J5 flags links between OTC crypto trading desks, criminal activity

The Joint Chiefs of Global Tax Enforcement (J5) has published two law enforcement advisories highlighting the connections between over-the-counter (OTC) cryptocurrency trading desks, cryptocurrency payment processors and criminal activity.

From the J5’s estimates, it was suggested that OTC trading desks accounted for a large share of cryptocurrency trading activity, with daily trading activity totalling $1.44 billion compared to $74.51 million at cryptocurrency exchanges.

OTC trading desks were noted to be “platforms that enable individuals to buy and sell digital assets outside of a public exchange”.

In a statement made by the ATO regarding the J5’s findings, it added that OTC trading desks provided clients with anonymity and reliability when moving large sums of money or cryptocurrency, “thus potentially functioning as an obfuscation tool for tax evaders and money launderers”.

In September 2024, the J5 launched its Cyber Challenge focused on data involving OTC cryptocurrency trading desks and cryptocurrency payment platforms.

From this research, the crime taskforce was able to create the link to criminal activity and illegally moving funds, as nearly $236 billion in suspicious activity was reported to the Financial Crimes Enforcement Network in connection with the trading platforms.

“Cryptocurrency payment processors enable direct payment for goods and services using digital assets. While these platforms offer fast and convenient transactions, they can also be used to hide and spend illegally obtained digital assets or to commit tax evasion,” the J5 said.

“From 2020 to 2024, suspicious activity reports tied to these processors increased by more than 1000 per cent. To date, financial institutions and digital asset providers have reported $5 billion in suspicious activity to the Financial Crimes Enforcement Network associated with cryptocurrency payment processors.”

From its investigation, the J5 said it recommended that financial intelligence units leverage specific keyword searches when reviewing suspicious activity reports to identify transactions or patterns that indicated money laundering or tax evasion taking place on these platforms.

Following this discovery, the J5 was set to continue looking into the data to further its fight against international and transactional tax crime and money laundering.