Digital intelligence must overcome challenges to solve crypto crimes

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While the value of cryptocurrencies has fluctuated wildly over the past year, this has not diminished the appeal of cryptos to criminals. Many of them move their illegal activities underground and out of sight of the police. However, due to the public nature of most blockchains, this rapid movement should not be of major concern to law enforcement. With the right tools and the right training, tracking the proceeds of crypto crime is actually not as difficult as it sounds.

However, intelligence agencies must have a cryptocurrency investigation plan that includes the right tools to legally collect digital evidence and properly trained staff to investigate these types of crimes when they arise.

Digital intelligence (DI) is a two-part definition of data collected from digital sources and types of data (think smartphones, computers, and the cloud), and how agencies access, manage, and obtain information. information from this data to effectively conduct investigations. In order for law enforcement to investigate crypto-related security incidents, they must be equipped with the appropriate tools and expertise to move those investigations forward. When investigators know what they’re looking for and are equipped with the right tools and expertise to analyze and follow these leads, cryptography begins to look less like an invisible web and more like DI operations that investigative teams do. are used to it.

Related: Declaring a Crackdown? What to do with the cryptographic framework version of the DoJ

According to a report on the application of cryptocurrency by the United States Attorney General’s Cyber-Digital Task Force within the Department of Justice, cryptocurrency-based crimes fall into three categories. :

1.Use of cryptocurrency as the proceeds of crime

Bitcoin (BTC) was rocketed in global media due to a series of high-profile international darknet-related criminal cases in 2013. At that time, Bitcoin was the only form of currency on the dark web. After several successful government foreclosures, anti-regulatory IT developers have created Monero (XMR), Dash, Zcash (ZEC), and other privacy coins designed to obscure the public ledger, making it difficult for the forces of the order tracking and seizure of assets.

Related: Darknet, Cryptocurrency & Two Crossed Health Crises

Legitimate businesses typically don’t use the darknet to sell goods and services, but that doesn’t mean legitimate goods aren’t offered on the darknet. Stolen goods, counterfeit products and copied software with stolen activation keys are easily traced at large discounts.

Businesses also face the risk of information theft. Selling bank accounts, employee records, customer records, and proprietary information is one of the most lucrative ways 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 providers throughout the year came from payment products stolen from compromised financial institutions.

Related: Privacy-Preserving Computing on Blockchains Could Prevent Breaches

The easiest and fastest way to find these criminals is to use advanced crypto tracking tools and analysis programs.

2. Money laundering and concealment of financial activities

When criminals make money from illegal activities like drug dealing, fraud, arms trafficking or human trafficking, they need a way to convert the illicit funds to do so. sound legitimate. This process is called money laundering.

Due to its ease of use and pseudo-anonymity, cryptocurrency laundering is quickly becoming an important method for moving and laundering money. Within minutes, the cryptocurrency can be transferred transnationally, converted to any other cryptocurrency, or exchanged for real assets.

Related: US Updates Its AML / CFT Crypto Laws

3.Crypto on crypto crime

Some crypto criminals choose to focus their efforts on users and cryptocurrency exchanges.

In 2018, three North Korean military hackers indicted in February 2021 managed to steal and extort more than $ 1.3 billion in fiat and cryptocurrency from financial institutions and businesses. As Deputy Attorney General John Demers put it:

North Korean agents, who use keyboards rather than masks and guns, are the main bank robbers in 21st century nation states.

Related: North Korean Crypto Hack: Separating Fact from Fiction

In 2020, around $ 1.5 billion was lost due to fraud and embezzlement, according to CipherTraces 2020 Cryptocurrency Crime and Anti-Money Laundering Report. DeFi-related crime only continues to increase quarter over quarter.

These types of surveys pose many challenges for both government and private companies. The technology behind the cryptocurrency system is complex and rapidly changing. Not surprisingly, law enforcement agencies struggle to keep up with the latest security patches and the hardware required to successfully resolve cases.

Obviously, the use of cryptocurrency is not a passing trend, as interest in crypto has increased significantly. Law enforcement can track certain crypto wallets or addresses, which can help identify a suspect behind transactions. New developments in digital intelligence give investigative teams the ability to visualize transactions and follow virtual paper trails that can uncover evidence about individuals who commit crimes.

Related: Bitcoin Can No Longer Be Considered A ‘Untraceable Crime Coin’

Training and education are the key

One of the first hurdles for law enforcement in dealing with cryptography is perception. Cryptocurrency is new and evolving, so people perceive it as complicated, which means training and education are essential. Investigators and agencies should have the skills to optimize practices and techniques, but it can be difficult for police command personnel to see the importance of cryptocurrency training as these types of investigations are new for law enforcement.

Related: How Are DeFi Protocols Hacked?

Agencies faced the same hurdle ten years ago, when command staff didn’t think cell phone investigations were important. Many teams were not investigating mobile devices because they did not have the tools and training to perform proper analysis of cell phone data. Almost all crime today has to do with a cell phone. In the near future, almost all financial crimes will be cryptocurrency related, as crypto is the inevitable future of money.

New survey tools

The second level consists of survey tools. These are physical tools used to collect data from devices and software used to analyze the collected data. To create the best tools for crypto investigators, teams need solutions built around a comprehensive blockchain search engine tool that pulls together massive amounts of data points to track cryptocurrency addresses across dark markets. , crypto exchanges and ATMs.

New solutions entering the market give teams the ability to reveal cryptocurrency artifacts to serve as leads to launch a blockchain investigation.

Related: Outsmarting Crypto Criminals: Why Exchanges Need To Go The Extraordinary Level

Advances in cryptocurrency technology have driven experienced criminals underground, where law enforcement involvement is virtually non-existent and the chances of being caught are minimal. Law enforcement agencies should prepare now to create a comprehensive end-to-end investigation solution focused on knowledge, tools and services. Digital intelligence is essential for breaking down what went wrong and preparing for the next incident, and it is imperative that all ID strategies have contingencies supported by world-class tools specifically designed for cryptography. .

With the growth in the use and popularity of cryptocurrencies, agencies should also strive to bring their DI expertise in-house and recruit knowledgeable experts. It’s a two-part solution, agencies need both expertise and the right tools to properly respond to crypto-related incidents. These are the building blocks of a strong ID strategy. Crypto has been traced to a variety of crimes, from financial fraud to trafficking in drugs, wildlife and humans, making it a fundamental part of DI investigations. And while becoming the new form of money, the technology behind cryptocurrency will help facilitate investigative processes.

Meeting these new challenges requires evolving tools, training, and law enforcement strategies built around ID and data analytics. The bottom line is that crypto is here to stay, and law enforcement agencies must take the necessary steps today to be ready to deal with the increase in crypto crime that is sure to become widespread with the growing popularity of cryptocurrencies. But crypto is just a tool for criminals, like money always has been. But it must also become a tool for the police.

This article does not contain any investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research before making a decision.

The views, thoughts and opinions expressed here are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Leeor Ben-Peretz is Director of Strategy at Cellebrite, where he leads the company’s strategy and business development functions. He brings over 20 years of experience in the forensics, telecommunications and software security markets, having held key business development and product management roles at industry-leading companies such as Aladdin Knowledge. Systems, Pelephone Communications, Comverse and InfoGin. Leeor holds an Executive MBA from the Hebrew University of Jerusalem and a BA in Commerce and Economics from Tel Aviv University College.

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