In 2016 Ilya Lichtenstein hacked the Bitfinex exchange and moved 119,754 bitcoin out of it in more than 2,000 fraudulent transactions. To launder the coins, Lichtenstein and Heather Morgan set up online accounts under fictitious identities and automated transactions with computer programs. The funds passed through darknet markets and exchanges, into other cryptocurrencies in a practice known as "chain hopping", through mixing services, into US business accounts "to legitimize their banking activity" and into gold coins. Both pleaded guilty to money laundering conspiracy on 3 August 2023, and Lichtenstein was sentenced to five years in prison on 14 November 2024.
Layering names a stage, and the techniques sit inside it. In the three stage model of money laundering methods, its role is the middle step, between placement, when criminal money first enters the financial system, and integration, when it returns looking legitimate.
Which techniques count as layering?
Any move counts when its purpose is to hide where the money came from. Eight recur in cases and typology reports:
- Wire chains across jurisdictions. Each hop through offshore accounts adds a bank that sees only its own part.
- Shell and front companies. The account holder is a company, not the person who owns the money.
- Mirror trading. Two matching trades move value across a border with no payment between the parties.
- Trade invoices. An over or under priced invoice moves value as payment for goods, the core of trade based money laundering.
- Chain hopping and mixers. Each conversion or mix breaks the link on the blockchain.
- Back to back loans. A loan secured on a hidden deposit returns the money as borrowed funds.
- Gambling chips. Funds become chips and come back as winnings or a casino check.
- Money mule chains. Money passes through accounts of people paid to receive and forward it.
Table 1. What one bank sees of each technique, and what it cannot see.
| Technique | What one bank sees | What it cannot see |
|---|---|---|
| Wire chains | An incoming and an outgoing wire | The hops before and after it |
| Shell and front companies | A company account with plausible activity | The owner behind the company |
| Mirror trading | One leg of a trade | The matching trade at another firm |
| Trade invoices | A payment for goods | The real price or whether goods moved |
| Chain hopping and mixers | A deposit from an exchange or wallet | The coins' path across chains |
| Back to back loans | A loan and its collateral | Where the collateral came from |
| Gambling chips | A casino payout | The cash that bought the chips |
| Money mule chains | A customer receiving and forwarding funds | The other mules in the chain |
What does the law call layering?
No statute says "layering"; the laws define what it does. The Vienna Convention of 1988 and the Palermo Convention of 2000 both make it a crime to commit "the concealment or disguise of the true nature, source, location, disposition, movement" or ownership of criminal property.
The EU repeats that wording in Directive (EU) 2018/1673, Article 3(1)(b). The US bans a transaction "designed in whole or in part" to conceal or disguise the nature, location, source, ownership or control of the proceeds (18 U.S.C. 1956).
The UK makes it an offense to conceal or disguise criminal property (Proceeds of Crime Act 2002, s327).
Moving money is not the same as concealing it. In Regalado Cuellar v. United States (2008) the Supreme Court held, on the transport provision 1956(a)(2)(B)(i), that "merely hiding funds during transportation is not sufficient to violate the statute, even if substantial efforts have been expended to conceal the money": the purpose of the transport, not merely its effect, had to be to conceal or disguise one of those attributes. The Court also found no requirement to show an appearance of legitimate wealth. A layering chain is described best the way the law tests it, step by step, by what each move hid.
What can one bank see of a layering chain?
Picture the bank (illustrative) that held one of the US business accounts in the Bitfinex chain. It saw funds arrive from an exchange and leave again; it did not see the hack, the mixers or the chain hops before them. That is why layering is the hardest stage for anti money laundering teams to catch: each step crosses institutions, and each institution holds one step.
complead, formerly Sanction Scanner, opens each alert in its transaction monitoring as a case with the triggering transactions, the ownership chain and every counterparty attached, which is where one bank's step of a chain becomes visible.
For AML compliance, the suspicious activity report then describes that step in the law's terms: what the move appears to hide, and from whom.
What happened to mixer rules in 2026?
- 6 October. FinCEN withdrew, as of that day, the finding and proposed rule it had published on 23 October 2023 under section 311 of the USA PATRIOT Act, which would have treated international convertible virtual currency mixing as a class of transactions of primary money laundering concern and added recordkeeping and reporting duties (91 FR 63513).
Read step by step, the Bitfinex chain hid one attribute at a time: the fictitious accounts the ownership, the exchanges and mixers the source, chain hopping the movement, the business accounts the nature of the money, and the buried gold coins its location. Each step concealed one attribute the statutes list, which is what makes it layering.
Related terms
- Money laundering. Making criminal proceeds look legitimate; layering is its middle stage.
- Smurfing. Splitting cash into many small deposits made by several people.
- Mirror trading. Matching buy and sell trades that move value across borders.
- Trade based money laundering. Moving value through false prices or quantities in trade.
- Reverse money laundering. Moving clean money to fund a crime.
- Offshore. Banking or company structures set up in a jurisdiction other than the one the owner lives in.
How this entry was checked. The case steps are quoted from the Justice Department's releases of 3 August 2023 and 14 November 2024, and Javid Khasayev, Senior Anti Fraud Specialist at GoldenPay, held the Regalado line to the transport provision the Court read. Onur Taner (Customer Success Manager, complead) drafted the definition from the concealment wording that Article 3 of the 1988 Vienna Convention, Article 6 of the 2000 Palermo Convention, Directive (EU) 2018/1673, 18 U.S.C. 1956 and section 327 of the Proceeds of Crime Act 2002 share; those texts, Regalado Cuellar v. United States (2008) and FinCEN's withdrawal notice of 6 October 2026 were reread on 29 October 2026. The bank in H2 3 is illustrative. Last reviewed: 30 October 2026.
