Money Laundering in the World: Channels and Cryptocurrency’s One Percent Share

Money laundering occurs through various channels globally. In 2022, money laundering using cryptocurrencies was approximately $23.8 billion, accounting for only 1.19% of total money laundering worldwide.
One Percent Share of Cryptocurrencies
If you’re a fan of movies and series, you’ve likely watched or heard of the famous show Breaking Bad. The story revolves around a chemistry teacher who decides to produce methamphetamine to improve his financial situation and cleverly channels the profits from its sale into the economic system. Watching this series provides insight into the ins and outs of money laundering.
Money laundering converts profits from criminal activities and corruption into seemingly legitimate assets.
Money launderers are often individuals who have earned money through drug trafficking, embezzlement, bribery, arms trafficking, and other illegal means, and they employ various methods to launder this money, seeking to “clean” it.
Money laundering typically involves three stages: placement, layering, and integration.
- In the placement stage, money obtained from illegal activities is introduced into the legitimate financial system.
- In the layering stage, the true source of the money is concealed and transferred to other accounts through complex transactions and accounting tricks.
- In the integration stage, the money appears to be acquired from legal sources and is used to purchase assets or invest in businesses.
Money laundering is one of humanity’s biggest challenges, harming the economy, government, security, and ethics. It undermines the banking system, distorts markets, promotes corruption, strengthens crime, and negatively impacts public welfare. Therefore, it is essential for everyone to collaborate in the fight against money laundering and comply with anti-money laundering laws and regulations.
Money laundering has its roots in ancient times. Some merchants and rulers in ancient China and Greece concealed their wealth from state officials to avoid taxation or confiscating their assets. They also moved their wealth to distant regions and invested in various businesses; however, money laundering as a crime took shape in the 20th century.
Money laundering expanded significantly in the 1980s with the war on drugs between governments and trafficking groups. Many countries enacted anti-money laundering laws to combat drug-related crimes.
Some activities that may lead to money laundering include:
- Drug, arms, human, and goods trafficking
- Bribery, embezzlement, fraud, and abuse of power
- Financing terrorism, war, and dissemination activities
- Gambling, pimping, prostitution, and other crimes against morality
- Tax evasion, banking, and financial misconduct
Money launderers attempt to convert their dirty money into seemingly legitimate assets through various methods and integrate them into the economy. Some methods of money laundering include:
- Buying and selling real estate, gold, jewelry, and other valuable goods
- Investing in companies, stock markets, investment funds, and other financial institutions
- Utilizing bank accounts, remittances, checks, and other electronic payment methods
- Using parallel banking systems or informal value transfer systems, such as remittances
Money launderers use various methods to try to convert their illicit funds into seemingly legitimate assets and integrate them into the economy.
Establishment of the FATF
The intergovernmental organization FATF (Financial Action Task Force), or the International Special Action Group, was established in 1989 to set international standards for combating money laundering and terrorist financing.
This group has published 40 recommendations for its member and non-member countries, which include the following:
- Defining and punishing money laundering as an independent crime
- Implementing preventive and supervisory measures on financial and non-financial institutions
- Conducting risk identification and national assessments
- Identifying and verifying customers
- Monitoring accounts of politically exposed persons
- Reporting suspicious transactions to the financial intelligence unit
- Maintaining and storing financial information and records
- Exchanging information and cooperating among domestic and foreign entities
- Imposing targeted financial sanctions against individuals, groups, or countries
- Establishing a suitable judicial and legal framework to respond to financial crimes
- Training and raising awareness among employees and officials of financial and non-financial institutions
The intergovernmental organization FATF was established in 1989 to set international standards for combating money laundering and terrorist financing.
Some notable historical instances of significant money laundering cases include:
Money Laundering Case of Danske Bank
Danske Bank of Denmark was responsible for illegally transferring approximately €200 billion from former Soviet countries to Europe and around the world between 2007 and 2015. This money laundering case is recognized as the largest in European history, leading to the resignation of the bank’s CEO. Danske Bank is one of the largest banks in Denmark and has recently been embroiled in a significant money laundering scandal. This scandal prompted the European Commission, the governments of Denmark and Estonia, and American authorities to initiate extensive investigations into the bank’s activities. It has also been reported that a woman from Lithuania confessed to participating in the laundering of approximately $4.1 billion through Danske Bank’s branch in Estonia.
The funds laundered through Danske Bank were transferred to various countries and regions. Some of them include:
Europe:
Illegal funds from former Soviet countries were deposited into secret accounts in Europe. Some of these accounts were held at central European banks, such as Deutsche Bank, Nordic Investment Bank, and SEPA Bank.
