What to do if dirty cryptocurrency is already on your crypto address?

If dirty cryptocurrency arrives as part of a transaction, it is likely that the funds previously held in your crypto address are now “contaminated.” By continuing to use this address, you run the risk of “sullying” incoming new funds. It is important to take the time to understand why your address's risk score has deteriorated.

During this analysis, create and use a new address for new funds. Avoid linking your crypto addresses. Give up the idea of transferring a small amount of native token to pay for gas from the old address to the new one. Instead, use the exchange to fund your balance with the native token."

By regularly monitoring the risk score of your address, you can assume that the deterioration in the indicator is associated with the last transaction with a certain counterparty or that your address was included in databases associated with illegal activity.

It is worth noting: when analyzing transactions, check both the senders and recipients of your funds.

There is a common myth that if you receive “dirty” funds, you should return them. This approach works for exchanges that create individual deposit addresses for each client, but does not work for regular crypto addresses. Returning such funds will only worsen the situation. Two-way communication with a suspicious or dirty asset will significantly worsen the risk score of your address.

Most analytical tools are based on ML algorithms, which provide for risk score deterioration when interacting with high-risk addresses or dubious cryptocurrency. The more such interactions, the worse the risk score. Why don't service providers make exceptions for such transactions? The answer is simple: scammers make mistakes too, sometimes accidentally linking their anonymous addresses with those by which they can be identified.

Consider an analogy: a robber stole money from a bank and transferred 10,000 to you. Later you return these funds. Will this return protect you from questions from law enforcement? Hardly. You will still have to explain the reasons for such transactions.

As we mentioned earlier, dirty cryptocurrency can be obtained in various ways: from a friend, from an unlicensed crypto exchanger that ignores AML procedures, from an unknown project as part of an airdrop, from a freelance client paying for work in cryptocurrency, or as a result of a P2P exchange. If your address has received a high risk score, it is important to collect as much data as possible about your transactions. This could be correspondence with P2P users when agreeing to exchange or pay with cryptocurrency, confirmation from crypto exchangers about a successful transaction, etc. All this evidence must be correlated with specific transactions.

Be prepared, if you try to deposit these funds on the exchange, to provide all the collected evidence and undergo an in-depth KYC procedure. Be as polite as possible and demonstrate openness. However, if your funds are not only risky, but also have signs of links to fraud, terrorism or the dark web, such a move has its own risks. If the funds you received have a shady past, it can be compared to buying a car that turns out to be listed as stolen. You are required by law to report such incidents to law enforcement or you will be considered an accomplice.