Rise in Crypto Crimes Forces US to Switch to Tracking Software

ByLance T. Lee

Jul 2, 2022
Photo credit: Federal Trade Commission

Crypto transactions remain a major concern for governments around the world due to their implicit role in money laundering activities

By Kiran N. Kumar

Recently, the Department of Justice (DOJ) announced that the Federal Bureau of Investigation (FBI) is forming a qualified team to combat growing cryptocurrency crimes, especially during the Covid pandemic.

“People of all ages, including the elderly, are being victimized by criminals through cryptocurrency fraud schemes. Developments in cryptocurrency technology and an increasing number of businesses accepting it as payment have resulted in the growing popularity and accessibility of cryptocurrency,” the FBI said.

Read: American Indian charged in cryptocurrency money laundering scheme (March 11, 2022)

The federal agency became active after finding North Korean hacker group Lazarus behind the theft of $625 million in cryptocurrency from the Ronin network, owned by developer group Sky Mavis. Crypto crimes have made headlines and the FBI’s most wanted list includes crypto queen Ruja Igalatova who is on the run.

The year 2021 has seen a dramatic increase in cryptocurrency crimes forcing governments to think about a framework to regulate the crypto market capitalization of around $3 trillion – with daily trading volumes of around $275 billion dollars spread across 400 exchanges last year.

In fact, a study of 216 crypto exchanges around the world by London-based regtech firm Coinfirm found that 14% of them are licensed by regulators.

Another result revealed that “69% of exchanges do not have comprehensive and transparent Customer Due Diligence (CDD) and Know Your Customer (KYC) procedures, while only 26% have introduced procedures. money laundering (AML) such as transaction tracking or recruiting. a money laundering agent.

A European Commission (EC) proposal document titled, Markets for Crypto Assets (MiCA), outlined the Commission’s plan to make Europe fit for the digital age and ensure consumer and investor protection and market integrity. Under Article 76 of the proposal, it set out various market abuse rules and called on crypto-asset service providers to remain vigilant about potential market abuse.

Read: Cryptocurrency: A Serious Threat; Blockchain: a revolution in motion (July 6, 2021)

Even US officials, SEC Commissioner Hester Peirce and CFTC Commissioner Dawn Stump explicitly announced at a global conference their intention to adopt a similar oversight mechanism.

Even Hong Kong, which allowed crypto exchanges liberally and Singapore, which temporarily allowed them to operate under the Payment Services Act, want to introduce surveillance as a top priority.

Crypto transaction monitoring
Appropriate for now, Coinbase announced earlier this week that it sold an analytics software license to U.S. Immigration and Customs Enforcement (ICE) for $29,000 in August 2021, followed by a purchase of software potentially worth $1.36 million the following month.

ICE is a division of the US Department of Homeland Security and also looks into “broader transnational crimes, including various forms of financial crime”. These tools help the US agency track transactions in Bitcoin, Ether, and other cryptocurrencies.

Read: Justice Department seizes $2.3 million in cryptocurrency paid to Darkside ransomware extortionists (June 7, 2021)

“ICE now has access to a variety of forensic capabilities provided through Coinbase Tracer, the company’s intelligence collection tool (formerly known as Coinbase Analytics),” the report said.

Many government agencies will soon be switching to tracking software to keep an eye on crypto transactions, which remain a major concern for governments around the world due to their implicit role in money laundering activities.


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