Identifying Methods and Types of Money Laundering in the Crypto Asset Industry
Crypto asset industries have unlocked a new wave of innovation in digital finance. However, their core features of anonymity, speed, and borderless transactions have also made them a potential target for illicit activities. Criminals may attempt to use this sector to hide or launder the proceeds of crime.
Recognizing this risk, Indonesia's Financial Services Authority (OJK) has taken proactive steps to ensure the integrity of the domestic crypto asset industry. Through OJK Circular Letter No. 16/SEOJK.07/2025, the OJK has established a robust Anti-Money Laundering (AML) framework, requiring Digital Financial Asset Traders (PAKD) to implement strong systems to prevent their platforms from being exploited.
Three Stages of Money Laundering Criminal Activity (TPPU)
Money laundering typically involves three stages to make illicit funds appear legitimate:
Placement
This is the first stage where "dirty" money enters the financial system. In the crypto context, a criminal might use illicit cash to purchase Bitcoin or other crypto assets, often through peer-to-peer (P2P) transactions or intermediaries.
Layering
Once the funds are in the crypto ecosystem, the perpetrator conducts a series of complex transactions to obscure their origin. Techniques include transferring assets between numerous anonymous wallets, repeatedly swapping one cryptocurrency for another (chain-hopping), or using "crypto mixer" services designed to break the transaction trail.
Integration
This is the final stage where the laundered funds are reintroduced into the legitimate economy. The criminal can sell their crypto assets on an exchange and transfer the "clean" money to a bank account, use it to invest in other financial products, or purchase high-value assets.
7 Common Money Laundering Typologies in the Crypto Sector
The OJK highlights seven common money laundering methods to watch for:
Structuring
Breaking down a single large transaction into multiple smaller ones to stay below suspicious transaction reporting thresholds. Example: To launder Rp500 million, a criminal makes 50 separate crypto purchases of Rp10 million each over time or across different accounts.
Smurfing
Similar to structuring, illicit funds are split and transacted through accounts owned by many different individuals (smurfs) to hide the true owner of the funds.
Mingling
Combining illicit funds with revenue from a legitimate business to obscure the criminal source.
Misuse of Professional Services
Using professionals like lawyers, notaries, or accountants to create complex corporate structures or legal schemes that hide the identity of the beneficial owner and the source of the funds.
Use of Nominees
Using the identities of other people, such as family members or associates, to open and operate accounts, thereby distancing the actual criminal from the illicit activities.
Use of False Identities
Using stolen, fabricated, or synthetic identity documents to create exchange accounts, making the perpetrator difficult to trace.
Use of Companies in Tax Havens
Utilizing shell companies registered in tax haven jurisdictions. These companies often have no real business operations and are used solely to hold and transfer illicit funds with a high degree of anonymity.
Conclusion
Understanding these stages and typologies is crucial for regulators, industry players, and the public. This knowledge helps everyone identify red flags, such as overly complex investment schemes or requests to use another person's identity.
At CFX, we are committed to upholding the highest standards of security and compliance. CFX ensures that all licensed Digital Financial Asset Traders (PAKD) adhere to the robust, risk-based Anti-Money Laundering (AML) programs outlined in OJK regulations. These efforts are central to our mission to foster a safe, transparent, and trustworthy crypto ecosystem in Indonesia.