U.S., European Partners Crack Down on Criminal Use of Virtual Currencies

Earlier this week, I traveled to Europol’s headquarters in The Hague, where over 70 law enforcement officials from 21 countries were gathering, for the first time, to coordinate investigations into the criminal exploitation of virtual currencies, including Bitcoin.
The meeting was co-organized by the European Cybercrime Centre (EC3) and ICE Homeland Security Investigations (HSI), the primary investigative arm of the U.S. Department of Homeland Security.

Meeting on the criminal use of virtual currencies in The Hague. Photo: HSI
(Left to right) Andrew McLees, Special Agent in Charge, HSI; Mark Witzal, Deputy Assistant Director, HSI; and Olivier Burgersdijk, Head of Strategy for the European Cybercrime Centre, participate in the meeting on the criminal use of virtual currencies in The Hague. Photo: HSI

Our group of financial and cybercrime investigators and prosecutors discussed ongoing worldwide criminal cases involving the criminal use of virtual currencies to purchase narcotics and contraband online. One of our big concerns is the anonymity of financial transactions through some virtual currencies, such as Bitcoin, and the challenges this poses to “following the money” during criminal investigations.

We also addressed the development of Bitcoin ATMs and the growing number of merchants accepting virtual currencies – now estimated at 26,000 – that could expose virtual currencies to abuse by criminal networks. This is a serious problem.
Ongoing criminal cases include the virtual currency Liberty Reserve, which is alleged to have conducted 55 million illicit transactions and laundered up to $6 billion in criminal proceeds. There are also pending charges against the administrator of the online marketplace Silk Road, who was arrested by U.S. law enforcement after allegedly accepting up to 9.5 million bitcoins for the sale of hundreds of kilograms of illegal narcotics and other contraband. Investigators also revealed the use of bitcoins in the alleged online sale of a toxic substance purportedly for use in a homicide.

ICE HSI Deputy Assistant Director Mark Witzal opened the two-day meeting by speaking about the globalization of virtual currencies and the corresponding need for international collaboration and coordination. “Law enforcement is seeing a disturbing trend of the use of virtual currencies to buy and sell contraband, then launder the proceeds from those crimes,” he said. “Coordination meetings such as this are vitally important, so that as each of our law enforcement agencies learns more about how criminals use virtual currencies, we communicate these lessons with each other.”

Olivier Burgersdijk, Head of Strategy at EC3, emphasized how shifting the focus of law enforcement towards the dynamics of virtual payment schemes is essential to fight organized crime effectively in the future. “The financial trail is traditionally one of the best ways to find the criminals, in particular to reach the top targets,” he said.

Going forward, our aim is to strengthen our cooperation and improve our information sharing so we can better crack down on the criminal use of virtual currencies.

By Erik Barnett, Attaché to the European Union, ICE Homeland Security Investigations (HSI)


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