REGINA — As criminals turn to cryptocurrency to commit fraud and hide their source of funds, police are developing new skills to deal with the digital value.
Travis Poland spoke to Sgt. Adrienne Vickery, the RCMP's national cryptocurrency co-ordinator with the Federal Policing Criminal Operations Branch, about her work investigating cryptocurrency and money laundering.
What is cryptocurrency?
Cryptocurrency is a digital asset that maintains value and can be exchanged for goods and services by those willing to accept it. Bitcoin dominates the cryptocurrencies and it's the one we see in our investigations most regularly. Cryptocurrencies themselves are not illegal but, if they're used to launder funds or facilitate criminal activity, we'll investigate it.
Is it anonymous?
It's considered pseudo-anonymous. Every Bitcoin transaction is captured on the blockchain, which is a public ledger of transactions similar to what you would find in an accountant's office. It's an electronic record of every transaction, which includes details such as the amount sent and the addresses involved. However, the owner's identity is never displayed. Aftermarket money laundering services can increase the level of anonymity by mixing cryptocurrency funds to conceal their origins. While it may be challenging to identify the owner of cryptocurrency, eventually the criminals will want to convert the cryptocurrency to cash and we'll be waiting.
How do criminals use cryptocurrency?
The pseudo-anonymity of the transactions and ease of access make them vulnerable to criminal exploitation. Criminals on the dark web are selling illicit goods, such as firearms or drugs, in exchange for cryptocurrency. We're also seeing it used frequently in extortion crimes and fraud schemes, such as the CRA scam, where victims are asked to send funds in Bitcoin. Traditionally, criminals have used cash for transactions, but cryptocurrency offers a new, fast and cheap way to move value and facilitate criminal activity. In this global economy, it's very easy to move cryptocurrency around the world in a matter of minutes, even to remote areas where individuals may not have ready access to traditional financial systems.
What can police do about it?
Software tools exist allowing us to trace and analyze the movement of funds on the blockchain. Once the criminal attempts to convert the cryptocurrency into a traditional payment method, we can use any of the investigative techniques we've been using for years. New Canadian cryptocurrency regulations allow us to gather intelligence relating to suspicious transactions from FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada.
Cryptocurrencies files can be technical and often require collaboration from our digital forensic service units, cybercrime, financial crime and online undercover units as well as partner law enforcement agencies. By working together, we strengthen our operational capacity.
Has cryptocurrency been involved in any notable cases?
The most prominent case to date involves the Canadian exchange Quadriga, where the company's CEO, Gerald Cotton, died of complications from Crohn's disease while travelling in India. Cotton was allegedly the only person in possession of the information capable of accessing the $250 million in customers' cryptocurrency assets held within his exchange. This matter is currently under investigation.
Another significant file involves a dark web vendor with the moniker "Mr. Hotsauce" who was selling drugs to Canadians in exchange for Bitcoin. Without extensive cryptocurrency experience, the RCMP organized crime team in Milton identified, arrested and charged "Mr. Hotsauce." This resulted in a successful prosecution and forfeiture of assets, including over 22 Bitcoin (over $200,000), which was the RCMP's first cryptocurrency seizure and one of the first times cryptocurrency was forfeited as offence-related property in Canada.
Where did you learn about cryptocurrency?
I have a strong interest in the subject. I follow media reports and I've read everything I can get my hands on for the last several years. I've attended conferences and taken training in cryptocurrency and blockchain analysis. I feel one of the best ways to learn about it is to purchase your own cryptocurrency and transact with it. This will provide an understanding of the process and insights into what type of information is available to law enforcement.
What should police know about it?
I'm a big proponent of education in this area and we're working to increase awareness and provide training to officers. It's necessary that police have a basic understanding of cryptocurrency, can identify it and reach out to the appropriate experts when they encounter it in their investigations.
My best advice is not to fear this technology. When I first started researching cryptocurrency, I was a little overwhelmed as I didn't have a technology background. I quickly realized this offers another method to move and store value. Today, we see funds move digitally with e-transfers, credit cards and wire transfers. Cryptocurrency is similar but with a twist, and methods do exist to allow us to successfully investigate these files.
