By Matis Mäeker
Head of Estonian Financial Intelligence Unit
Crypto-assets[1] are increasingly used in both legal everyday activities and illegal ones. In Eastern Europe, particularly in Ukraine and Russia, as well as in Latin America, such as Venezuela, the use of cryptocurrency is increasing because it offers a more stable alternative in challenging economic conditions.
In many Asian and African countries, this is due to the lack of access to traditional financial services for a large number of people. In the global ranking of virtual currency usage, Central and South Asian as well as Oceanian countries dominate, with India, Nigeria, Indonesia, the United States, and Vietnam at the top.[2]
The blockchain data platform Chainalysis estimated in 2024 that $24.2 billion worth of cryptocurrency was moved to accounts linked to illegal activities in 2023.[3] A year later, the updated estimate was $46.1 billion for 2023 and $40.9 billion for 2024.[4]
Crypto is used to enable various crimes as well as to launder proceeds from them. This includes drug crimes, human trafficking, child pornography, various types of fraud, disinformation campaigns, ransomware attacks, and more. Revenue is used to commit new crimes. Considering that more than half of the assets stolen by crypto hackers last year were stolen by North Korean hackers[5], we can assume that it also finances weapons of mass destruction being developed by North Korea, which could end up in Russia’s hands for use in its attack on Ukraine.
Yet, we must be grateful to the unknown Satoshi Nakamoto, who invented Bitcoin – the first known decentralised cryptocurrency that fits today’s definition of virtual currency – and brought cryptocurrency to the masses. Of course, we can only be grateful if we use every method and tool available to harness the benefits that the metadata associated with this new type of asset provides to law enforcement authorities. It also requires the proper functioning and capacity of the criminal procedure elements.
Until now, most money laundering has taken place through payment channels, whether via credit institutions or payment service providers. If person A commits a crime and derives property from it, they deposit these assets into their own or a third party’s account and then transfer them to person B, who in turn transfers them to person C, and so on.
We have seen cases where the same funds circulate within the same credit institution through nearly 10 different accounts in a single day. Often, the same funds move in a similar manner through several other banks and countries within a day or a few days.
For law enforcement authorities and financial intelligence units, tracking such funds is challenging. If a criminal, in an ideal scenario, makes dozens of transfers or ‘asset hops’ per day, law enforcement agencies may take days or weeks – sometimes even months – to untangle each subsequent transaction when dealing with international transfers. This is due to the slow pace of international cooperation through mutual legal assistance requests, which, we have witnessed and heard, is becoming worse year-on-year. And at some point, a limit is reached to trace the assets because the assets were accidentally, or not so accidentally, transferred to a country that does not engage in judicial cooperation.
Often, it makes little difference whether the account owner is A or B, as the accounts are opened under front persons or companies registered in their names. Tracking and recovering such assets is not always impossible; it simply takes time. Time, however, is not the greatest ally of law enforcement in such cases, as the likelihood of ultimately recovering and seizing the funds decreases with each passing moment.
Virtual currencies, however, are a blessing from a crime detection perspective, as every transaction is recorded in a block or record that cannot be altered or manipulated.
Moreover, all blocks are public. Simply go online and check where the assets were transferred from, to whom, and in what amount. This means that there is no longer a need to spend months obtaining information on the fate of a single transaction and progressing step by step through the transaction chain. The entire transaction chain is displayed to law enforcement authorities within a fraction of a second.
Technological advancements in viewing these blocks have progressed so rapidly that in the ‘next second’, it is already possible to check whether someone else is using similar transaction chains or patterns and to look for clues about where these individuals might be located in the world. Garantex[6], one of the world’s most notorious service providers today, continually develops new business models, opens new accounts, alters its associated infrastructure and seeks other ways to conceal its activities.
Its activities are uncovered, and all linked accounts are flagged faster than most European Union countries – let alone those outside the EU – can respond to a mutual legal assistance request. If money used to be marked with dye in the past, then in virtual currency tools, crypto wallets can be tagged with markers that send alerts whenever transactions are made with the assets they hold, indicating that the funds have been moved to a new wallet.
Yes, law enforcement agencies do not immediately see who is behind an entire block or a specific crypto wallet, but we cannot be entirely certain of this even with payment intermediaries. Moreover, the block or crypto wallet behind the person’s identity is not so important, because the main thing is to restrict the criminal property’s further use, seize the assets and later confiscate them as a result of court proceedings. Just like with other currencies, crime must not be profitable in crypto either. Let them simply remain persons A and B at the beginning of the investigation.
