In our previous discussions, we highlighted the alarming growth of Bitcoin cases, which currently stand as the largest growing fraud category. Both within our agency and according to the FBI and the Department of Justice, cryptocurrency-related frauds are on the rise. In this blog post, we delve into the strategies employed to combat cryptocurrency scams, specifically focusing on Anti-Money Laundering (AML) tools and their crucial role in unmasking fraudulent activities.

The Resurgence of AML Tools: From Narcotics to Cryptocurrencies:

AML tools, originally developed in the 1960s and 70s to combat narcotics trafficking and unveil the bank records of traffickers, have found a resurgence in the battle against cryptocurrency fraud. These tools, designed to detect suspicious activities, have evolved to navigate the encrypted nature of crypto accounts, reminiscent of the secretive Swiss bank accounts of the past.

The Role of FinCEN: Navigating the Technological Frontier:

The Financial Crimes Enforcement Network (FinCEN), established to uncover hidden accounts, initially expressed uncertainty about the technology behind Bitcoin in 2013. However, recognizing the growing threat, FinCEN has intensified its capabilities to address cryptocurrency-related fraud. Their focus involves scrutinizing suspicious activity reports (SARs) from banks, a strategy that has proven effective in the fight against cryptocurrency scams.

Anti-Money Laundering Techniques: A Collaborative Effort:

In the early 2000s, the International Association of Asset Recovery (IAAR) played a pivotal role in disseminating high-level AML and asset recovery techniques. This collaborative effort, involving both private investigators and the public sector, has become crucial in combating cryptocurrency fraud. By leveraging these well-established techniques, investigators can pierce through the complexities of crypto scams, providing a means to identify the culprits and locate stolen funds.

Rising Cryptocurrency Suspicious Activity Reports: An Alarming Trend:

The alarming surge in cryptocurrency-related suspicious activity reports underscores the increasing prevalence of these scams. In 2018, there were 1,500 monthly reports, escalating dramatically to 850,000 in 2019. This staggering increase indicates the urgency with which authorities are addressing the issue and the pivotal role SARs play in tracking illicit activities within the cryptocurrency space.

Seizing Crypto Funds: Success Stories and Chess Moves:

The Department of Justice has achieved significant milestones in seizing crypto funds from both terrorist networks and the dark web. These successful operations highlight the effectiveness of deploying AML tools to trace the movement of funds across different banks. In this chess game against crypto scammers, investigators, both public and private, are adapting old tools to the new frontier, resulting in meaningful seizures and unraveling the complex web of cryptocurrency fraud.

Battling Cryptocurrency Scams with AML Tools:

As cryptocurrency scams continue to proliferate, the utilization of Anti-Money Laundering tools emerges as a powerful strategy for investigators. The collaborative efforts of agencies, both historical and contemporary, emphasize the adaptability of AML techniques in navigating the encrypted landscape of crypto accounts. Unmasking cryptocurrency frauds requires a multi-faceted approach, blending traditional investigative methods with the innovative use of AML tools. In the ongoing battle against cryptocurrency scams, these tools play a pivotal role in identifying perpetrators and recovering funds for victims of illegal schemes.