Officials from several American law enforcement agencies told the US congress June 20th that they have noted an increased use of cryptocurrencies for crime.
The Deputy Assistant Director of the Secret Service’s Office of Investigations, Robert Novy, stressed that enforcement agencies must continue to adapt and, “address emerging risks resulting from technology innovation…”
Novy also called for, “additional legislative or regulatory actions” against anonymous cryptocurrencies like Monero and ZCash (though he did not name them) and against “tumbler and mixer” services designed to obscure the origins of Bitcoin transactions, which are not anonymous.
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Novy began his remarks by noting the Secret Services’ “unique record of success in countering criminal uses of digital currencies,” and brought up three noteworthy historical instances of interagency enforcement actions against digital currencies and related services.
The Secret Service and partners shut down e-Gold Ltd. in 2007 and Liberty Reserve in 2013, said Novy, two digital currency projects that, “effectively conducted no customer verification, and were extensively used for a range of illicit activities, from child exploitation to identity theft.”
Novy said that from 2015 to the present, the Secret Service has seized over $28 million in cryptocurrency proceeds of crime.
The biggest busts, said Novy, have occurred by focussing on dubious exchanges. “Exchangers of cryptocurrency,” said Novy, “have been a particularly effective control point for law enforcement to focus its effort.”
The American Secret Service, said Novy, worked as part of an international effort to close BTC-e, a London-based cryptocurrency exchange run by Russian nationals that:
“…was one of the largest digital currency exchanges by volume, receiving $4 billion worth of digital currency over the course of its operation from 2011 to 2017…(that) processed transactions involving the criminal proceeds of numerous computer intrusions and hacking incidents, ransomware scams, identity theft schemes, corrupt public officials and narcotics distribution rings… and facilitated the exchange of roughly 95 percent of ransomware payments, according to a non-government report.”
Cryptocurrency and privacy advocates regularly point out that cash is still the preferred medium in criminal transactions, and also note that a number of prominent banks have been prosecuted for money laundering.
Novy said that cryptocurrencies have additional criminal appeal because they can easily transmitted transnationally over the internet and can be difficult to get hold of in instances of “lawful seizure,” making them, “particularly well-suited for supporting crimes that are transnational in nature.”
Because they are so ephemeral, said Novy, “effectively countering criminal activity involving digital currencies requires close international partnerships,” harmonized global legislation and the careful maintenance of an expert work force.
Novy ended his remarks by stating that, regardless of whatever measures taken by criminals or outlaws to use cryptocurrencies to facilitate their actions, “we are relentless in
enforcing the law and will not be stopped by the perceived anonymity of the Internet or digital currencies.”
You can watch the entire video of the “Illicit Use of Virtual Currency and the Law Enforcement Response” hearing here.
“Illicit Use of Virtual Currency and the Law Enforcement Response” here.
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