New research sheds light on using Bitcoin as a laundering channel - AML Intelligence
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New research sheds light on using Bitcoin as a laundering channel

By Dan Byrne

Bitcoin exchanges can be used to launder great deals of money, and make the transactions look legitimate in the process, according to new research.

Academics at the Blockchain Research Lab – a Hamburg-based non-profit dedicated to monitoring cryptocurrency exchanges across peer-to-peer networks – published research in September showing how criminals can use bitcoin to transfer profits within their own crime rings, Decrypt reported.  

Using a technique, which they call ‘exclusive mining’, a criminal would begin a bitcoin transaction using a private channel. The person (or people) on the other end of this channel would be the only ones able to confirm it and mine it for bitcoin – and they will inevitably be part of the criminal’s crime group.

Miners normally take a fee for doing this confirmation, and in this case the fee will be extortionately high – in reality a mechanism for laundering money.

Eventually, the funds will be converted into normal currency and round off what looks like a legitimate transaction.

Normally, all bitcoin users can confirm, mine and charge fees in this way.

But with exclusive mining, most users will only be aware that the transaction was made when the private miner adds them to their blockchain, by which point the chance for other users to mine and profit has gone.

Researchers Elias Strehle and Lennart Ante, said that while the technique itself is not new, it is very difficult to detect and not easy to solve, Decrypt reports.

However, Rich Sanders, CEO of blockchain investigations firm CipherBlade advised that the chances of it being used on a large scale are slim. The sheer amount of mechanics involved in exclusive mining are out of reach for most bitcoin users, he claims.

“It’s way to technical, so unless someone makes a turnkey solution, I doubt we’ll see much of it,” he told Decrypt.

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