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From detective Joshua Lee, M.L.S., CFE, CCCI, CTFI, CCIE
Criminals are slowly moving away from traditional financial crimes such as robbery and burglary to focus on white-collar crimes, which yield better returns with a significantly lower chance of being caught. However, due to stricter guidelines for fraud sentences and the threat of losing money and property for the confiscation of assets, many of these criminals are turning to a new platform – cryptocurrency – to hide money, making it very difficult to # Investigation of local and state agencies.
Bitcoin, Ethereum, Litecoin and Ripple are some of the cryptocurrencies for over 1,600 available for purchase. Some, like Monero and Zcash, have been specifically designed by money launderers to make it more difficult for the forces of order to track and seize. Monero even boasts on his website that his currency is "designed to be private, secure and untraceable".
What is the cryptocurrency?
In 2008, Satoshi Nakamoto published a conceptual document titled "Bitcoin: a peer-to-peer electronic payment system".
"The concept was rather elaborate: to introduce an anonymous global payment system based on the decentralized digital currency in which the user network replaces the need for a centralized fiat currency issued by the government, "said Jay Fawcett, a retired detective in the department of Mesa Police (Arizona): Decentralized digital currencies do not use intermediaries, making them a very attractive alternative for criminals.
Cryptocurrencies are decentralized virtual currencies performed on a peer-to-peer computer network, with Bitcoin being the largest and most traded Bitcoin. In other words, cryptocurrency is a form of "digital" money not associated with a central repository. Money flows in and out of the system through the use of users' computers, similar to how Naptser exchanged MP3 songs and videos from 1999 to 2002. Instead of making purchases using a credit or debit card, a user can make purchases using a digital wallet. The user can transfer money to others, quickly, safely, anonymously and economically. Chargebacks – when the credit card company reverses a charge – does not exist in the cryptocurrency world because all transactions are final.
Cryptocurrency transactions are verified using high-powered computer equipment. Each transaction is entered in a string with other transactions. This is called blockchain. The single block is then assigned a cryptographic hash based on the SHA256 encryption. The block, which contains several transactions, is then verified by the miners. Using their modified "computers", the miners solve the cryptogram and receive a small part of the commission, which is based on the byte size of the transaction. But the real incentive is the blocking premium that is given to the miner who resolves the hash and confirms a block. This is called mining and therefore the term "miner". The more transactions are verified by the miners, the more difficult the future cryptographers will be. The harder the cryptographer is, the larger the byte size of the transaction and the larger the byte size, the more money a miner can make.
Justin B., a miner from Arizona Bitcoin told me during a 2016 interview: "I'm in for the money! I connect it, connect it to the Internet, download the program and the digital wallet and earn money. "Justin has been extracting bitcoins since 2013, but it is moving from Bitcoin to two other cryptocurrencies due to the electricity consumption it now needs to solve these complex cryptos.
A safe, cheap, non-reversible, anonymous way to transfer money sounds like too good to be true misstep, but that's exactly why many companies and criminal organizations now accept cryptocurrencies as payment.
Dark Web
A recent report found that Google, the world's largest search engine, finds only between 1% and 13% of total web traffic. Most online information is hosted in the deep web, not in the world wide web. The deep web refers to parts of the web that are not indexed by search engines. In other words, public search engines can not look for information hosted in the deep web. It is likely that your agency uses the deep web, but calls it by another name such as "intraweb".
The dark web is part of the deep web, but is only accessible via specialized browsers such as The Onion Router (Tor) or I2P. Once you have logged in and know where to look, a viewer can find anything. Drugs, weapons, stolen art and pornography are easily accessible. Stolen artifacts and cultural artefacts, non-traditional weapons such as rocket launchers, child pornography and people (trafficking in human beings) are usually found using chat rooms and personal referrals.
L & # 39; opioid epidemic and the dark network
All types of drugs are readily available and purchased on the dark web. All that a buyer needs is a cryptocurrency portfolio with Bitcoin, Monero or Zcash, an address to send the chosen drug and a computer or smartphone. Once the buyer finds what he wants, he clicks "buy" and then "proceeds to payment". Enter shipping information and click pay. The experience is very similar to checking out with a Pay-Pal account and takes only a few minutes.
The hard part of the fight against drug sales on the obscure web comes from sellers who only sell quantities of drugs that can be used at a time. Although some sellers may choose to sell in bulk, most US sellers prefer to sell small doses (5-20 tablets) using standard bags or small bubble bags. Small envelopes sent from within the United States have a very low chance of being intercepted or even shielded by order forces. This is not the case with international shipments, which are receiving more control than before. The bad guys know that larger packages are easier to intercept than envelopes, which is why most choose to ship small doses.