America:
Illegal funds were transferred to the accounts of virtual companies in the United States. Some of these companies were registered in Delaware, Nevada, and Wyoming.
China:
Illegal funds were transferred to accounts of Chinese companies in Hong Kong and Macau. Some of these companies operated in various fields such as trade, investment, tourism, and marketing.
Individuals and Groups Involved in the Money Laundering
Managers and Employees of Danske Bank’s Estonia Branch:
They were responsible for accepting and transferring illegal funds from former Soviet countries to secret accounts in Europe and worldwide. They also defied laws and regulations related to money laundering and provided false reports to their supervisors.
Customers of Danske Bank’s Estonia Branch:
These included companies and individuals, both natural and legal, who deposited funds from illegal activities such as drug trafficking, arms smuggling, corruption, and sanctions evasion into their accounts at Danske Bank’s Estonia branch. These clients included Russia-affiliated groups, such as the “A Just Russia – For Truth” party.
Al Capone’s Laundry Money Laundering:
Al Capone was one of the most notorious American criminals during the prohibition of alcohol in the 1930s. He laundered the money from his illegal activities by purchasing numerous coin-operated laundries, thereby integrating his profits into the formal economy under the guise of revenue from these laundries.
Lebanon Bank Money Laundering:
In 2016, American authorities arrested several individuals for laundering approximately $373 million on behalf of Hezbollah in Lebanon. They utilized a network of virtual companies and accounts at Lebanese banks to transfer money obtained from drug trafficking and arms smuggling to Hezbollah accounts.
Channels of Money Laundering Worldwide

There is no precise data on money laundering globally because it is an illegal and covert, making it difficult to obtain official and reliable statistics. However, some sources can provide estimates. For example:
A 2014 report by the Organization for Economic Cooperation and Development (OECD) estimated that the volume of money laundering worldwide is between 2 and 5 percent of the global GDP, which translates to approximately $800 billion to $2 trillion.
Money Laundering Through Cryptocurrency
A study by Chainalysis in 2022 revealed that the volume of money laundering using cryptocurrencies in that year amounted to approximately $23.8 billion, which constitutes only 1.19 percent of the total money laundering globally. This figure represents an increase of 850 percent compared to 2018 and 68 percent compared to 2021.
Cryptocurrencies offer a high degree of anonymity that is often unattainable in traditional financial systems, attracting criminals seeking to launder proceeds from illegal activities.
The amount of money laundering using cryptocurrencies in 2022 was about $23.8 billion, making up just 1.19 percent of total global money laundering.
Cryptocurrencies are suitable for money laundering due to their characteristics, such as decentralization, complex encryption, anonymity, and transaction untraceability.
These features allow criminals to conceal the illegal origins of their funds, converting, transferring, or using them in cryptocurrency. Some notable examples of cryptocurrency money laundering worldwide include:
- The discovery of a money laundering case involving £114 million in cryptocurrency by the Metropolitan Police’s Money Laundering Unit in the UK. This has been identified as the world’s largest cryptocurrency money laundering case.
- In the U.S., a Swedish individual named Roger Nils-Jonas Karlsson was sentenced to 15 years in prison for security fraud and money laundering that exploited thousands of victims for a total of $16 million. He had deceived victims into purchasing shares in an investment scheme using cryptocurrency.
- In China, judicial authorities have arrested over 1,100 suspects for using cryptocurrencies to launder money illegally through telephone and internet scams.
Cash-Based Money Laundering
One of the methods of money laundering that criminals and wrongdoers employ is cash, which is considered one of the most reliable ways to introduce dirty money into the legal financial system. There are no precise statistics on the amount of money laundering through cash, but it can be confidently stated that cash is the primary method used by criminals for laundering money.
Gold-Based Money Laundering
According to some sources, gold is one of the most common tools for money laundering used by criminals, traffickers, terrorists, and other illegal actors to conceal the origin of their funds. Some reasons for the popularity of gold in money laundering include:
- Gold has high value and low volume, making it easy to transport.
- Gold has a global market and can be bought and sold in any country.
- Gold can be converted into various forms and shapes, such as coins, jewelry, gemstones, and even powder.
- Gold is resistant to corrosive and degrading factors and is not easily identifiable.
- Gold can be divided into smaller pieces, each retaining its own value.
- Gold can be counterfeited or have its identifiers changed, such as altering markings, serial numbers, or the manufacturer’s label or country of origin.
