homeland security

Department of Homeland Security (DHS) Trials Blockchain Solution for Canadian Borders

The DHS has implemented a number of rapid POC projects to investigate the usefulness of blockchain in border management.

In a novel and innovative approach, the DHS is working directly with trade members from the Commercial Customs Operations Advisory Committee (COAC) working group, including customs broker Customs Direct LLC. In this role, Customs Direct has partnered with blockchain developer Morpheus.Network to fast track the technical evaluation of blockchain as a key factor in improving efficiencies on border management.

Dan Weinberger, CEO of Morpheus.Network welcomes the evaluation by DHS. “We have trialed our secure blockchain technology across a number of supply chain sectors. We are confident that we can deliver simple-to-use yet trusted solutions for different areas of border management. “

The first POC investigated free trade in the context of the North American Free Trade Agreement (NAFTA). The DHS and Customs Border Protection (CBP) opted for a less formal but much more rapid approach by seeking POC participants directly from the COAC working group. Selected member Customs Direct, with its Morpheus.Network partner, worked through the POC and applied their experience to show the benefits of Distributed Ledger Technology.

Jim Masloski, CEO of Customs Direct praised the approach taken by the DHS. “I’ve more than 30 years’ experience in custom brokerage and it is a complex area compounded by many touchpoints and legacy infrastructure. By adopting a rapid evaluation process the DHS can make decisions based on technology that is available today. This is a game-changer for supply chain transparency.”

The initial POC looked at benefits that could be realized by utilizing blockchain with NAFTA/CAFTA claims and was conducted in September 2018 by CBP’s Office of Trade, Trade Transformation Office, (TTO), Business Transformation and Innovation Division (BTID).

This evaluation ran for six months and concluded in October with a successful outcome. So emboldened, the DHS initiated a second POC, this time in Intellectual Property Rights (IPR) which is expected to be concluded in the coming weeks.

The IPR Blockchain POC will assess the agency’s ability to facilitate shipments by aligning right’s holders and licensee(s) to the entry for an improved importation experience. The live fire system test is anticipated to occur in September 2019. A 360-degree assessment looking at policy, operations, and legal and technical aspects of the Blockchain technology will be conducted following the POC.

The effect of this ‘live fire testing’ has been beneficial to the DHS as it can actively investigate the technical options without deploying overly laborious or time-consuming tender based processes.

The official response to the projects has been very positive. Documents released by the COAC note that the aim of utilizing blockchain technology for CBP is to improve the processing of trade-related documents by hosting information about trade transactions on a decentralized, tamper-proof distributed ledger system, which can be authenticated and accessed by various stakeholders.

Supply chain issues

In a typical supply chain, there are over 40 points of contact between different entities. Something as simple as sending a bulk shipment of flowers internationally can generate over 200 hard copy documents from more than a dozen sources. Each handling point is susceptible to human error: Misfiling, late documentation, lost packages, slow payments, etc. which can delay or halt the entire shipment. In addition, there is a huge issue of counterfeit goods and the lost revenue cost to genuine manufacturers. These are massive pain points causing lost time and revenue.

Removing the inefficiencies in supply chain will stimulate economic growth through the reduction of barriers to global trade. It is estimated by the World Bank in 2018 that reducing these barriers could result in increased global GDP by $2 trillion.

Weinberger commented: “The global supply chain sector encompasses incredibly complex systems and yet many of the processes are still analog and require physical delivery of documentation. We can leapfrog these antiquated, and largely inefficient, systems and use distributed ledger technology to securely automate end-to-end supply chains including handover and back-office procedures. The result is to increase speed, improve accuracy and reduce costs. Overall we can bring the supply chain customer experience into the 21st Century.”

Masloski concluded: “Our partnership with Morpheus.Network works really well. We understand border management and they understand the technology to support it. Together we can assist the DHS and CBP optimize cross border activity, reduce fraudulent activity and keep costs down. We look forward to delivering more valuable solutions.”

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Analyst Honored for Exposing South Korean Dark Web Crypto Child Pornography and Blackmail Site

Criminal analyst, Kim Reece, has been named as a finalist for the Samuel J. Heyman Service to America Medal for her role in the takedown of the South Korean ‘Nth Room’ child pornography chat rooms that hosted the vile content of the ‘Welcome to Video’ dark web site.

US Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) Criminal Analyst, Kim Reece was named as a finalist for the Samuel J. Heyman Service to America Medal.

According to the announcement on May 27, Reece’s blockchain analysis led to an international criminal investigation of the largest dark web child pornography sites—’Welcome to Video’ that leveraged cryptocurrency to cloak their payments on over one million video downloads.

Working alongside cross-agency partners Christopher M. Janczewski, IRS- Criminal Investigations, and Zia M. Faruqui of the US Department of Justice (DOJ), Reece’s contribution led to the arrests of the site’s operator, Jong Woo, and more than 300 users, as well as the rescue of 25 exploited children.

250,000 Child Porn Videos

The sexual exploitation of underage school-going girls in South Korea has been happening for years on the “Nth Rooms” dark web site. Notably, they would be filmed undertaking violent self-harm and sexual acts, and the videos taken were made available via Telegram chat rooms after members made crypto payments.

It is reported that at least 10,000 people utilized these chatrooms after paying fees ranging from $200 to $1,200 in Bitcoin, with trades completed through a separate protected forum.

According to the law enforcement agencies who spearheaded the investigation, the amount of child sexual pornography content seized was close to 8 TB or more than 250,000 videos.

Let’s Rape

According to the indictment, on March 5, 2018, agents from HSI, IRS-CI, the National Crime Agency in the United Kingdom, and the National Police in South Korea arrested Jong Woo Son, 23, a South Korean national. The authorities also seized the servers he used to operate a darknet market place exclusively advertising child sexual exploitation videos available for download by site members.

