Although the value of cryptocurrencies has changed a lot last year, this has not diminished the attractiveness of crypto to criminals.Many of them are move They are illegal activities underground and outside law enforcement. However, due to the public nature of most blockchains, this rapid movement should not be the main focus of law enforcement agencies. With the right tools and training, tracking the proceeds of crypto crime is actually not as difficult as it seems.
However, intelligence agencies must have a cryptocurrency investigation plan that includes the right tools for legally collecting digital evidence and appropriately trained personnel to conduct investigations when such crimes occur.
Digital Intelligence (DI) is a two-part definition-data collected from digital sources and data types (think smartphones, computers, and clouds), and organizations access, manage, and gain insights from these data for effective development Methods of investigation. For law enforcement agencies to investigate encryption-related security incidents, it must be equipped with appropriate tools and expertise to facilitate these investigations. When investigators know what they are looking for, and are equipped with the right tools and expertise to analyze and track these clues, encryption begins to look less like an “invisible” network, and more like the DI operations that investigative teams are used to.
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According to the report of the U.S. Attorney General’s Cyber Digital Working Group on the Enforcement of Cryptocurrency within the Department of Justice, crimes based on encryption fall Divided into three categories:
1. Using cryptocurrency as proceeds of crime
Bitcoin (Bitcoin) Was pushed into the global media due to a series of high-profile international criminal cases related to the dark web in 2013. At the time, Bitcoin was the only form of currency on the dark web. After several successful government seizures, the anti-regulatory computer developer created Monero (XMR), sprintcash(Jersey) And other privacy coins designed to obfuscate public ledgers, which makes it difficult for law enforcement agencies to track and seize assets.
related: The dark web, cryptocurrency, and two intersecting health crises
Legal businesses usually do not use the dark web to sell goods and services, but this does not mean that the dark web does not provide legal goods. Stolen goods, counterfeit products, and copy software with stolen activation keys are easy to find at substantial discounts.
Enterprises also face the risk of information theft. Selling bank accounts, employee records, customer records, and proprietary information is one of the most profitable ways for criminals to make money on the dark web. In 2019, CipherTrace, a cryptocurrency intelligence company Discover 66% of products and services The products provided by dark web providers throughout the year are derived from stolen payment products from stolen financial institutions.
related: Privacy protection calculations on the blockchain can prevent violations
The easiest and fastest way to find these criminals is through advanced encryption trackers and analysis programs.
2. Money laundering and concealment of financial activities
When criminals make money through illegal activities such as drug sales, fraud, arms trafficking, or human trafficking, they need a way to convert illegal funds to make it look legal. This process is called “money laundering”.
Due to its ease of use and pseudo-anonymity, cryptocurrency money laundering is quickly becoming an important method of transfer and money laundering. Within minutes, cryptocurrencies can be transferred across countries, converted into any other cryptocurrencies, or traded as real assets.
related: U.S. updates its cryptocurrency AML/CFT laws
3. Cryptocurrency crime
Some cryptocurrency criminals choose to focus their efforts on cryptocurrency users and exchanges.
In 2018, three North Korean military hackers—— Persons indicted in February 2021 — Successfully stole and extorted more than 1.3 billion U.S. dollars of fiat and cryptocurrency from financial institutions and companies. As Assistant Attorney General John Demers said:
“North Korean agents who use keyboards instead of masks and guns are the world’s leading national bank robbers in the 21st century.”
related: North Korean encryption hackers: distinguishing fact from fiction
In 2020, about 1.5 billion U.S. dollars Lost due to fraud and misappropriation, According to CipherTrace’s “Cryptocurrency Crime and Anti-Money Laundering Report 2020”. DeFi-related crimes continue to rise only quarterly.
These types of investigations pose many challenges to the government and private companies. The technology behind the cryptocurrency system is complex and rapidly evolving. Not surprisingly, police agencies are struggling to keep up with the latest security patches and the hardware required to successfully resolve the case.
Obviously, the use of cryptocurrency is not a temporary trend, because the interest in cryptocurrency has increased sharply. Law enforcement agencies may track certain encrypted wallets or addresses, which may lead to the identification of the suspect behind the transaction. New developments in digital intelligence enable investigative teams to visualize transactions and track virtual paper trails that can find evidence about criminal individuals.
related: Bitcoin can no longer be regarded as an untraceable “criminal token”
Training and education are the key
One of the first obstacles for law enforcement to deal with cryptocurrency is perception. Cryptocurrency is new and evolving, so people think it is complicated, which means training and education are essential. Investigators and agencies must have the necessary skills to optimize practices and techniques, but it may be difficult for police commanders to see the importance of cryptocurrency training because these types of investigations are new to law enforcement.
related: How can the DeFi protocol be hacked?
Ten years ago, when commanders thought cell phone surveys were not important, agencies faced the same obstacles. Many teams did not study mobile devices because they lacked the tools and training required for proper cell phone data analysis. Today, almost all crimes are related to mobile phones. In the near future, almost all financial crimes have some connection with cryptocurrency, because cryptocurrency is the inevitable future of currency.
New survey tool
The second layer consists of survey tools. These are the physical tools used to collect data from the device and the software used to analyze the collected data. In order to create the best tool for crypto investigators, the team needs a solution built around a comprehensive blockchain search engine tool that collects a large number of data points to track cryptocurrency addresses through dark markets, exchanges, and crypto ATMs.
The new solution entering the market enables the team to display cryptocurrency artifacts as a “clue” to start a blockchain investigation.
related: Outsmarting crypto criminals: why exchanges must redouble their efforts
The advancement of cryptocurrency technology has pushed experienced criminals underground, where law enforcement personnel are barely involved and the chance of being caught is small. Law enforcement agencies should now be ready to create a complete end-to-end investigation solution, with a focus on knowledge, tools, and services. Digital intelligence is the key to solving problems and preparing for the next event. All DI strategies must have emergencies supported by world-class tools designed specifically for encryption.
With the use and popularization of cryptocurrency, institutions should also strive to bring their DI expertise inside and recruit savvy experts. This is a two-part solution-organizations need expertise and the right tools to properly respond to encryption-related events. These are the cornerstones of a powerful DI strategy. Encryption can be traced back to different crimes—from financial fraud to drug, wildlife, and human trafficking—making it an essential part of DI investigations. While becoming a new form of currency, the technology behind cryptocurrency will help simplify the investigation process.
Responding to these new challenges requires the development of law enforcement tools, training, and strategies built around DI and data analysis. Most importantly, encryption will continue to exist, and law enforcement agencies must take the necessary measures today to prepare for the increase in encryption crimes. With the increasing popularity of cryptocurrencies, encryption crimes will certainly become more common. But cryptocurrency is just a tool for criminals, just like money. But it must also become a tool of law enforcement agencies.
This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.
The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Leo Ben-Perez He is the Chief Strategy Officer of Cellebrite, responsible for leading strategy and corporate business development functions. He has more than 20 years of experience in the forensics, telecommunications, and software security markets, and has held key business development and product management related positions in 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 Bachelor of Business and Economics from Tel Aviv College.