According to a 2015 Financial Action Task Force (FATF) report, the volume of money laundering involving gold worldwide is estimated to be between $120 billion and $240 billion. This figure only includes physical gold money laundering and does not cover other methods involving gold. Other sources provide different statistics; for example, a report published in 2019 by the OECD indicated that the volume of money laundering with gold in 2016 was around $300 billion.
Stock-Based Money Laundering
Money laundering through stocks is one method where criminals buy or sell shares of various companies using shell companies to present the proceeds from their illegal activities as legitimate.
This method is typically carried out in low-regulation or informal capital markets, where oversight is challenging. Some techniques for stock-based money laundering include:
- Rapid buying and selling of stocks at fluctuating prices to increase transaction volume and conceal the origin of the money.
- Buying and selling stocks at agreed prices between buyers and sellers without market competition.
- Buying and selling stocks using virtual or hidden accounts that do not identify the account owners.
- Buying and selling stocks through shell companies registered in tax haven countries.
Money Laundering Through Governments

Money laundering by governments is one of the methods of financial misconduct and political corruption, where governments or governmental officials use their power and influence to present money obtained from illegal or non-transparent activities as legitimate, transferring it to their accounts or affiliated companies. Some methods of money laundering by governments include:
- Using shell companies registered in tax havens, where the identities of the real owners are not disclosed.
- Utilizing state-owned or private banks that are under government oversight or protection and do not comply with anti-money laundering laws.
- Engaging in public or private contracts that include unreasonable conditions or alter the contracts during their execution, funneling potential funds into personal accounts or favored companies.
- Employing auditing or financial monitoring systems that obscure the source of money through falsifying reports or withholding information.
Money Laundering in Iran
Money laundering in Iran is a serious and complex problem that has caused economic, political, and social harm. Some factors influencing the spread of money laundering in Iran include:
- Lack of a transparent banking and financial system that complies with international standards.
- Absence of a strong and independent auditing and financial oversight system.
- Insufficient and ineffective laws and regulations for combating money laundering.
- Lack of cooperation and coordination among judicial, executive, and supervisory institutions.
- Absence of interaction and collaboration with international organizations and institutions in the fight against money laundering.
- Presence of illegal and criminal activities such as smuggling goods, currency, drugs, and weapons.
- Corruption and favoritism in various governmental and private sectors.
- Economic and political sanctions against Iran.
Iran’s largest money laundering case is known for the “3,000 billion tomans money laundering” scandal, which came to light in 2012. In this case, a group of defendants used a network of shell companies and bank accounts to launder a significant amount of money by buying and selling coins, gold, dollars, and other foreign currencies and transferring the money to their own accounts or to third parties.
The Tehran prosecutor’s office, in collaboration with the Central Bank, the General Inspection Organization, the National Intelligence and Security Organization, and the police, investigated this case. Thirty-two individuals were identified and arrested as the main defendants.
Some of the defendants had prior criminal records, and some had familial ties to well-known political and judicial figures.
This case faced significant delays, and numerous changes across various courts, and the final verdict was issued in 2017. According to the court’s ruling, 15 individuals were sentenced to life imprisonment, and 17 others received prison sentences.
How Can Money Laundering Be Prevented?
To prevent money laundering, cooperation and coordination among domestic and international entities are essential for formulating and enforcing anti-money laundering laws and regulations. Additionally, modern and electronic technologies should be utilized to monitor and trace suspicious transactions and obscure the source of funds. Some effective methods for preventing money laundering include:
- Intensifying oversight of capital markets and domestic and foreign banks.
- Defining and prosecuting money laundering as an independent crime.
- Establishing independent and reliable organizations for auditing and financial oversight.
- Exchanging information and collaborating with international organizations such as FATF and OECD.
- Raising public awareness and training personnel in sensitive sectors about the dangers and signs of money laundering.
- Utilizing electronic banking to identify patterns of unusual and irregular transactions.
Although cryptocurrencies can be used for illegal purposes, the use of Bitcoin and other cryptocurrencies for money laundering and other crimes is significantly less concentrated than that of cash.
The Role of Cryptocurrencies in Money Laundering
While cryptocurrencies can be used for illegal purposes, the overall use of Bitcoin and other cryptocurrencies for money laundering and other crimes is significantly more dispersed than cash.
In 2019, only $829 million worth of Bitcoin (BTC) was spent on the dark web, accounting for just 0.5% of all Bitcoins. The blockchain technology records all transactions; thus, the risk of financial crimes in cryptocurrencies, such as money laundering with Bitcoin, is manageable.
