All prior work on on-chain AML addresses mechanisms where funds transit the blockchain at some point during the laundering operation. This paper identifies and formally characterizes a qualitatively different class: off-chain laundering circuits — complete multi-stage layering operations where the blockchain is either never involved or touched only at the final integration step, when funds already carry a clean provenance narrative. We catalog five empirically documented off-chain circuit types: (1) hawala with crypto settlement, (2) cash-to-casino-to-wire-to-crypto, (3) trade-based money laundering (TBML) with crypto settlement, (4) correspondent banking without compliance, and (5) parallel currency markets (blue markets). For each circuit we formalize the structure, quantify the on-chain detection surface, and derive the conditions under which ZK-Sentinel can detect anomalies at the single vulnerable point: the integration step. Off-chain circuits represent approximately 55% of total laundering volume by amount, are largely undetectable by any on-chain tool, and require orthogonal detection mechanisms that are fundamentally non-cryptographic. This is the sixth and final paper in the series.
Alejandro Jaime (Sun,) studied this question.