Cryptocurrency Frauds: How Informed Are Law Enforcement Agencies?

There are several issues that have been raised on the use of Bitcoin and other digital currencies for crime. This is despite the fact that there is no evidence that criminals prefer Bitcoin to fiat.

In fact, the criminals that are tech savvy may have inkling on how to cover their tracks with cryptocurrencies such as monero because these are inherently privacy coins. Apart from these, many are aware that using popular cryptocurrencies such as Bitcoin would leave no one in doubt of how the funds moved debar the use of mixing services that are very efficient.

Bitcoin mixing services act to obfuscate the trail of coins. So an experienced crook could use it. But with advancements in blockchain analysis, it is a matter of time for even the smartest blenders with the best algorithms to be ‘decoded’.

A Race With Technology

In countries with high awareness of the technology, law enforcement agencies are striving to keep up with the advances in blockchain. In other places, there is little they can do since they are not well-informed or trained about digital currencies.

In many third world countries, the police would rather seize mining machines with the hope that the miners would bribe them to get their hardware back as mentioned in a comment by Hatshepsut:

“In my country the cops used to extort crypto miners by seizing their equipment and charging them with “terrorism funding” or some other bullshit. The courts always dismissed those charges, but miners were losing their precious time while their equipment was arrested, so it was cheaper to pay a bribe to the cops and keep mining.”

It seems there is a correlation between the awareness created by the media and the interest the law enforcement show in cryptocurency. Also, the legal status is another strong indicator of the perception of these agencies to digital assets.

“But now there’s less news about it, and the central bank has softened their stance on crypto, so I assume cops don’t bother miners as much as they did before” Hatshepsut said.

Absence of National Policy

Most countries do not have policies guiding cryptocurrency use. What many have done so far is warn their citizens about risks associated with  cryptocurrency use while others regard the assets as scams. Even president Trump in his popular tweet wrote that cryptocurrency is “not money”. There is no doubt that the awareness shown by law enforcement is proportionate to the interest of the political class in digital currencies.

The United States Marshal Service are known to auction seized digital currencies. These were mostly coins associated with crime such as the dark web, drug deals and money laundering cases handled by the Department of Justice.

What we are seeing is an emerging trend in which tech savvy criminals are embracing Bitcoin and alternative cryptocurrencies instead of the good old cash that has helped crooks in concealing their identities for centuries. But how prepared are the law enforcement agencies in different countried?

A Negative Reputation

The perception of the public (and law enforcement) about digital currencies in many countries is that it is associated with crime. The reason no doubt is that the most common digital currency news are usually about criminals declared wanted for Bitcoin scams. These are perpetrated through ponzi, high yield investment programs and such schemes.

The Exchange Impact

The virtual nature of digital currency is one of the reason some governments and their security agencies have not given it attention it demands. Just like Trump, the politicians in these countries feel that cryptocurrency is not money. This perception changes when exchanges reify this.

It is one thing not to see crypto as money and another to see citizens trade billions of national fiat for cryptocurrency.   We are increasingly seeing countries where exchanges are located paying serious attention to cryptocurrency to figure out ways to benefit from the innovation.

The Australian Taxation Office (ATO) in releasing a guideline on crypto taxation stated:

“Our view is that bitcoin is neither money nor a foreign currency, and the supply of bitcoin is not a financial supply for goods and services tax (GST) purposes. Bitcoin is, however, an asset for capital gains tax (CGT) purposes.”

Viewing Bitcoin and other cryptocurrencies as assets is the stance taken by many countries since what governments recognize as money is fiat. At the moment, the interest in cryptocurrency among governments is in taxation and to ensure that it is not utilized as tool for money laundering. This is because exchanges has made it obvious that cryptocurrency and money are interchangeable.

Overlooked Crime

Cyber crimes associated with cryptocurrencies are the most overlooked. The reason is that the blockchain technology on which most cryptocurrencies is built on is decentralized. Since there is no central server or authority, people easily move funds around the world.

Criminals have taken advantage of the absence of regulation to defraud investors of billions of dollars. When such frauds happen, many victims that are at loss on whom to report to. Even when they report to the local police, many are not trained to combat crypto-related cyber crimes. There is need for training of special units within police formations to counter cryptocurrency-related crimes.

The proliferation of scam investment sites is mainly due to the fact that few criminals are arrested and tried. This is because the victims do not know what to do when scammed because even the police in many countries are uninformed about crypto crimes or handicapped by lack of training for the cyber unit.

According to Youdacapt:

“The appearance of many wild Ponzi made our police focus on forming a division for white collar crime, but never touched the highest person because of the influence of the antibody position, this is still embarrassing. There has not been one case of crypto HYIP that has become a serious case because the police only investigate complaints as if they only consider it a level 3 crime.”

The Need for Regulation

Streamlining cryptocurrency regulation is the only escape from the present Wild West seen in the industry. Scammers are having a field day while many law enforcement agencies have little clue how to engage criminals. Investors should also be educated to identify genuine crypto investments sites to avoid losses. This is so important considering the fact that a smart crypto crook could cover their tracks well.



Author: Jofor Humani

Jofor is a crypto journalist with passion for investigative reviews.

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