law enforcement agencies have found, privacy coins, mixers and Layer-2 enhancements can severely complicate real-time tracing. For businesses, the tension is profound. Banks and fintechs risk unknowingly onboarding “tainted” crypto, while later revelations can trigger legal and reputational crises. The paradox is this: the blockchain is fully visible, but in a fragmented global regulatory environment, stitching together accurate, real-time intelligence from multiple pieces of the story becomes a compliance nightmare. Even firms outside the crypto sphere must grapple with the fallout when illicit funds surface through their systems.

Implications and Outlook

Looking ahead, the laundering landscape is poised to expand into tokenised assets from real estate and carbon credits to digital bonds. These tokenised real‑world assets (RWAs) offer liquidity and accessibility yet also present new avenues for misuse if AML and KYC checks aren’t fully embedded from the outset. Meanwhile, emerging decentralised identity (DID) systems could empower law enforcement with verifiable credentials without central data storage, but privacy concerns persist around user control and data security.

We can also expect a surge in cross-industry collaboration with banks, fintechs, crypto platforms and regulators increasingly sharing intelligence and best practices to shore up defences. For business leaders, crypto-laundering is no longer a niche compliance headache, it’s a boardroom issue that strikes at the heart of risk, costs and brand trust.

The once-iconic “suitcase of cash” has gone digital, and in the blockchain era, the real challenge isn’t just tracing the money, it’s keeping pace with the high-speed laundromat itself.

And what about you…?   

  • How confident are you that your organisation’s current anti-money-laundering checks are effective at detecting crypto-related risks, not just traditional cash flows?
  • What collaborations or information-sharing frameworks (with fintechs, crypto platforms, or regulators) might strengthen your organisation’s ability to stay ahead of increasingly inventive laundering tactics?