Although the price of cryptocurrency has fluctuated wildly over the past year, it has not decreased its appeal to criminals. While some may enjoy the gains using British Bitcoin Profit, others are moving their illegal activities underground and outside the view of law enforcement. This rapid movement should not be a concern for law enforcement agencies due to the public nature of most blockchains. It is not difficult to track the proceeds of cryptocurrency-enabled crimes with the right tools and training.
However, intelligence agencies should have a plan for cryptocurrency investigations that includes legal tools to collect digital evidence and properly trained personnel to investigate these crimes as they occur.
Digital intelligence (DI), is a definition that includes data from digital sources, data types (think smartphones and computers) and how agencies access, manage, and extract insights from this data in order to conduct investigations. To investigate crypto-related security incidents, law enforcement must have the right tools and expertise. Crypto becomes less “invisible” and more like the DI operations that investigators are used to when they know what they are looking for and have the tools and expertise to analyze those leads.
According to a report on cryptocurrency enforcement by the United States Attorney General’s Cyber-Digital Task Force within the Department of Justice, crypto-based crimes fall into three categories:
Using cryptocurrency to fund crimes
Bitcoin (BTC) was pushed into the global media because of a series of high-profile, international criminal cases linked to the darknet in 2013. Bitcoin was the only cryptocurrency on the dark net at that time. After several successful government seizures Monero (XMR), Dash (ZEC), and other privacy coins were created by anti-regulatory computer programmers. This was to obfuscate public ledger making it more difficult for law enforcement agencies to track down and seize assets.
Although legitimate businesses don’t typically use the darknet for selling goods or services, it does not mean that they aren’t available to purchase legitimate goods on the darknet. You can easily find counterfeit goods, stolen activation keys and copied software at steep discounts on stolen goods.
Information theft is a risk for businesses as well. Information theft is a lucrative way for criminals to make money on the darknet. In 2019, cryptocurrency intelligence firm CipherTrace found that 66% of the products and services offered by darknet vendors throughout the year stemmed from the stolen payment products of compromised financial institutions.
Money laundering and concealment of financial activity
Criminals can make money by illegal activities such as drug sales, fraud, or weapons trafficking. They need a way of converting the illicit funds into legal currency to make it appear legitimate. This is known as “money laundering.”
Crypto-money laundering has quickly become a popular method of moving and laundering money due to its simplicity and pseudo-anonymity. In just a few seconds, cryptocurrency can be transnationally transferred, converted into other currencies, or traded for real estate.
Crypto on crypto crime
Some criminals in crypto choose to concentrate their efforts on users of cryptocurrency exchanges and traders.
In 2018, three North Korean military hackers — who were indicted in February 2021 — successfully stole and extorted more than $1.3 billion of fiat and cryptocurrency from financial institutions and companies. Assistant Attorney General John Demers stated:
In 2020, around $1.5 billion was lost because of fraud and misappropriation, according to Cipher Traces “2020 Cryptocurrency Crime and Anti-Money Laundering Report.” DeFi-related crime only continues to rise quarter over quarter.
Both the government as well as private companies face many challenges when conducting these types of investigations. The technology behind cryptocurrency is complex and constantly evolving. It is not surprising that police agencies struggle to keep up with new security patches and hardware required to solve cases.
It is clear that cryptocurrency use isn’t a trend. Cryptocurrency interest has risen dramatically. Some addresses or wallets may be being tracked by law enforcement, which could lead to the identification of the suspect responsible for the transactions. Digital intelligence has made it possible for investigators to see transactions and follow virtual paper trails, which can reveal evidence about criminals.
Education and training are the keys
Perception is one of the biggest obstacles to law enforcement when it comes to dealing with crypto. Because cryptocurrency is still new and in development, people may perceive it as complex. This means that education and training are essential. Agents and investigators must be able to use the best practices and techniques. However, it can be difficult for police officers to understand the importance of cryptocurrency training.
The same problem faced agencies a decade ago, when command staff didn’t believe cell phone investigations were necessary. Many mobile device investigations were not being conducted by many teams because they lack the necessary tools and training to properly analyze cell phone data. Nearly every crime today has some connection to a mobile phone. Nearly every financial crime will be connected to cryptocurrency in the future. Cryptocurrency is the future of money.
New investigative tools
Investigative tools are the second tier. These tools are both physical tools that collect data from devices, and software that analyzes the data. Teams need to have a comprehensive, blockchain search engine tool to find cryptocurrency addresses via dark markets, exchanges, and crypto ATMs.
The market is changing rapidly and new solutions allow teams to find cryptocurrency artifacts that can be used as “leads”, to initiate a blockchain investigation.
Experienced criminals have gone underground due to the advancements in cryptocurrency technology. Law enforcement involvement is almost non-existent and there are very few chances of getting caught. Law enforcement must prepare now to develop a comprehensive end-to-end investigation solution that focuses on tools, knowledge and services. Digital intelligence is crucial in identifying the root causes of problems and planning for the next one. It is essential that DI strategies include contingencies and use crypto-specific tools.
Agencies should be looking at ways to bring their DI expertise in-house, and recruit savvy experts. This is a two-part solution. Agencies need both the expertise and the tools to respond to crypto-related incidents. These are the foundations of a solid DI strategy. The origins of crypto can be traced back to a variety of crimes, including financial fraud and drug, wildlife, and human trafficking. This makes it an integral part DI investigations. The technology behind cryptocurrency is a new type of money that will aid in the investigation.
These new challenges require the development of law enforcement tools, strategies, and training that are based on DI and data analysis. Crypto is here to stay. Law enforcement agencies need to take the necessary steps now to prepare for the increase in crypto crime that will be more common with the popularity of cryptocurrency. Crypto is just as useful for criminals as money. It must also be used by law enforcement agencies.