Blockchain analytics company Elliptic has recently announced significant progress in utilizing artificial intelligence (AI) to detect money laundering in Bitcoin. Through a collaboration with researchers from the MIT-IBM Watson AI Lab, Elliptic has been able to identify illicit proceeds deposited at cryptocurrency exchanges, uncover new patterns of money laundering transactions, and identify previously unknown illegal wallets. This breakthrough has been made possible through the use of a deep learning model, which has allowed Elliptic to enhance its products and services for combating financial crimes in the cryptocurrency space.
One of the key outcomes of this research is the release of the underlying data to the public. With a dataset containing over 200 million transactions, the community now has the opportunity to develop new AI methods for identifying illegal cryptocurrency activities. Instead of solely focusing on transactions made by criminals, the machine learning model is trained to recognize “subgraphs” – chains of transactions that indicate Bitcoin laundering. By concentrating on these subgraphs, Elliptic is able to target the broader “multi-hop” laundering process rather than individual on-chain actions of criminals.
Elliptic tested this new technique by collaborating with an undisclosed cryptocurrency exchange to detect money laundering attempts. Out of 52 predicted “money laundering” subgraphs that ended with deposits to the exchange, 14 were confirmed to be linked to flagged users by the exchange. This level of accuracy is impressive, with less than one in 10,000 accounts being flagged on average. The success of these tests highlights the potential of AI tools in identifying illegal activities within the Bitcoin economy.
Despite the progress made in leveraging AI for detecting money laundering, Elliptic acknowledges that there is still much more to explore in this domain. The company believes that further collaboration and data-sharing will be crucial in advancing these techniques and combating financial crimes in cryptoassets. The use of AI tools in analyzing extensive data sets to identify patterns that may go unnoticed by humans is a promising development, as evidenced by the increasing VC investment in Web3 and AI startups, which exceeded $637 million in 2023.
The integration of artificial intelligence in detecting money laundering in Bitcoin represents a significant step forward in enhancing security and transparency in the cryptocurrency industry. By leveraging advanced technology and collaborating with research institutions, companies like Elliptic are at the forefront of combatting financial crimes in the digital asset space.
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