How Criminals Use Crypto for Money Laundering

Hey friend,

Today I’m explaining how money laundering actually works with crypto, why criminals think it’ll protect them, and most importantly, why law enforcement is getting better at catching them every single day.

This is for educational purposes - understanding how financial crimes work helps us all stay safer and recognise red flags.

 What Is Money Laundering Anyway?

Before we talk about crypto, let’s understand the basic problem criminals face. Imagine you’re a drug dealer who just made $10 million in cash. You can’t just deposit it in a bank - they’ll immediately ask where it came from, and “selling drugs” isn’t an acceptable answer.

Money laundering is the process of making “dirty” money appear “clean” so you can use it without going to jail.

The traditional process has three steps:

Placement: Getting the dirty cash into the financial system somehow

Layering: Moving it around to confuse the trail

Integration: Bringing it back out looking legitimate

For decades, criminals used car washes, casinos, restaurants, and fake businesses. Then cryptocurrency arrived, and criminals thought they’d found paradise.

 Why Criminals Think Crypto Will Save Them

Cryptocurrency seems perfect for criminals at first glance:

No banks involved: You don’t need to walk into a bank with suspicious cash

Fast transfers: Money moves globally in minutes, not days

Pseudonymous: Transactions show wallet addresses, not real names

Decentralised: No single authority controlling everything

So criminals started thinking: “If I can convert my dirty cash to Bitcoin, move it around between different wallets and exchanges, then convert it back to clean money, nobody can trace it!”

Sounds good in theory. The problem? They’re completely wrong.

 The Big Lie: Crypto Isn’t Anonymous

Here’s what criminals don’t understand until it’s too late: cryptocurrency is actually the opposite of anonymous.

Every single transaction is recorded forever on a public blockchain that anyone can see. Think of it as a permanent ledger that never gets erased.

When you buy something with cash, that transaction disappears into history. When you buy something with Bitcoin, that transaction is recorded forever, linked to specific wallet addresses, with timestamps and amounts visible to everyone.

Law enforcement agencies now have sophisticated tools that can trace crypto transactions better than traditional banking transactions.

How They Actually Try to Do It