In 2019, only $829 million worth of Bitcoin (0.5% of all Bitcoins) was spent on the dark web.
The role of many money services businesses (MSBs) in preventing money laundering and other blockchain-related crimes is unclear; they may still be unaware of how to properly implement anti-money laundering processes like customer verification. In such cases, money services may prefer to ignore these issues rather than confront them.
As criminals continue to deceive users and exploit their funds, money laundering can occur through tools that align with transaction data. This makes identifying high-risk customers easier for money services.
Some prominent methods of money laundering include:
Mixers
Mixers, known as facilitators, can effectively separate illegal cryptocurrencies. Mixers divide these cryptocurrencies and pass them through several addresses before recombining them. This process results in a clean and legitimate cryptocurrency, for which fees have also been paid. The cryptocurrency is legally held in a wallet in most money laundering cases. It then passes through another dark web wallet before reaching the destination wallet on the dark web. This process makes the cryptocurrency clean and legitimate enough to be returned to the legal world, traded on an exchange, or converted to fiat currency.
Illegal Exchanges
Another method criminals use to launder cryptocurrencies is through illegal exchanges that do not comply with anti-money laundering laws and do not perform proper identity verification. The continuous conversion of one type of cryptocurrency to another legitimizes it, which criminals ultimately transfer to a wallet outside the exchange. In rare cases, criminals may convert the cryptocurrency to fiat currency; however, it is unusual for fiat markets to service illegal exchanges.
Peer-to-Peer Networks
Many criminals use decentralized peer-to-peer networks to reduce the risk of money laundering with Bitcoin, which is often international in scope. They can utilize suspicious intermediaries to send their assets to their destinations. Most cryptocurrency money laundering schemes are conducted through exchanges in countries with lax anti-money laundering laws. This is where criminals can convert their cryptocurrency into fiat currency and use it to purchase luxury items like expensive cars and mansions.
Cryptocurrency ATMs
As of September 2019, there were about 5.5 million cryptocurrency ATMs worldwide. These machines, which are always connected to the internet, allow anyone to purchase Bitcoin using a credit card. Additionally, these machines may have two-way capabilities for converting Bitcoin to cash using a scannable address. Bitcoin ATMs can also support cash deposits via QR codes (which are scanned at a traditional exchange for withdrawing Bitcoin and other cryptocurrencies). The rules enforced by financial institutions to maintain a record of their customers and transactions vary by country and are often poorly enforced. Therefore, criminals can exploit this lack of law enforcement for money laundering.
Prepaid Cards
Prepaid credit cards with balances in cryptocurrencies represent another means of money laundering. These cards can be used for criminal activities or trading with other cryptocurrencies.
Gambling and Gaming Sites
Online gambling and gaming sites that accept Bitcoin and other cryptocurrencies as payment methods are another avenue for money laundering. Cryptocurrencies can be used to purchase credits or virtual chips, which users can withdraw after a few small transactions.
Anti-Money Laundering Solutions for Money Transfer Services
Money transfer services are tasked with controlling money laundering in a manner that complies with the anti-money laundering frameworks of various countries. Adhering to regulations can assist money transfer services in preventing money laundering through cryptocurrencies.
Emphasizing anti-money laundering processes, centralized systems, and compliance with laws can also result in a business with a large user base incurring significant losses if regulations are not followed.
The good news is that centralization and regulation adherence can eliminate negative perceptions of money laundering using cryptocurrencies. Anti-money laundering regulations, such as identity verification for each transaction, can significantly reduce the risk of money laundering.
As long as covert transactions remain the primary means of money laundering with cryptocurrencies, insisting on recording and storing transactions on the blockchain can mitigate the risks of money laundering. This is because the transaction chain on the blockchain is traceable, making it difficult to conceal transactions.
The Role of the Financial System, Banks, and Governments in Money Laundering
So far, we have identified the channels through which money laundering occurs, and now we want to introduce the main culprit of money laundering: the legal financial system.
The financial system, supported by banks that governments manage through public trust, has the power to print money, create inflation, lend and credit to whomever they choose, spend money wherever they wish, and ultimately provide an opportunity for criminals to introduce illegally obtained assets into the financial system and banks resulting from mismanagement by governments.
For centuries, the rulers have had control over the financial system—or, better said, the “system of public trust.” Criminals easily navigate through the inefficiencies and weaknesses of this traditional financial system, going unnoticed. Consequently, statistics on money laundering are never published, and these figures are merely speculation. Who knows if some large-scale money laundering operations are not under the government’s and banks’ full supervision?