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Crypto Conversions Can Be Traced: US Customs

Each time a conversion is made from a cryptocurrency to a government-issued currency, a “vulnerability” is created that can help track transactions, a U.S. Immigration and Customs Enforcement (ICE) official reported.

Matthew Allen, an assistant director of domestic operations with the Homeland Security Investigations (HSI) division of ICE, spoke before the U.S. Senate Caucus on International Narcotics Control during an October 2 hearing and discussed the role of cryptocurrencies in drug trafficking.


Allen spoke about the ongoing epidemic caused by the abuse of opioids and the drug fentanyl. Based on current investigative efforts, officials claim the drugs may be originating in China and reaching the U.S. through mail carriers or through trade with Mexico. These transactions proliferate in the dark web, illicit marketplaces that primarily deal in cryptocurrencies. The high levels of privacy and ease of anonymous money transfers offered on the dark web aid illegal traders. These dark net markets have become key surveillance areas for ICE-HSI Cyber Crimes Division as they attempt to contain the influx of opioid drugs.


How Cryptocurrency Conversions are Tracked?

Allen reported that cryptocurrencies like Bitcoin and Monero are regularly used in transactions linked to nefarious activities on the dark web marketplaces. HSI has achieved “some level of success” in tracking criminals, as the recipient(s) of cryptocurrencies still need to convert their virtual tokens to fiat currencies. This conversion helps in getting some trace of the participants involved.


"Utilizing traditional investigative methods such as surveillance, undercover operations, and confidential informants, coupled with financial and block-chain analysis, ICE-HSI is able to disrupt the criminals and dismantle the [transnational criminal organizations]," Allen said, "as well as the cryptocurrency exchangers who typically launder proceeds for criminal networks engaged in or supporting dark net marketplaces."


Investigators to Target Unregistered Exchanges

Allen also highlighted the malpractices followed by a few cryptocurrency exchanges and "peer-to-peer" exchanges in particular, which do not follow the required regulatory procedures of registration or the necessary compliance laws. Peer-to-peer exchanges also allow their participants to remain anonymous. While a good number of legal and registered crypto exchanges exist, the participants who use cryptocoins for illegal purposes typically refrain from using registered exchanges to conceal their identities. Instead, they utilize the illicit or unregistered exchanges that do not require or ask for personally identifiable information.


Both national and global agencies are training candidates for effectively investigating cryptocurrencies and their associated transactions. "We train investigators... in an effort to deter organizations from laundering proceeds or using cryptocurrencies to fund the purchase of fentanyl/opioids or other narcotics," he said.

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