Global Tax Chiefs Warn Crypto OTC Desks Hide $236B in Suspicious Activity

The advisory from the J5—comprising tax bodies from Australia, Canada, the Netherlands, the United States, and the United Kingdom—paints a picture of a massive, opaque parallel market. The group’s data shows the average daily trading volume for OTC crypto desks totals $1.44 billion, a figure that dwarfs the $74.5 million estimated for traditional exchanges. This immense flow of capital is not easily monitored, as the J5 notes money passing through these channels “isn’t as easy for regulators to monitor in real-time.”

The core of the warning lies in the sheer volume of flagged transactions. To date, nearly $236 billion in suspicious activity has been reported to the U.S. Financial Crimes Enforcement Network (FinCEN) in connection with these trading platforms. The J5 stated these desks “provide clients with anonymity and reliability when moving large sums of money or cryptocurrency, thus potentially functioning as an obfuscation tool for tax evaders and money launderers.” The concern is compounded by the belief that many OTC desks may not be filing the suspicious activity reports required to mitigate the risks of their high-volume business.

Alongside OTC desks, cryptocurrency payment processors are under intense scrutiny. The J5 reported a staggering increase of more than 1,000% in suspicious activity reports tied to these processors from 2020 to 2024, with related reports filed to FinCEN totaling $5 billion. This surge coincides with a growing trend among luxury goods merchants to accept digital assets.

The advisory specifically notes that dealerships for brands like Rolls-Royce, Bentley, and Ferrari, alongside yacht brokerages, property firms, and luxury watch companies, now offer crypto payments. “The ability to off-ramp cryptocurrency and purchase luxury goods can be an attractive concept for tax evaders and illicit actors who aim to use the proceeds of tax evasion, money laundering, and other financial crimes,” the J5 warned. This creates a direct pipeline for converting illicit crypto gains into high-value, tangible assets within the traditional financial system.

A significant challenge identified by the J5 is a fundamental lack of visibility. Many commercial blockchain analysis tools do not identify and label OTC desks, leaving law enforcement agencies blind to these transactions in real time. This regulatory gap was starkly illustrated by the 2023 collapse of the crypto exchange JPEX in Hong Kong, which used influencers to promote OTC storefronts. The incident led local regulators to admit they did not know how many OTC businesses were operating in the city and that oversight was minimal.

In response, jurisdictions are moving to close these loopholes. Hong Kong’s government will introduce a new regulatory regime for OTC desks this year, requiring compliance with the local Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). Their activity will be further constrained by the territory’s new stablecoin licensing regime, targeting their frequent use of USDT for transactions. These moves follow enforcement actions like the 2021 U.S. settlement with payment processor Bitpay for violations of multiple sanctions programs.

Amid the warnings, major industry players emphasize their efforts to combat illicit finance. Haider Rafique, Global Managing Partner and CMO at the exchange OKX, outlined the techniques used by compliant OTC desks, including those run by major exchanges. These involve comprehensive Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, real-time surveillance via blockchain analytics, and “tight collaboration with regulators and authorities to spot, report, and help freeze suspicious flows fast.”

“Building trust in crypto means shutting down the bad actors decisively,” Rafique told Decrypt. “We strongly support law enforcement in cracking down on illicit crypto activity, including misuse of OTC channels.” This stance highlights the industry’s recognition that the anonymity once associated with crypto is a double-edged sword, and that long-term legitimacy depends on robust, cooperative frameworks to isolate criminal elements from the broader financial ecosystem.