Recreational shoppers like to buy drugs from dark web providers because it is highly unlikely that they will be captured and publicly humiliated. Buyers may have discreetly sent drugs directly to their home, usually via USPS for privacy reasons. Most orders are shipped within 24 hours and are delivered with warranty. This easy-to-use, private, reliable and low-risk option makes it a perfect choice for a working class addict.
Fentanyl is commonly used in place of heroin but marketed as heroin. This is an important driver of the current opioid crisis in America.
Recognition and documentation: 3 things to educate your policemen on cryptocurrency
An officer in a suburb of Phoenix, Arizona, stopped a vehicle for a violation of the civil code. After finding marijuana and prescribing medicines packaged in small microtubes, the officer arrested the driver for the sale of drugs. When he was looking for the drug dealer's car, he found several Bitcoin ATM receipts. The driver would sell drugs and deposit his proceeds directly in a Bitcoin ATM, preventing the proceeds from being confiscated by investigators of asset confiscation. The officer did a great job with his investigations and also noted in the report that he found ATM Bitcoin revenue. What he forgot to do – because he was never instructed otherwise – was to forward the case to a detective for immediate control.
A follow-up with the ATM owner of cryptocurrency is important. If they comply, as required by US law, they would have all information on the transaction. If the owner of the ATM is not maintaining customer information (KYC), then charge him / her the federal offenses (18USC1960) or the KYC penal code of your state.
In the past it was very difficult for the order forces to monitor how cryptocurrencies play a role in crime, but there are cryptocurrency intelligence companies that make it easier. The first step to combat crypto-crimes is correct identification and traceability.
There are three things that all police agencies should document in their police reports regarding cryptocurrency. It is important to note that not all cryptocurrency users are criminals; however, if a drug dealer or child pornographer has one of the following conditions, you may draw conclusions from the fact that they are involved in crypto-criminality:
1. Receipts of cryptocurrency
Documentation of cryptocurrency receipts is especially important if the official intends to charge money laundering. Currently, Bitcoin (BTC), Litecoin (LTC) and Ethereum (ETH) are available through ATM services and others have announced that they are developing ATM options for their currency.
For a money laundering fee, it is important to match the transaction with the blockchain. Technology is available to help match these transactions.
It is also a good idea to "overturn" ATM owners and recruit them as sources for your investigation.
2. Mining equipment
Most cryptocurrency extraction equipment looks the same. There are a series of rectangular boxes with fans hooked together or individual CPUs connected to each other. TIP: If it does not look like a traditional computer, you might see a miner.
In the United States, the only cryptocurrency miners and users are not regulated by the Financial Crime Enforcement Network (FinCEN), the main federal regulator. However, if the miner or users act on behalf of another or are concessionaires in cryptocurrency, the FinCEN regulations apply.
New York State, Connecticut and, recently, North Carolina, have laws that limit the use of cryptocurrency. As always, consult your public prosecutor for details before taking action.
3. Digital wallets
There are different types of digital cryptocurrency portfolios. Some are web-based and others are software-based. What is important, especially after the service of a search warrant on a computer or mobile phone, is to document the use of cryptocurrency portfolios. These are typically in the form of an app. As a best practice, use an Internet search engine to identify any apps you do not recognize. If a digital portfolio is identified and if the portfolio is held by a company based in the United States, a seizure order can be requested. This should be done quickly as cryptocurrencies can be moved from a portfolio from anywhere in the world.
Cryptocurrency is not a passing fad, but a complex and serious problem that is here to stay. Lack of regulation, the ability to remain anonymous and inexperienced police agencies only encourage criminal behavior in the digital environment. Recognizing and documenting the basic cryptocurrency problems in your jurisdiction will help your agency take the first step to investigate the crime of cryptocurrency.
About the author
Detective Joshua Lee works in the organized crime section for the Mesa Police Department (Arizona). Joshua specializes in the confiscation of property and crimes of white-collar workers, including crypts-crimes.
Joshua earned a B.A. in Justice Studies, a M.S. in law firms and is a certified fraud examiner. He is an adjunct professor of jurisprudence and jurisprudence at a large national university and a small regional college. He also trains police in-service training, teaches at the Regional Police Academy and is a financial crimes counselor for banks and financial institutions throughout the State of Arizona.