Therefore, law enforcement authorities might actually want crime to shift even further into virtual currencies and intermediaries within this asset class. This would make such crimes easier to detect and trace. At the same time, there is still a long way to go, considering that $24.2 billion that was referred above presents only 1.2–3% of the actual volume of criminal activity that is laundered per year taking into account the estimation of the United Nations Office on Drugs and Crime (UNODC).[7]
That being said, I wish for the transfer of property derived from criminal activity to take place outside Estonian service providers. Otherwise, we take on all the negative consequences that come with money laundering, related crimes and the financing of terrorism.[8]
Being oriented towards innovation and an open economy, Estonia took on the risks associated with cryptocurrency without thoroughly considering risk mitigation measures. This also characterised the innovators themselves, who were focused on growth, blindly admired crypto as such and left risk management to the background. However, the initial regulation provided supervisory authorities with overly limited legal grounds to refuse the issuance of an authorisation or to revoke an existing one.
The principle of territoriality applies in criminal proceedings, but virtual currencies are a global business. In the past, the individuals behind crypto companies were not based in Estonia and could not be held accountable. It is often the same in many countries today.
Therefore, cryptocurrency can help us catch criminals and seize their assets if the confiscation toolkit is up to date, but it is more challenging to hold money laundering enablers accountable. We can only fight these professional offenders with deterrent, real punishments. It must be possible to impose fines on legal entities and money laundering and aiding in it should be punishable under criminal law. Otherwise, cryptocurrency will not be of use.
As for the creator of Bitcoin, let law enforcement authorities award them a ‘statue’ and let’s hope that criminal assets continue to flow into cryptocurrency in even greater amounts, as it makes our job easier!
THE AUTHOR: Matis Mäeker is the Head of the Estonian Financial Intelligence Unit (FIU) and a Vice-Chair of the MONEYVAL Bureau. Mäeker is a member of Estonian delegation to MONEYVAL and member of Heads of FIU of Egmont Group, he has also been an alternative member to European Banking Auhtority’s AML Standing Committee. Mäeker has been the evaluator and reviewer of many mutual evaluation reports conducted by MONEYVAL. During his nearly 10-years experience in the Estonian Financial Supervision Authority Matis Mäeker authored the Authority’s AML/CTF public guideline, internal guidelines and risk-based approach model. He co-authored the book „The AML Compliance Book: 150 Golden Rules“
This article was first published in the Yearbook 2024 of the Prosecutor’s Office, Republic of Estonia (in Estonian) on February 18 2025, https://aastaraamat.prokuratuur.ee
[1] In this article, the terms crypto-assets, cryptocurrency, and virtual currency are used synonymously for the sake of simplicity.
[2] The 2024 Geography of Cryptocurrency Report. Available online: https://go.chainalysis.com/2024-geography-of-cryptocurrency-report.html (10 January 2025).
[3] The Chainalysis 2024 Crypto Crime Report. Available online: https://go.chainalysis.com/crypto-crime-2024.html (10 January 2025).
[4] The 2025 Crypto Crime Report. Chainalysis. Available online: https://go.chainalysis.com/2025-Crypto-Crime-Report.html (4 March 2025).
[5] $2.2 Billion Stolen from Crypto Platforms in 2024, but Hacked Volumes Stagnate Toward Year-End as DPRK Slows Activity Post-July. Chainalysis. Available online: https://www.chainalysis.com/blog/crypto-hacking-stolen-funds-2025/ (10 January 2025).
[6] What is Garantex? Available online: https://www.chainalysis.com/blog/hydra-garantex-ofac-sanctions-russia/ (10 January 2025).
[7] United Nations Office on Drugs and Crime on Money Laundering. Available online: https://www.unodc.org/unodc/en/money-laundering/overview.html (10 January 2025).
[8] See, for example, the International Monetary Fund’s website for information on the damage caused by money laundering (https://www.imf.org/en/Topics/Financial-Integrity/amlcft (10 January 2025) or https://www.imf.org/en/Blogs/Articles/2023/12/07/financial-crimes-hurt-economies-and-must-be-better-understood-and-curbed (10 January 2025)).
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