The US moves to Forestall crypto crimes

With the creation of the Darknet Marketplace and Digital Currency Crimes Task Force on June 20, a wide range of U.S. law enforcement agencies formally announced their cooperation on darknet and digital currency crimes. The new group will focus on crypto crimes or “cryptocurrency-enabled crimes” such as drug trafficking, money laundering, identity theft, and child abuse.

A memorandum of understanding on the new task force was signed last week by Homeland Security Investigations (HSI) Arizona representatives, the Office for U.S. Attorneys, the Internal Revenue Service Criminal Investigation, the Drug Enforcement Administration, and the Postal Inspection Service.

The agencies have been collaborating since 2017, during which time there has been an increase in cryptocurrency use and crypto crimes.

Specialized units for crypto-related enforcement are being created by law enforcement agencies worldwide. Late last year, Interpol established a crypto crimes division. Local task groups are being formed by police in Canadian cities. The HSI has 93 foreign sites across 56 nations, giving the new task force a global reach.

The National Cryptocurrency Enforcement Team of the Justice Department and the Federal Bureau of Investigation’s Virtual Asset Exploitation Unit will collaborate in the United States. They were established in February. Last year, the Securities and Exchange Commission substantially increased the size of its Cyber Unit.

Many resources are available to law enforcement. Crypto crimes rose by 40% that year, and Chainalysis estimated last year that over 4,000 crypto whales possess money stolen illegally. There is evidence. Nevertheless, law enforcement activities are having an impact.

Crypto crimes hit a record $20 bln in 2022

Data from blockchain analytics company Chainalysis revealed that crypto crimes reached a record $20.1 billion in 2022 as transactions involving organizations subject to U.S. sanctions increased sharply.

In 2022, the cryptocurrency market struggled as risk-taking decreased, and several crypto businesses went under. As a result of the large losses incurred by investors from crypto crimes, regulators increased their requests for enhanced consumer protection.

Despite dropping total crypto transaction volumes, Chainalysis showed that the value of unlawful crypto crimes climbed for the second year in a row.

According to Chainalysis, transactions involving sanctioned entities are expected to increase by more than 100,000 times by 2022, accounting for 44% of all criminal operations in 2017.

According to Chainalysis, “much of 2022’s crypto crimes” was made up of funds received via the Russian exchange Garantex, which the U.S. Treasury Department sanctioned in April. Chainalysis also stated that the majority of this activity is “likely Russian users using a Russian exchange.” According to a Chainalysis spokeswoman, wallets are classified as “illicit” if they are part of an approved company.

Additionally, the United States imposed sanctions on crypto mixing services Blender and Tornado Cash last year, claiming hackers were using them to launder billions in proceeds from their cybercrimes.

However, other illegal cryptocurrency transactions, such as scams, malware, financing for terrorism, and human trafficking, showed a 7% decrease last year.

According to Chainalysis, the $20.1 billion estimate only accounts for transactions that are visible on blockchains and leaves out “off-chain” crypto crimes like false accounting by cryptocurrency companies.

According to Chainalysis, the figure does not include instances in which cryptocurrency is used as payment for non- crypto crimes, such as drug trafficking, or when it is the proceeds of such crimes.

Why crypto crime is not properly investigated

The rate of crypto crimes around the world keeps rising. Centralized exchanges like FTX collapsed last year, causing the sector to lose billions of dollars.

Blockchain and cryptocurrency are complex technologies that call for specialized knowledge to identify bad actors who might be committing crimes. However, because this technology is still in its infancy, this ability or knowledge must be improved when looking into those who commit crimes.

The lack of resources and the need for further training for security organization personnel are thought to be the two biggest obstacles to conducting a thorough investigation into crypto crimes, according to the REACT (Regional Enforcement Allied Computer Team).

Security organizations must educate themselves on various topics, including cryptocurrency, how it works, the types of crimes it may be used for, how to identify criminal activity and more. Infrastructure like computer systems, monitoring software, GPS devices, and even crypto assets to play with are considered resources. While these are significant problems, REACT contends that investigative institutions might begin by addressing some of them.

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How investigations are done

When investigating crimes, REACT, which has looked into up to 50 cases of pig butchering scams and has successfully recovered funds from 15 of those cases, noted that one of its procedures is to “quickly assess stolen funds by tracing the victim’s initial transfer out of an exchange or wallet” and to seize it rather than shutting down websites used by these criminals or arresting them.

Reference: Crypto crackdown to intensify as five US agencies join hands to form anti-crypto crime task force