U.S. Slashes Crypto AML Investigators
The U.S. has slashed the number of federal investigators reviewing anti-money-laundering safeguards at crypto exchanges, reducing oversight to the lowest levels since 2017. This comes as the crypto industry is expanding rapidly, raising concerns about illicit finance and potential regulatory backlash.
- The IRS division responsible for investigating money laundering in non-bank financial institutions, including crypto exchanges, saw its number of agents drop by 33% in 2025, from 208 to 139. This is the lowest staffing level for this unit since at least 2017. - This reduction in oversight coincides with a massive surge in illicit cryptocurrency activity, which reached a record $158 billion in 2025, a 145% increase from 2024. - In the first half of 2025 alone, regulatory fines against the cryptocurrency sector for anti-money laundering (AML) failures exceeded $1 billion. This includes a more than $504 million penalty against the exchange OKX for severe AML and KYC (Know Your Customer) failures. - Another exchange, BitMEX, was fined $100 million in early 2025 for evading AML and KYC laws, allowing customers to trade with just an email address. - The Financial Action Task Force (FATF), an international standard-setter for combating money laundering, requires cryptocurrency service providers to be licensed, conduct customer due diligence, and report suspicious transactions, similar to traditional banks. - Criminals exploit cryptocurrencies for money laundering through various methods, including using "mixers" or "tumblers" to obscure the trail of funds, "chain hopping" between different cryptocurrencies, and leveraging decentralized finance (DeFi) platforms that often have weak customer verification procedures. - Illicit actors are increasingly favoring stablecoins for their operations; in 2025, stablecoins accounted for 84% of all illicit transaction volume. - Crypto-related crime is also linked to a significant human cost, with transactions tied to alleged human trafficking, including illicit escort services and child sexual abuse material, surging by 85% in 2025.
