Crypto Conversions Create Vulnerabilities for Government and Users According to US ICE Official


Crypto Conversions Create Vulnerabilities For Government And For Users

In cryptocurrency, there is a risk of creating vulnerabilities. This happens any time that a cybercriminal uses cryptocurrency to exchange for the government-issued fiat currency, according to an official involve with the U.S. Immigration and Customs Enforcement. The official, Matthew Allen, spoke at a hearing on October 3rd, where he talked about cryptocurrencies and their relationship with drug trafficking. The hearing was held before the U.S. Senate Caucus on International Narcotics Control.

In a statement, which was prepared in advance, he said, “On dark net marketplaces and other ‘unindexed' websites, purchases are often paid for with cryptocurrencies such as Bitcoin and Monero, among many others.” The main focus of investigating these types of payment systems is to focus on two specific types, which are money service businesses and cryptocurrencies.

One of the most interesting points of conversation had to do with the Homeland Security Investigation (HSI) division of ICE. Allen noted that they are having success in tracking some of the criminals that take on cryptocurrency in an effort to launder the profit they turn from selling drugs. The statement said, “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 TCOs, as well as the cryptocurrency exchangers who typically launder proceeds for criminal networks engaged in or supporting dark net marketplaces.”

Vulnerability are developed whenever the criminals decided to exchange the cryptocurrency for the fiat funds that they need elsewhere. However, due to the trackability of funds on the blockchain, this is almost a good thing for the HSI division, considering that “This is the time when criminals are most susceptible to identification by law enforcement means and method.” Allen added, “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], as well as the cryptocurrency exchangers who typically launder proceeds for criminal networks engaged in or supporting dark net marketplaces.”

Allen’s statement continued at the hearing, focusing on all of the different types of cryptocurrency exchanges that are available in the market and how they have the potential for money laundering. One of the riskiest exchanges is that of peer-to-peer transactions, because there are startups that use this method to avoid the following of compliance laws. According to the statement, there are two types of P2P practices that are considered illegal:

  1. One that “illegally generates revenue by charging a premium for allowing their customers to remain anonymous.”
  2. One that “involves a person or entity operating as a vendor on dark net marketplaces.”

Despite these challenges, officials at both the national and international levels are training the investigations to work on tracking these transactions. In reference to the strategies that the entity is using, Allen said, “we train investigators from national and international agencies in cryptocurrency investigations in an effort to deter organizations from laundering proceeds or using cryptocurrencies to fund the purchase of fentanyl/opioids or other narcotics.”

Ultimately, stopping drug trafficking and other illicit activities isn’t something that a single organization or even single solution can prevent from “harming the American public.” The approach has to be aggressive, though Allen notes that they will continue to work at all levels to create a more efficient system that can reduce the risk.

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