The dark web site was called Welcome to Video: the ‘nth rooms’ refers to a series of Telegram chat rooms where users would illegally produce and trade sexually exploitative footage of women and children. The core of the business was to turn real-life assaults into online content, with the site itself boasting over one million downloads.

As the business grew from 2018 to 2019, the Telegram chat rooms became more bespoke for its depraved clientele. The users could have their pick of the “slave room” or perhaps the “violate your acquaintance room” and a variety of rooms dedicated exclusively to child rape and sexual abuse.

In the chat rooms where underage girls were degraded, forced to behave like animals and violated in public unsanitary areas, it was common for the users to greet each with the phrase, “let’s rape.” Victims were often manipulated into giving out personal information that could be used to blackmail them into obeying the commands of the chat users.

Kim Reece Honored and Recognized

Analysis of the platform revealed that it generated close to one million BTC addresses.ICE HSI Criminal Analyst Kim Reece – Image Via ICE.Gov

“It is a great honor and privilege to recognize Kim Reece for her nomination for the Samuel J. Heyman Service to America Medal,” said Deputy Director and Senior Official Performing the Duties of Director, Matthew T. Albence. “Even more important than this prestigious acknowledgment, however, is her continued dedication and use of her expertise to protect exploited children. The efforts of Ms. Reece and her interagency partners were instrumental to the takedown of this international criminal organization.”

At the end of the announcement, Homeland Security noted some hotlines and encouraged members of the public to report any suspected child predators or exploitation. The 24 hr toll-free hotlines are 1-866-347-2423 and TTY for hearing impaired at (802) 872-6196.

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US Department of Homeland Security Can Now Trace Illicit Monero Cryptocurrency Transactions

The United States Department of Homeland Security (DHS) will now be able to track transactions of the most privacy-oriented cryptocurrency coin, Monero (XMR), leveraging a new tool by crypto intelligence company CipherTrace.

In an official release, CipherTrace mentioned that the forensic tools were developed under contract with DHS Science & Technology Directorate. Law enforcement and government agencies will now be able to use the tools to visualize and trace Monero transactions flows in criminal investigations.

Monero The Black Sheep of Crypto

Although Bitcoin cryptocurrency has been ranked the number one cryptocurrency choice among criminals, a significant number (45%) of darknet market transactions are carried out using the privacy coin Monero.

Monero employs a unique design to ensure user anonymity and always enforced privacy. Ring signatures are built into the protocol design and thus enable transaction mixing. Therefore, when someone tries to locate the source of a Monero transaction, it would appear as if a whole crowd of users took part in the exchange, thus making it almost impossible to identify the true source.

Law enforcement officials have been highly interested in finding a way to trace Monero. In the past, there has been no tool with the capacity to trace Monero transactions. However, Dave Jevans, the CEO of CipherTrace, said that the company has developed the first tool that has the ability to track Monero transactions.

Jevans mentioned that the tool has been in development for over a year. The US Department of Homeland Security will now use the tool to carry out investigations and trace Monero transactions.

The tool provides the US DHS with visualization, exploration, and search tools for tracking Monero transaction flows; integrated with CipherTrace’s Inspector financial investigations products. The tools help to ensure investment funds, OTC trading desks, and cryptocurrency exchanges that they do not accept Monero currencies from illicit proceeds and investigate Monero obtained from potentially illicit sources and take appropriate actions to stay in compliance.

Blockchain And Data Privacy

As people have public blockchains, the strive for anonymization in both processing and transaction is a key element for preserving consent and protecting privacy. Monero is one cryptocurrency that has taken the lead on this, and which uses stealth addresses and ring signatures. Such mechanisms now support the hiding of the core information of a transaction. Such anonymization has made life increasingly difficult in detecting and investigating crypto-related crimes. Thanks to the recent development of forensic tools for law enforcement and government agencies to monitor, track, and investigate illicit Monero transactions.

Authorities in the U.S and Brazil Disrupt Crypto Fraud Ring

There seems to be a surge in crime related to cryptocurrency as blockchain technology keeps expanding.

The United States Immigration and Customs Enforcement recently reported an investigation by the Brazilian National Police, U.S. Homeland Security Investigations (HSI) and other law enforcement agencies that led to the disruption of crypto-related fraud across several countries but with operational base in Curitiba, Brazil.

A U.S investigation has revealed that 37-year-old Brazilian citizen and former US resident Francisley Valdevino da Silva is the ringleader of a crypto fraud ring. Investors in more than a dozen countries were tricked into believing that there was a well-organized high-end crypto-financial product, when in fact the organization promoted fraudulent cooperation and licensing that enticed victims to invest millions of dollars in questionable cryptos. Ultimately, the cryptocurrency had little or no value.

The Brazilian authorities have also identified a similar fraudulent activity in Brazil with around $800 million wired through the Brazilian banking system alone aside from illegal proceeds transferred through cryptocurrency.

Governments Regulating Crypto-Related Crimes

The increase in online activities has created an opportunity for the growth of criminal activities in the digital ecosystem. Measures have therefore been put in place by different governments across the globe to fight such activities.

The U.S Department of Homeland Security hopes to put an end to the increasing cases of money laundering by creating a special unit called the Cyber Fraud Task Force ( CFTF). To effectively monitor and stop illegal online activity, CFTF investigators must be able to analyze a computer network, monitor IP addresses, and coordinate with Internet Service Providers (ISPs) to identify suspicious activity.

The Financial Crimes Enforcement Network (FinCEN) has also proposed methods for businesses operating in the crypto space, particularly exchanges. In the proposal, unhosted wallets properly monitored and transactions above $3,000 from unhosted wallets should be verified before concluding transactions with them.