Tools for artificial intelligence have the potential to completely transform attempts to prevent money laundering in bitcoin transactions.

There are millions of transactions per day, and these systems assist banks and law enforcement keep up with the volume of transactions by analysing considerably more transactions faster than a human could.

Being able to spot suspicious transactions quickly can be advantageous for law enforcement, since common money laundering tactics involve making numerous quick transactions across accounts.

However, it's important to keep in mind that artificial intelligence is not a magic bullet when it comes to stopping money laundering.

AI tools are also available to terrorists, rogue nations, and criminals, who can use them to commit more frauds and circumvent money laundering regulations.

AI technologies are far more rapid than humans in helping law enforcement identify suspect trends in financial transactions.

As stated by Mathieu Weill, AI can help reduce false positives in anti-money laundering work by 30-50 percent, help digitize Know Your Customer processes and identify ultimate beneficial owners.

It can also help ensure compliance with national regulations and identify validator nodes that are either under sanction or controlled by criminals.

“Blockchain technology is being recognized for its potential to significantly improve AML processes,” Weill writes.

“Its inherent properties, such as immutability and transparency, make it an ideal tool for maintaining secure and tamper-proof records of financial transactions. Blockchain can facilitate real-time sharing of updated KYC documents and transaction histories . . . making it more difficult for launderers to conceal their activities.”

Law enforcement professionals need all the help they can get. New York State regulators alone have a backlog of tens of thousands of transactions to monitor, according to Arthur Mueller of WorkFusion.

AI tools are not just in the hands of law enforcement and financial institutions. Cybercriminals have access to them, too, and in some cases are building their own.

This will complicate things for the public and private sectors, as well as enable criminals to steal, defraud or launder money even faster and at a larger scale.

“Generative AI models can be used to make money laundering processes more efficient for financial criminals – for example, by helping to create fake companies, invoices, records and financial statements, find loopholes in legislation and even generate offshore accounts in which to hide funds.”

Less elaborate criminal schemes have also started employing AI. Fraudsters running “pig butchering” romance scams are already using tools like Chat GPT to make more compelling pitches to victims.

Adversarial AI tools such as Fraud GPT and Worm GPT are being sold on the Dark Web.

Fraud GPT assists bad actors with “writing malicious code; creating undetectable malware; finding non-VBV bins; creating phishing pages; building hacking tools; finding hacking groups, sites, and markets; writing scam pages and letters; finding leaks and vulnerabilities; and learning to code or hack.”

According to Gary Anderson of Kivu Consulting:

“Cybercriminals and the threat actor community are technologically savvy, motivated and tend to be early adopters of new technology trends when they see advantages and improvement on how they can evolve their tools, techniques and practices.”

Some criminals, on the other hand, are using the promises of AI to falsely lure victims into investment scams. According to a DOJ press release:

“David Gilbert Saffron, 51, of Australia, and Vincent Anthony Mazzotta Jr., 52, of Los Angeles, allegedly conspired to operate a fraudulent scheme to induce victims to invest in various trading programs that falsely promised to employ an artificial intelligence automated trading bot to trade victims’ investments in cryptocurrency markets and earn high-yield profits.” This deceptive practice is also referred to as “AI washing.”

Law enforcement, banks, and other cryptocurrency-related organisations must use these tools themselves before they become completely swamped by the criminal adoption of AI.

In addition, they must conduct public outreach and instruct individuals on security best practices and how to prevent scams.

BlockCerts founder Tim Vasko has proposed a game-changing solution: combining blockchain technology and artificial intelligence to fortify and rely on the ecosystem for everyone involved.

At the centre of BlockCerts' innovation is the idea of Authenticated Intelligence, which combines the rigorous validation processes that support GPT's technology with the immutable proof protocols inherent in blockchain.

This sophisticated verification approach ensures that every transaction is both encrypted and cross-layer checked, greatly lowering the possibility of fraudulent activity, including laundering of money.

"Our strategy transcends theoretical postulation; it is an active, tangible system that reinforces both the conventional realms of business and finance, as well as the dynamics of the cryptocurrency sector, with the indispensable values of integrity and trust," says Vasko, emphasising the approach's practicality and efficacy.

Authenticated intelligence is more than just an idea; it's an operational platform that is dedicated to making sure that all transactions follow the highest ethical standards and building confidence in the connected digital ecosystems in which we all currently live.

AI is among the most potent instruments ever made. The philosophical idea known as the "technological imperative" holds that new technologies must be created and adopted for the benefit of society since they are unavoidable and vital.

Therefore, even if adopting AI will help us, it is critical for professionals to keep one step ahead of dishonest actors by proactively leveraging generative AI to increase compliance and mitigating associated risks.