Cryptocurrencies divide opinion. To some, they signal innovation, decentralisation and a new way to invest; to others, they conjure speculation, scams and fraud.
One of the touted benefits of virtual assets – the broader regulatory term for cryptocurrencies – is that they allow fast, cross-border, peer-to-peer transfers without a bank or broker in between. That’s an alternative where formal banking is costly, unreliable or simply out of reach. But the same features also serve bad actors, expediting cross-border crime, tax evasion and, potentially, corruption.
| How criminals use crypto While evidence on the specific links between cryptocurrencies and corruption remains limited, what is clearer is that crypto can provide another channel for paying bribes, moving or laundering the proceeds of corruption and enabling criminal networks. A Ukrainian Member of Parliament was sentenced in 2024 to eight years in prison for offering a bribe in bitcoin to secure funding for reconstruction projects. Ukraine’s anti-corruption authorities described it as their first documented cryptocurrency bribe. One case even reached into diplomacy. A Russian national pleaded guilty in 2024 to conspiracy to commit money laundering related to his role in operating the cryptocurrency exchange BTC-e from 2011 to 2017. The indictment alleged that BTC-e was used to facilitate crimes ranging from computer hacking to fraud, identity theft, tax refund fraud schemes, public corruption and drug trafficking. In February 2025, the US released BTC-e’s owner as part of a prisoner exchange with Russia. Technical obfuscation is what makes this possible. Bad actors blend identifiable tokens from multiple sources and route them to new wallets, obscuring the link between origin and destination. They move funds across different blockchains and through one-off wallet addresses, muddying the trail that analytics firms rely on to follow the money. Assets designed to conceal user addresses and balances make it nearly impossible for third parties to view transaction histories. It’s like a massive digital shell game. Regulatory gaps let these mechanisms flourish. The disintermediated design of decentralised finance (DeFi) protocols allows value to move through automated programs – ‘smart contracts’ – with minimal direct human involvement in individual transactions. This creates uncertainty over who is responsible for filing suspicious activity reports or running anti-money laundering (AML) checks. Criminals also use illicit fiat proceeds to fund cryptocurrency mining. This results in newly minted coins with no direct link to previous criminal activity, which can then be sold back into the formal financial system as clean assets. Unlicensed brokers convert crypto back into real-world cash without the identity checks known as KYC (Know Your Customer) procedures, as reported by Transparency International US. The Russian playbook Transparency International Russia has documented how Russian actors built a global web of hard-to-trace cryptocurrency payment schemes to move money on behalf of sanctioned entities, enabling trade with no accountability. A 2024 paper by Transparency International Russia identified some of the real beneficiaries of these evasion strategies connected to the war: a small elite of wealthy individuals and entities woven into a kleptocratic government. In our most recent Corruption Perceptions Index, Russia scored 22 out of 100, among the lowest in the world. |
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| Sanctions evasion and criminal activities extends well beyond crypto. Transparency International Russia traced how Russian companies used entities registered in British Overseas Territories – mostly the British Virgin Islands and Bermuda – to trade goods worth billions. The same set of territories appeared in cases of high-level corruption and related large-scale money laundering on a 2018 report by Transparency International UK.
In Australia, long-standing weaknesses in anti-money laundering rules have made the country a target for Russia’s dirty money. A cat-and-mouse race In March 2025, the US Secret Service, Europol and authorities from Germany and Finland launched a coordinated operation against Garantex, a Moscow-based crypto exchange sanctioned for facilitating millions of dollars in illicit transactions. The network proved harder to dismantle. Garantex reappeared under new names and continued operating across the UAE, Brazil, Kyrgyzstan, Thailand, Georgia and Hong Kong. Garantex offers a case-study for a wider problem: enforcement can seize a virtual asset service provider and indict a handful of individuals, but such domains can easily relocate to wherever oversight is weakest. |
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| Moscow is at the center of a global network using technology to bypass the rule of law. Photo: Transparency International Russia | |
| A patchwork of solutions against a network Taking down the first face of Garantex took several countries acting together. Closing down its successors will require sustained coordination indefinitely – fragmented national responses won’t cut it. The Financial Action Task Force has revised its global standards to bring virtual assets and Virtual Asset Service Providers (VASPs) explicitly within scope, requiring jurisdictions to apply the same customer due diligence and anti-money laundering safeguards long expected of the traditional financial sector. Though this revision of standards is welcome, enforcement continues to lag. Reform proceeding jurisdiction by jurisdiction, without coordination, will always be prone to exploitation from schemes that treat borders as irrelevant. At a minimum, the same measures we have long advocated for other channels of illicit financial flows should also be extended to crypto. This means ensuring virtual asset service providers, who facilitate the conversion of crypto into cash (off-ramping) and vice versa (on-ramping), are actually held to the customer due diligence, AML obligations and independent supervision that FATF standards already require of them. Regulators and supervisors should be given the mandate, capacity and resources to enforce this in practice. Setting the direction The European Union has expanded its use of sanctions to target crypto-related sanctions evasion linked to Russia’s war on Ukraine. It’s 21st sanctions package, adopted 23 July 2026, introduced for the first time a dedicated ban on crypto-asset services in third countries that host platforms facilitating sanctions evasions. The package also includes the highest number of listings since the war began, targeting over 100 banks and crypto operators. These steps reflect a growing awareness within major financial centres and are needed, even if responses are moving at different speeds and addressing different pieces of the problem. But this is a global challenge. Without coordination, the gaps between jurisdictions will keep the door open to virtual assets as a place for illicit wealth to be hidden. Regulation will only catch up once it treats crypto the way beneficiaries of illicit finance already do – as one borderless system. |
