There are mechanisms to obfuscate using Bitcoin laundering services or with zksnarks-based transactions (https://zk.money). As much as it would be great to be able to track these funds, I think it will be increasingly impossible.
Ban the exchange of laundered bitcoins and other coins, too. If laundering you non-banned coins gets them banned, your incentive to do so goes way down.
A) Use already clean money in one address to buy a token on uniswap (or any AMM)
B) Use your laundered dirty money in other addresses to pump the token on uniswap (or any AMM)
C) Sell the token from address in A) back into the Uniswap liquidity pool at a massive profit, enjoy the profits and reintegrated money. You look like any trader.
D) Bag hold the token in the address from B) and never think about it again and never worry about trying to cash that out. In addition that address can add to the liquidity pool and provide a service to all other traders indefinitely.
E) Laugh at people that are still imagining how difficult it is to launder money on public ledgers. Blockchain detectives on their wild goose chase looking at the wrong addresses.
Do this all over time, and not immediately pumping a token with the laundered money.
Sure, I’ll probably get more scrutiny after writing this but you won’t. I really hate chilled speech and people having dumb ideas because the should-be-obvious reality is never talked about. The point is that the trader behavior is indistinguishable from others, and there are no financial intermediaries on permissionless AMMs to flag anything.
This isn’t that different from regular (non-blockchain) money laundering. You can pick your favorite illiquid penny stock, pump it up to 10 cents, and arrange to pick up the profit on the other end. You’ll be up against various people betting against you and, if you use Uniswap between reasonably liquid tokens, you’ll also be up against arbitrageurs. With Ethereum you can, in principle, arrange to atomically pump a liquidity pool and take the profit, but doing so makes it really obvious what’s going on. And, with Ethereum, all the creative sleuths can see what’s going on and can analyze the data and find you.
(This style of intentionally introducing a pricing error and arbitraging it yourself happens for real and is not always particularly profitable. You can read about the foreign exchange fixing antitrust shenanigans. Some traders thought they were being very clever, and, according to Matt Levine, made relatively small amounts of money and ended up getting seriously smacked down. The feds and the courts may be slow, but they’re not dumb.)
This all seems very abstract, but, when you try to spend what you think were carefully laundered ransomware gains on a nice beach in France or Florida and Interpol or the FBI arrests you, the resulting trial and prison time will be considerably less abstract. :)
