As new use cases emerge on the Web3 and regulations are put in place, cryptocurrencies are being adopted by the general public but also by cybercriminals.
From the smallest drug trade to the largest money laundering ring, the use of crypto-assets is spreading in the midst of traditional crime. While legitimate use of cryptocurrencies far outnumbers criminal use, the growth of this asset class as a whole is leading to a sharp increase in the gross dollar value of illicit cryptocurrency transactions.
2022, a record year for crypto-crime
It is often mistakenly thought that fighting cryptocurrency crime is only for large national law enforcement agencies or elite cybercrime units. This has actually been true for cases where national security was at stake, such as the ransomware attack on the Corbeil-Essonnes hospital or the ransomware attacks by Russian hackers Lockbit which released the personal data of hundreds of patients. On the other hand, it should not be forgotten that this type of crime reaps victims with different and varied profiles all over the world. To deal with it, local organizations can act immediately with the right tools.
Cryptocurrency scams have a huge monetary and human cost
Scams are the largest form of crypto-crime affecting millions of people, including users with little money to spare. In emerging markets, the situation could be even worse. Scams known colloquially as “pig slaughter”, which combine romance scam strategies and fake investment opportunities, are claiming victims around the world, including the scammers themselves. The perpetrators of these scams are sometimes victims of human trafficking organized by powerful criminal networks that force them to spend long hours defrauding the residents of the richest countries.
Contrary to popular belief, you don’t need to be a cybercrime expert to investigate these scams. With the right tools, you can go from easily accessible information, such as a victim’s cryptocurrency address, to information needed for a subpoena to expose the scammer. The goal of any scammer is to convert stolen funds into fiat currency, but this can only be done through centralized cryptocurrency exchanges. However, these are subject to Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance procedures. This way, law enforcement agencies can cite the exchange to appear to find out who controls that address and then use more traditional investigative techniques. Investigators can also use blockchain analytics solutions to track down malicious actors and attempt to recover funds from victims, as well as identify other potential victims to determine how widespread the fraud is. Not all cases are that straightforward, so investigators need access to training and knowledge of cryptocurrency fundamentals.
Local law enforcement has the power to investigate cryptocurrency crimes
Scams aren’t the only form of crypto-crime local law enforcement faces. Cyber attackers using ransomware often target schools, hospitals and other critical infrastructure. Despite the measures taken by governments to fight illicit activities, they undermine trust in cryptocurrencies, destabilize cities and cost companies a lot of money. In 2019, the OCLCTIC (Cyber Crime Office of the French Judicial Police) seized 674 bitcoins in a case of hacking a cryptocurrency platform, ending a certain form of impunity for crypto-criminals in France. Since then, many cases involving cryptocurrencies in France have been resolved by investigative services, such as in September 2020, when a terrorist financing network that used prepaid bitcoin coupons sold in tobacconists was dismantled, proving that this asset is no longer used only by cybercriminals. Last October, a 33-year-old hacker involved in Lockbit ransomware was arrested in Canada. This investigation conducted by the FBI, Europol, the Royal Canadian Mounted Police and the French Gendarmerie showed that it was possible to obtain results on complex issues involving the use of cryptocurrencies thanks to the constant improvement of investigation tools and a better understanding of the ecosystem. At the same time, more and more regional units have faced cases of using cryptocurrencies in petty crimes.
The diversity and impact of these threats highlights the importance of blockchain analytics training for local and regional law enforcement agencies. Criminals cause billions of dollars in damage every year, and their use of cryptocurrencies is likely to increase as they consistently adopt the latest technology for their attacks. Furthermore, despite the volatility of the market, cryptocurrencies represent the future with an ever-increasing number of users but which creates new opportunities for bad actors. So, if local agencies are to effectively investigate cryptocurrency cases, they need to have the right tools, the right data, and the right training.