Elliptical He noted that financial institutions have long maintained strong controls against money laundering, fraud and sanctions violations. But the rise of cryptocurrencies is opening up new avenues against the same threats, allowing funds to be moved across borders and blockchains in seconds instead of days. Legacy tracking tools designed for traditional accounts often fall short, but public blockchains create permanent, traceable records that advanced analytics can handle. use.
blockchain intelligence Firm Elliptic has identified key risk typologies that every financial institution dealing with digital assets should recognize to strengthen compliance and reduce risk.
The first includes laundering Income from drug cartels. Major smuggling networks are now converting cash proceeds into cryptocurrencies, using professional brokers to move funds internationally and bypass correspondent banking restrictions.
A common pattern is seen Mexican Cartels paying Chinese suppliers for fentanyl precursors via Bitcoin or stablecoins.
Institutions face increased risk both at the initial cash deposit side, where illicit funds enter crypto, and at the exit point, where cleared assets return to seemingly ordinary customer accounts.
Traditional red flags, such as unexplained cash deposits, can miss the crypto layer entirely.
The second biggest concern is fraud caused by social engineering.
Billion dollar plans like romance fraud and “hog slaughter” operations account for large illicit flows, often carried out from settlements in Southeast Asia. use Victims through sophisticated tactics, including AI-powered deepfakes.
Retail customers or corporate partners may unknowingly transfer money to fraudulently controlled companies walletsdisclosure to banks through custody services, payment processors or asset management platforms.
Even seemingly routine transactions can link back to these networks when properly monitored. Third, criminals increasingly rely on obfuscation and cross-chain laundering.
They fragment transaction histories across multiple networks, routing funds through mixers, privacy tools, bridges, and non-KYC exchanges.
Elliptic’s latest innovations analysis It shows that more than $21.8 billion in illicit or high-risk assets have moved this way in recent years – a threefold increase since 2023; There are many investigations that span three or more blockchains and some exceed ten.
Single threaded scanning alone leaves dangerous blind spots.
Sanctions Avoidance represents the fourth typology. Designated wallet addresses tied to sanctioned entities or jurisdictions give rise to direct, indirect or institutional risk.
Examples include Russia-related stablecoins Iran’s purchase of US dollar stablecoins and North Korean actors handle hundreds of billions of dollars in volume.
Even exchanges that were sanctioned years ago continued to process tens of billions of dollars until international sanctions intervened.
Institutions need to go beyond direct counterparties to avoid unintentional violations. Finally, state-sponsored cyber theft poses serious challenges.
Beings like north korea‘s Lazarus Group The organization has committed major heists, such as the theft of approximately $1.46 billion from Bybit in February 2025, and quickly laundered the proceeds through dozens of wallets, bridges, and mixers.
The speed and apparent normality of these flows make them difficult to detect without a full chain of custody analysis. Elliptic emphasizes that blockchain’s transparency, when paired with advanced analytics, turns potential vulnerabilities into strengths.
via scanning walletsBy tracking multi-hop flows and integrating these insights into existing compliance programs, organizations can identify risks that traditional systems miss. Elliptical He concluded that knowing and being familiar with these five typologies is no longer optional; It is essential to be able to safely participate in the digital asset economy while meeting. regulator obligations.
