In September 2024, the Financial Intelligence Unit of the Swedish Police (FIU) released a report highlighting the key results of an in-depth investigation into illicit crypto exchange providers.
Based on these entities' specific characteristics, the crypto exchange providers fit the role of a so-called professional money launderer (PML).
FIU offers a deeper understanding of how these perpetrators operate and identifies four main profiles of illicit crypto exchange providers, which we will present in this article.
Illicit crypto exchange providers offer unlicensed and illegal services to convert criminal proceeds into cryptocurrencies or vice versa.
These providers play a crucial role in the criminal economy by laundering money from various crimes, including drug trafficking, fraud, and cybercrime. Their operations often have an international reach, making it a significant challenge for law enforcement agencies to prevent such activities.
This is why FIU Sweden considers illicit crypto exchange providers professional money launderers (PML). A PML is a person who systematically launders money for others in exchange for payment. In this report, a PML refers to a crypto exchange provider that offers services for crypto exchange on behalf of criminals.
These PMLs may have access to various systems or possess specialised skills, making it easier for criminals to manage their illicit proceeds. They can operate individually or within organised networks, sometimes forming multidisciplinary groups that traverse multiple industries.
In the reports, FIU Sweden identifies four main profiles of illicit crypto exchange providers:
The modus operandi of these illicit providers involves a range of activities. They receive, store, and trade cash and cryptocurrency for fees, often using crypto wallets to which they have direct or indirect access on behalf of various clients.
This process not only enables the movement of large sums of money but also complicates tracking efforts by law enforcement.
Through detailed case studies included in the report, FIU illustrates the involvement of these providers in criminal networks.
In one example mentioned in this report, one convicted individual was found to have engaged in illegal hawala transactions, using their crypto exchange operations as an independent part of their criminal activities.
They financed themselves by buying cash with cryptocurrency and subsequently purchasing new cryptocurrency.
FIU Sweden considers illicit cryptocurrency providers an emerging trend within money laundering and a crucial part of organised crime's strategy to maintain and expand its criminal markets.
The report underscores the necessity for robust law enforcement, supervision, and monitoring to combat the rise of illicit crypto exchange providers. Enhanced regulatory frameworks and international cooperation are crucial in addressing these challenges.
If you’re interested in reading the full report, you can access it here.