Over 60% of illegal crypto activity is tied to sanctioned groups or terrorist organizations, report finds

Sanctioned entities, like those linked to North Korean hacking groups and U.S.-designated terrorist organizations such as Lebanon's Hezbollah, continue to rely on cryptocurrency for fundraising, according to a new report from Chainalysis.

The American blockchain analysis firm's "2024 Crypto Crime Report" found that $24.2 billion of illicit cryptocurrency was transferred in 2023, based on already identified illicit crypto wallets. Chainalysis retroactively updates its yearly crypto figures when new illicit wallets come to light.

While last year's numbers currently represent a drop from the previous year, Chainalysis noted a much higher proportion of the funds were attributed to sanctioned or terrorist-linked recipients, accounting for about 61.5% of total illicit transaction volume in 2023.

"Actors subject to sanctions are often cut off from international traditional financial systems, and crypto can become an attempted alternative mechanism to store, send, and receive funds," Andrew Fierman, head of sanctions strategy at Chainalysis, told CNBC on Thursday.

Entities like the crypto "mixer" Tornado Cash and Garantex took the lion's share of illicit funds in 2023. Tornado Cash was sanctioned in August 2022 for its role in laundering crypto stolen by the North Korean hacking organization Lazarus Group. Russian-based exchange Garantex was sanctioned in April 2022 for its affiliation with illicit actors, including ransomware groups.

Crypto mixers are software that obscure the history and origin of digital assets sent through them.

The amount of crypto transferred to sanctioned entities has climbed in recent years in tandem with a greater share of new trade restrictions specifying crypto wallets.

In 2023, the U.S. Office of Foreign