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Barrier to Justice: The Cost of Blockchain Analysis
Law enforcement agencies in countries with limited resources may face a significant obstacle in investigating cryptocurrency-related crimes due to the high cost of consulting blockchain analysis firms.
However, a closer examination of these cases reveals that most investigations involving cryptocurrencies do not start with mysterious transactions or anonymous addresses. Instead, they typically begin with a suspect and involve forensic analysis of their devices to uncover which cryptocurrency addresses they control.
Expert Witnesses in Court
The rapidly evolving nature of virtual assets means that blockchain technologies are often misunderstood by law enforcement and judicial officers. To ensure the successful prosecution of cases involving cryptocurrencies, expert witnesses can play a crucial role in clarifying and verifying evidence in court.
- By explaining the investigative steps taken to gather evidence, authorities can demonstrate that it is no different from any other financial crime investigation.
Recovering Stolen Assets
Assets held in cryptocurrencies can be treated similarly to those held in bank accounts or real estate. For instance, a judge can issue an asset-freezing order on a cryptocurrency account pending the outcome of the case.
- However, international cooperation on asset freezing is crucial, as cryptocurrency transactions can occur rapidly.
- Authorities have two options for recovering stolen assets: transferring them into fiat currency through an exchange or holding an auction.
Multidisciplinary Approach
At the 4th Global Conference on Cryptocurrencies and Criminal Finances in 2020, experts emphasized the importance of a multidisciplinary approach to investigating cryptocurrency-related crimes. This involves joint investigation teams combining financial investigation, cybercrime, and technical IT/forensic analysis expertise.
- Unfortunately, many investigators still do not collaborate with counterparts from other disciplines or convene multidisciplinary investigation teams.
- This lack of coordination can hinder the effective recovery of stolen assets.
New Technologies
The conference also highlighted the need for new technologies to facilitate the investigation and prevention of money laundering and terrorist financing through cryptocurrencies. Governments should support research and innovation in this area, as private firms are currently the primary drivers of progress.
Investigative Strategies
Finally, investigators must adapt their strategies to effectively trace transactions through the cryptocurrency sphere. This can involve:
- Systematically searching suspects’ premises for devices or documents containing details of cryptocurrency accounts.
- Upskilling and incorporating new investigative techniques into routines as the use of cryptocurrencies continues to grow worldwide.
Original Publication Date: March 15, 2021 Last Updated: August 6, 2021
This article has been republished from [original source] with permission.