Chainalysis, a leading blockchain analytics and cybersecurity firm, revealed on January 15, 2020 that it had managed to trace $2.8 billion in Bitcoin (BTC) being transferred to criminals via cryptocurrency exchanges in 2019, with the vast majority of these transactions going through Binance and Huobi, two of the world’s largest digital asset trading platforms.
Chainalysis’ management noted:
“While exchanges have always been a popular off-ramp for illicit cryptocurrency, they’ve taken in a steadily growing share since the beginning of 2019. Over the course of the entire year, we traced $2.8 billion in Bitcoin that moved from criminal entities to exchanges.”
Chainalysis pointed out that 27.5% of the allegedly illicit Bitcoin transactions went to Binance and 24.7% of them went to Huobi.
On the two leading crypto-asset exchanges, a relatively small group of user accounts that received over $100 billion in BTC last year took in the bulk of the illicit funds, Chainalysis’ team revealed. Approximately 75% of the total crypto funds received on Huobi and Binance reportedly went to 810 of the highest-receiving accounts.
Chainalysis’ management stated:
“Overall, just over 300,000 individual accounts at Binance and Huobi received Bitcoin from criminal sources in 2019.”
According to the analytics firm, these large accounts likely belong to over-the-counter (OTC) brokers that “are typically associated with an exchange but operate independently.”
While Huobi and Binance have implemented know-your-customer (KYC) procedures and policies, these requirements are much lower for over-the-counter (OTC) trading desks. This is why some OTC desks on these major exchanges have been providing money-laundering services to criminals, the Chainalysis team claims.
Out of a list of 100 larger 100 OTC crypto brokers that Chainalysis suspects are offering money laundering services, 70 are reportedly from Huobi. The 100 brokers may account for around 1% of all Bitcoin-related transactions per month, the report noted.
Samuel Lim, Binance chief compliance officer, reportedly told the Chainalysis team that the exchange “is committed to cleaning up financial crime in crypto and improving the health of our industry.”
“We will continue to improve on our proprietary KYC and AML technology, as well as the third-party tools and partners we work with, to further strengthen our compliance standards.”