As mentioned, the “follow the money” de-anonymization methodology combines blockchain analysis
techniques and collaboration with exchanges or wallet applications providers to allow financial investigators to
track fund movement on the blockchain to an exchange.
Blockchain ledgers enable analysts to follow money flows from suspected illicit activities all the way to
exchanges or custodial wallets, i.e. services that keep funds on behalf of their customers, where suspects may
be depositing their cryptocurrencies. Likewise, financial investigators can use this technology to follow money
flows from exchanges or custodial wallets, from which suspects may have withdrawn cryptocurrencies, all the
way to suspected illicit activities.
Custodial wallets constitute a different, less common type of service than exchanges. Like exchanges and
banks, they also store crypto on behalf of their customers. However, they do not provide exchange services.
Both exchanges and custodial wallet providers are designated by the Financial Action Task Force (FATF) as
VASPs and are thus subject to strict regulations, including the above-mentioned KYC requirement, to verify the
identity of their customers. Law enforcement could therefore collaborate with these services to identify the
persons behind deposits or withdrawals to and from these services.
Collaboration with exchanges and
custodial wallet providers
Blockchain Analytics