Chainalysis and the Fight Against Criminals
Crime-Related Cryptocurrency Transactions
Last year, crypto-related crime was at an all-time high, reaching $14 billion in digital currency. However, while this number may seem large, it is far smaller than the $4 billion stolen last year. While this number does not include the cost of recovering stolen funds, it does illustrate how cryptocurrency can help protect victims.
It's been widely known that transnational criminal organizations are now turning to cryptocurrency as a payment method. For example, Colombian and Mexican drug cartels now use cryptocurrency to make payments and do laundering proceeds. In the same way, traffickers who smuggle cocaine from South America now use cryptocurrency for payments. And once they've done so, these gangs may soon have the means to keep the money flowing.
Transnational Criminal Organizations
Blockchains offer investigators a clear view of illicit financial flows. The traditional financial system makes following money very difficult. However, the transactions are recorded permanently with blockchains. This makes them easy to trace. Chainalysis Reactor enables investigators to use this data to pinpoint cash-out points. Illicit industries such as drug and human trafficking, counterfeit goods, and other frauds are fueled by profits and erode communities while contributing to corruption worldwide.
One of the first uses for blockchains was in money laundering, but their utility for organized crime goes beyond darknet markets and money laundering. For example, Chainalysis's 2021 Crypto Crime Report details the use of cryptocurrency in a cocaine smuggling ring in the UK and Australia. The ring transferred millions of dollars between dealers and moved them through the network using a digital payment system. It also enables investigators to trace funds using Reactor, a blockchain-based digital currency.
Drug Cartels
Blockchain technology gives investigators unprecedented access to illicit financial flows. While following the money in traditional financial systems is difficult, blockchains record transactions permanently and make them much easier to visualize. For example, investigators can use the Chainalysis Reactor to identify cash-out points in drug and human trafficking networks. These illicit industries create vast amounts of wealth and devastate communities while contributing to widespread corruption worldwide.
A recent report reveals that Chainalysis has won $10 million in federal investigative contracts. The company says that it has helped catch rogue FBI agents, traced cryptocurrency from child-abuse markets, and disrupted the funding of terrorist activities with its software. In addition, it has worked with U.S. law enforcement agencies to identify suspicious transactions and avert a criminal's identity.
Ransomware Demands
Cybercriminals often ask victims to pay for ransomware demands in cryptocurrency. The reason is simple: cryptocurrency ensures anonymity at the destination address. Crypto wallets do not require users to disclose their names or other personal details, so the payment destination address remains hidden. In addition, they don't force victims to disclose their bank account numbers to the criminals. This means their identity remains secure. While most ransomware demands demand the payment in cryptocurrency, others may require personal information such as credit card numbers.
Ransomware is malicious software that encrypts computer files and prevents users from accessing those files. Typically, cybercriminals inject ransomware into computer systems through an email attachment or an unsecured website. Once they infect the computer, they increase the ransom. A full-screen window will often appear with information about the ransom and a timer indicating the amount of time left to unlock the computer.
Chainalysis KYT
Chainalysis is a company that provides blockchain-based investigative tools for law enforcement. It provides data on cryptocurrency-based hacks and thefts, along with adoption metrics. The company also aims to support companies that follow government regulations. Its investigative tools include real-time analysis of blockchains and transaction tracking. Chainalysis defines crime as illegal products, terrorism, and subverting democracy.
The firm is most well-known for solving high-profile criminal cases. One recent case involved tracking down a mysterious bitcoin seller linked to Silk Road's notorious darknet marketplace. The US government seized the bitcoins later. As a result of its software, it's vital to maintain high levels of transparency and trust. The company's mission is to help ensure that cryptography remains safe and regulated and that it doesn't become a tool for criminals to steal money.
Chainalysis KYT's Ability To Alert Clients When A Service Provider Engages In Suspicious Behavior
The new integration between blockchain analysis company Chainalysis and anti-money laundering compliance solution Unit21 offers a comprehensive solution for financial institutions that will help them mitigate regulatory risk and comply with industry regulations. The solutions are built on a common blockchain technology that reduces manual workflows and streamlines the filing of suspicious activity reports. In addition, Chainalysis KYT monitors the transactions of hundreds of thousands of services transacting in cryptocurrencies. These include Bitcoin, Ether, Litecoin, Tether, and Gemini Dollar.
Identifying and alerting clients to suspicious activity is critical in this environment, where a significant portion of the market comprises illegal services. Chainalysis KYT monitors the blockchain continuously, which means that it can detect any high-risk activity and prevent it from occurring. By identifying a user's ETH address, Chainalysis can prevent criminals from engaging in any transactions with a darknet market address under sanction by OFAC. It can also alert compliance teams about any transaction involving an ETH address that contains OFAC sanctions.
Chainalysis' Ties To The Us Government
A company with strong ties to the US government is expected to increase its work with law enforcement agencies by leveraging its access to its databases and expertise in piecing together cryptocurrency transactions. In fact, the company has won over $5 million in federal contracts in the past five years. The company has also begun picking up work for federal agencies, including the Department of Defense, Secret Service, and Transportation Security Administration.
There are many concerns about Chainalysis' ties to law enforcement, and one of these is the privacy of its users. While false positives on bank accounts and credit cards can be frustrating, they are generally not life-threatening. Nevertheless, false positives on criminal activity could damage a user's reputation and credit score. In addition, as Chainalysis's platform evolves, it will likely gather input from more data systems. Because of these potential risks, they encourage privacy and freedom advocates to watch their work closely.