Elliptic Uncovers ‘Novel’ Bitcoin Money Laundering Pattern

• Elliptic has published new research on Bitcoin money laundering.
• The latest study continues previous research published by the firm in 2019.
• The firm uncovered an emerging trend in BTC money laundering.

Blockchain forensics firm Elliptic said Wednesday it has made significant progress in using artificial intelligence (AI) to identify Bitcoin transactions made by illicit actors.

Elliptic published its first research in 2019 after training a machine learning model using over 200,00 transactions. In the second research, published on May 1, the firm trained the model using a vast dataset containing nearly 200 million transactions.

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New Bitcoin Money Laundering Pattern

In a blogpost spotlighting the new research, Elliptic said it had detected potential money laundering instances on the Bitcoin network after training the machine learning model to identify “subgraphs,” chain of transactions representing BTC being laundered.

“By identifying these subgraphs rather than illicit wallets, this approach allows us to focus on the “multi-hop laundering process more generally rather than the on-chain behavior of specific illicit actors,” Elliptic said.

Of 52 “money laundering” subgraphs predicted by the model and which ended up with deposits to an exchange involved in the research, 14 were confirmed to have been received by users who had already been flagged as being linked to possible money laundering.

The research further uncovered new types of emerging money laundering patterns on the Bitcoin network, such as the use of “intermediary nested” in certain ways.

Intermediary nested services include businesses that move funds through accounts at larger exchanges, often without the exchange’s awareness in the case of illicit activity.

“Nested services are known to frequently have less stringent customer due diligence checks than the cryptocurrency exchanges they utilize, or sometimes have no such anti-money laundering checks at all, resulting in their misuse for cryptocurrency laundering.” Elliptic described.

The latest research was co-authored by Elliptic and MIT-IBM Watson AI Lab researchers.

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