Swedish authorities have recently classified certain cryptocurrency exchanges as “professional money launderers” (PMLs), identifying their involvement in organized crime and money-laundering activities. This label follows an extensive analysis by the Swedish Police Authority and the Financial Intelligence Unit (FIU) into the operations of unlicensed and illegal crypto service providers.

Four Types of Illegal Crypto Exchanges

The FIU identified four distinct profiles of illegal cryptocurrency exchanges that facilitate money laundering:

1. Node Exchange Provider – Facilitates transactions between multiple users, acting as a central point for illegal exchanges.
2. Hawala Exchange Provider – Mimics the traditional hawala system by moving money outside formal banking channels.
3. Asset Exchange Provider – Helps convert illegal funds into various assets, such as cryptocurrencies.
4. Platform Exchange Provider – Offers a platform where multiple illegal activities and exchanges can take place.

Law Enforcement’s Growing Role in Crypto Oversight

The report emphasizes the need for stronger law enforcement monitoring of these illicit exchanges. Authorities see these unlicensed providers as a major risk to Sweden’s efforts to combat organized crime, as they help criminals hide and launder money.

Licensed crypto exchanges were acknowledged for their role in reducing illegal activity, with Swedish authorities urging them to monitor suspicious transactions and act decisively, including halting transactions and removing clients if necessary.

Crackdown on Bitcoin Miners for Tax Evasion

In addition to addressing illegal exchanges, Swedish authorities are targeting crypto mining operations that have been underreporting their taxes. The Swedish Tax Agency investigated 21 mining firms between 2020 and 2023 and found that 18 had filed incorrect tax information to avoid paying value-added tax (VAT). These firms now face a combined $90 million tax bill.

Some firms appealed this decision, and a few were successful in reducing their liabilities. However, Swedish authorities remain determined to close tax loopholes in the crypto mining industry.

Sweden’s actions signal a growing trend among governments to crack down on the misuse of cryptocurrencies in criminal activities. Licensed and regulated exchanges are encouraged to play their part in curbing money laundering and ensuring compliance with local laws. For the broader crypto industry, this could lead to more scrutiny and stricter regulations in the future.