Are you familiar with cryptocurrency? It is a form of digital or virtual currency secured by cryptography – one that includes more than 510 cryptocurrencies, such as bitcoin, and a gross market capitalization of $5.5 billion. It is also a growing security and financial threat to our nation and to the world.

Cyber-Criminals, Deep Web, and Pseudonyms

While cryptocurrencies promise benefits such as more efficient international commerce and reduced banking fees, they are also favored by cyber-criminals and trans-national criminal organizations among other denizens of the Deep Web.

And for those who think that law enforcement is once again meddling into the digital privacy rights of the “countries without borders cyber world,” think again. As noted in a recent article in The Guardian, “cryptocurrency is being used to pay for child abuse material, according to the monitoring group the Internet Watch Foundation. Child abuse material is being stored, shared and sold by criminals hacking innocent sites on the open web, who are then using the cryptocurrency bitcoin to sell the material.”

A New Federal Report: Risks and Threats of Cryptocurrencies

The U.S. Department of Homeland Security has just released a major report on this issue Risks and Threats of Cryptocurrencies, co-authored by Hillard Heintze.

  • Since 2008, Hillard Heintze has served as senior law enforcement advisor and subject matter expert to the Homeland Security Studies and Analysis Institute (HSSAI), a congressionally chartered federally funded research and development center (FFRDC) for DHS to provide independent analyses, free from conflict of interest to our nation’s homeland security enterprise.
  • As a trusted agent of DHS, HSSAI has over the years, relied on Hillard Heintze for collaborating on numerous studies impacting security operations, law enforcement and investigative activities that assisted such agencies such as Customs and Border Protection (CBP), the Transportation Security Administration (TSA) and other DHS component agencies.  

In this case, HSSAI asked Hillard Heintze for our exclusive insights and co-authorship in a study to help law enforcement and prosecutors at all levels of government to better understand the threat posed by the criminal use of cryptocurrency.  The study presents recommendations to federal, state, and local law enforcement agencies and prosecutors in cases of criminal activity using this currency.

Hillard Heintze’s Role

Through our national network, Hillard Heintze and HSSAI interviewed current and former federal and state prosecutors and other professionals from the ranks of federal and state law enforcement in connection with the challenges confronting the successful prosecution of criminal and civil cases involving virtual currency.

We found that cryptocurrencies are particularly relevant to federal, state, local, regional, and tribal stakeholders within the Homeland Security Enterprise (HSE), because cryptocurrencies offer cyber-criminals, corrupt officials, transnational criminal organizations (TCOs), and foreign terrorist organizations (FTOs) the ability to conduct pseudonymous financial transactions outside of traditional banking channels.

7 Actions Law Enforcement and Prosecutors Should Take

In short, the study recommends that federal, state, local, regional, and tribal stakeholders within the Homeland Security Enterprise address cryptocurrencies by taking these actions:

  1.  Increase knowledge and awareness through training courses and independent Deep Web research;
  2. Budget for and investing in new forensic software, tools, and models, as well as increase the number of highly capable analysts, investigators, and prosecutors dedicated to cyber-enabled and cyber-facilitated crime;
  3.  Catalog and disseminate best investigative practices and procedures;
  4.  Establish a centralized entity to analyze transactions on the blockchain;
  5.  Target individuals who operate unlicensed or unknown cryptocurrency exchanges;
  6.  Develop red-flag indicators of money laundering activities that use cryptocurrencies for the private sector; and
  7.  Partner with foreign counterparts for force multiplication.

The issue of cryptocurrency by criminals remains a threat to the security of our nation. We are proud of our partnership with HSSAI in making our nation safer and will continue to provide our advice and expertise in order to “protect what matters.”