Elliptic has indicated that financial institutions have long maintained strong controls against money laundering, fraud, and sanctions violations. Yet the rise of cryptocurrencies introduces new pathways for these same threats, moving funds across borders and blockchains in seconds rather than days. Legacy monitoring tools designed for traditional accounts often fall short, but public blockchains create permanent, traceable records that sophisticated analytics can exploit.
Blockchain intelligence firm Elliptic has identified key risk typologies that every financial institution handling digital assets needs to recognize to strengthen compliance and reduce exposure.
The first involves laundering proceeds from drug cartels. Major trafficking networks now convert cash revenues into cryptocurrencies, using professional brokers to move funds internationally and bypass correspondent banking restrictions.
A common pattern sees Mexican cartels paying Chinese suppliers for fentanyl precursors via Bitcoin or stablecoins.
Institutions face heightened risk on both the initial cash deposit side—where illicit funds enter crypto—and the exit point, when cleaned assets return to seemingly ordinary customer accounts.
Traditional red flags like unexplained cash deposits may miss the crypto layer entirely.
A second major concern is fraud driven by social engineering.
Multi-billion-dollar schemes such as romance scams and “pig butchering” operations generate vast illicit flows, frequently run from compounds in Southeast Asia that exploit victims through sophisticated tactics, including AI-powered deepfakes.
Retail clients or corporate partners may unknowingly transfer funds to scam-controlled wallets, exposing banks through custody services, payment processors, or wealth management platforms.
Even routine-looking transactions can link back to these networks when traced properly. Third, criminals increasingly rely on obfuscation and cross-chain laundering.
By routing funds through mixers, privacy tools, bridges, and no-KYC exchanges, they fragment transaction histories across multiple networks.
Elliptic’s latest analysis shows more than $21.8 billion in illicit or high-risk assets moved this way in recent years—a threefold rise since 2023—with many investigations spanning three or more blockchains, and some exceeding ten.
Single-chain screening alone leaves dangerous blind spots.
Sanctions evasion represents the fourth typology. Designated wallet addresses tied to sanctioned entities or jurisdictions create direct, indirect, or institutional exposure.
Examples include Russia-linked stablecoins handling hundreds of billions in volume, Iranian acquisitions of US dollar stablecoins, and North Korean actors.
Even exchanges sanctioned years ago continued processing tens of billions before international enforcement actions intervened.
Institutions must trace beyond immediate counterparties to avoid inadvertent violations. Finally, state-sponsored cyber theft poses acute challenges.
Entities like North Korea’s Lazarus Group organization execute massive heists—such as the February 2025 theft of approximately $1.46 billion from Bybit—and rapidly launder proceeds across dozens of wallets, bridges, and mixers.
The speed and apparent normality of these flows make them hard to detect without full chain-of-custody analysis. Elliptic stresses that blockchain’s transparency, when paired with advanced analytics, turns potential vulnerabilities into strengths.
By screening wallets, tracing multi-hop flows, and integrating these insights into existing compliance programs, institutions can detect risks that traditional systems overlook. Elliptic concluded that becoming well-versed and acquainted with these five typologies is no longer optional; it is essential for safely participating in the digital asset economy while meeting regulatory obligations.