- Crime involving cryptocurrency has risen in line with the technology’s prominence.
- Police forces were initially confounded by assets which defied conventional investigative techniques.
- Business Insider spoke to a police analyst at Europol helping to coordinate a fightback.
- It involves bringing different police forces together, negotiating with the crypto community, and expanding fledgling investigative techniques.
Where crime goes, the law follows — eventually.
Cryptocurrency was born in dark corners of the internet, and has a long association with illicit activity, and the sort of ultra-privacy-sensitive communities which make law enforcement nervous even if they’re doing nothing wrong.
As bitcoin and other cryptocurrencies have become mainstream, with soaring valuations per coin, they have also been adopted by a much broader array of criminals than the Silk Road users of the past — down to unsophisticated drug dealers on the streets of London.
In a briefing attended by Business Insider, London’s Metropolitan Police said it is now not unusual for police to check smartphones for crypto wallets when they seize them as evidence.
Numerous police commanders have told Business Insider that their forces are making their first steps towards seizing cryptocurrencies from criminals after arrest, with an eventual view to distributing them for the public good under the Proceeds of Crime Act.
More criminals taking up crypto means that police forces have to come up with new ways to respond, especially as it its privacy features frustrate their traditional tactic for investigating crime: follow the money.
But while tracing cryptocurrency is hard, it isn’t impossible. Several years down the line, detectives are starting to catch on.
Europe’s crypto fightback
In Europe, much of the crypto-tracing activity and strategising takes place at a continent-wide level, orchestrated by Europol.
The pan-European police agency helps connect the many hundreds of law enforcement organisations across the continent, and provides a centralised system by which officers can access information and pool tactics.
Business Insider spoke with Jarek Jacubchek, a cybercrime analyst at Europol’s HQ in the Netherlands, who gave an impression of the system as a whole.
Jacubchek works in Europol’s cybercrime centre, a kind of nexus for high-tech crime which is available to help other forces do things that are not within their own capabilities.
This part of Europol has ended up handling cryptocurrencies as well. Jacubchek declined to tell Business Insider exactly how many staff now deal with crypto policing, but said it had risen sharply in the past year.
These things can include consulting a large database of IP addresses and digital wallet identifiers linked to persons of interest, or running new searches.
The results of these can open up new leads for detectives, or give officers the evidence they need to make a crucial arrest. They also produce how-to guides for agencies getting to grips with crypto for the first time.
Getting inside the infrastructure
One advantage Europol has is that they form relationships with the cryptocurrency infrastructure itself: Exchanges, brokers and other assets you have to use to deal in bitcoin and the like.
Every year Europol arranges the Virtual Currencies Conference, a closed-to-the-public meeting where crypto experts and police can meet and talk frankly.
The fifth one is due to be held in June this year. In a press release following the 2017 conference, Europol said that some 150 investigators turned up, along with representatives of parts of the crypto world.
Europol named participants including Bitcoin.de, Bitfinex, BitPanda, Bitonic, Bitstamp, BitPay, Coinbase, Cubits, LocalBitcoins, SpectroCoin, and Xapo.
Each year has seen a huge stride forward in the capabilities on offer, Jacubchek told Business Insider. He said: “Basically the first conference was ‘what is bitcoin and how does it work?'”
“We never touch these basic topics any more, we already assume people are familiar and we can start talking about tracing technologies and about topics that are much more practical for the investigators.”
The conferences have practical results, too. With encouragement from law enforcement, crypto services have developed and strengthened KYC (“Know Your Customer”) procedures, bringing themselves in line with traditional finance by asking for proofs of identity, address and the like before people can access services. Some even ask people to submit selfies.
With these in place, even if the asset you’re dealing in is essentially untraceable, you very much are not.
Jacubchek characterises the crypto companies he’s had dealings with as “very cooperative” — not least because they want the police to help them in return. Their aim, he said, is to identify the types of data most valuable to law enforcement, and make sure that getting hold of it is “as frictionless as possible.”
Exchanges and the like are obvious targets for hacks, theft and other illicit activity, and by keeping good records and maintaining good relationships with the police, they maximise the likelihood that criminals can be caught and dealt with.
The approach is the opposite taken by some cryptocurrencies, which have developed a reputation for criminality far beyond that of other coins. Jacubchek named monero, zcash and dash as especial markers of wrongdoing, an impression backed up by London’s Metropolitan Police. (You can read a full story about problem cryptocurrencies here.)
But for the most part, police and the crypto community appear to be moving closer together, at the same time as virtual currencies take up a more permanent place in financial system.