A US Immigration and Customs Enforcement official has said that it is possible to trace fiat to crypto and vice versa conversions, making financial transactions traceable down to the individual or organization involved.
During an October 3 hearing in the US Senate on International Narcotics Control, Matthew Allen, Assistant Director of Domestic Operations with the Homeland Security Investigations, a division of Immigration and Customs Enforcement said, “On darknet marketplaces and other ‘unindexed’ websites, purchases are often paid for with cryptocurrencies such as bitcoin and monero, among many others”
Many law enforcement authorities over the world have shown their concern that cryptocurrencies enable criminals to perform their activities with ease since the transactions are not done through traditional banking channels, making them hard to trace. With currencies such as monero, a cryptocurrency designed to keep users anonymous by masking transactions so that they are not traceable, criminals are starting to favor them more and more.
He claimed that, although cryptocurrencies make the transfer of value easier for criminals, they still need to use fiat to convert into cryptocurrencies for the transactions and then back to fiat to use it. According to him, “Whenever monetary exchanges are made, a vulnerability is created”. It is this vulnerability, he told the Senate Caucus, that can be used to trace the owners of the cryptocurrency and track down the criminals.
He further explained “Utilizing traditional investigative methods such as surveillance, undercover operations, and confidential informants, coupled with financial and blockchain analysis, ICE-HSI (Immigration and Customs Enforcement – Homeland Security Investigations) 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 darknet marketplaces.”
He further briefed the Senate Caucus on different types of crypto exchanges and how they can be used to launder money. He particularly mentioned unregistered peer to peer startup exchanges, which do not declare themselves as money services business and do not follow regulations. These are favored by criminals since their money laundering can be kept anonymous.
He believes that carefully trained investigators can track cryptocurrencies and exploit the conversion since “This is the time when criminals are most susceptible to identification by law enforcement”
In his discussion, he also informed that there has been a degree of success in tracing drug sales down to the criminals involved.
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