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CipherTrace Unveils New Compliance Software For Banks Against Illicit Crypto Transactions

Blockchain security and analytics provider CipherTrace has unveiled a new cryptocurrency compliance product recognized as “Armada”, which is designed to eradicate risky crypto blind spots for financial institutions and banks. The new product targets financial institutions and banks dealing with cryptocurrencies.

CipherTrace Dedicated to Help Banks

Armada targets a large number of financial institutions, which have not adopted the proper AML (anti-money laundering) and KYC (know your customer) guidelines that could assist in detecting unregistered digital asset transactions. With the use of the new tool, financial institutions would be able to meet their anti-money laundering obligations and gain visibility into risky crypto blind spots. This assists in keeping the KYC procedures secure and also conducting due diligence on all VASPs (virtual asset service providers).

Dave Jevans, CipherTrace CEO, said that: “If Kunal Kalra’s banks had been using Armada to monitor their accounts, we could have identified Kalra much earlier.”

CipherTrace works with financial institutions and banks and their existing monitoring tools to assist in enhancing their AML procedures. It also assists in tracing the source of on-chain funds, matching user IDs, and finding problematic wallet addresses. The firm is backed by Galaxy Digital owned and operated by Mike Novogratz, one of the most vocal cryptocurrency supporters within the industry.

With Armada, banks and financial institutions can learn more about counterparty risks linked with unregistered virtual asset service providers and money service businesses. Jevans further described that if M.Y. Safra Bank deployed Armada, it would easily detect illegal crypto transactions. He revealed that although the bank has not been fined by the OCC (Office of The Comptroller of The Currency), it must focus on reporting and monitoring suspicious activities and carrying out independent AML/BSA audits.

He stated that the bank also must allow an independent party to reviews its previous activities and not only hire a BSA officer, but also adequate support staff in the next 180 days.

CipherTrace is a California-based company that provides a suite of blockchain forensic services and tools, which allow its clients to analyze crypto transactions flow like identifying laundered or hacked funds and also provides theft asset recovery service.

Cryptocurrency Theft Alarming At $4.4 Billion In 2019

According to a report released by CipherTrace, the crypto sector lost about 4.4 billion in thefts and scams in 2019, up by more than 150% from $1.7 billion in 2018. The report shows that crypto theft has increased at an alarming rate because malpractices have been taking place through crypto exchanges. The trend has been triggered by an increased number of criminals who are keen to undertake bigger heists. Criminals endeavor to use every means to chase money, which is there and ripe for taking. However, regulatory scrutiny within the crypto sector is being beefed up across the world as the market developers and participants are seeking to penetrate the crypto space. CipherTrace assists law enforcement and financial regulators in their investigations on cryptocurrency-related AML and compliance issues.

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India Darknet Policing Ramps Up Following Drug Racket Arrests

Law enforcement agencies in India are teaming up with national research and academic institutions to enhance their ability to police the darknet.

Indian law enforcement agencies are collaborating, as part of a think-tank, with academic institutions, technology startups, and research organizations to bolster darknet policing capabilities in the nation.

According to the Hindustan Times, sources close to the matter said, “A Union home ministry think-tank is studying software solutions to help law enforcement agencies monitor the darknet, or a network of secret websites and encrypted networks, and track cybercriminals through digital footprints.”

The joint effort is expected to analyse limitations of policing the darknet and produce a range of solutions to bolster law enforcement on the dark web. So far, the police have identified around 12 clear problems with their ability to police the darknet in India and submitted these to the cohort of 120 academic and research institutions.

The Hindustan Times also reports that the law enforcement resource being developed will leverage artificial intelligence and machine learning techniques to update itself automatically and regularly. There are also plans to design a case management platform for financial crimes.

Darknet Violations Surging

The darknet is the overlay network within the internet that can only be accessed by specific software which rose to infamy within the crypto-community thanks to the Silk Road darknet marketplace. Via the Silk Road, darknet users could get their hands on just about anything, from narcotics to weapons, and they could pay using Bitcoin.

According to the Times of India, as part of a global crackdown targeting darknet narcotics and black market pharmaceutical syndicates, India’s Narcotics Control Bureau made several important arrests in the global Operation Trace enforcement action. The arrested syndicate accepted payments in Bitcoin and Ethereum.

Cryptocurrency and the Dark Web

Policing the dark web has become more of a priority for global law enforcement since the advent of cryptocurrency, which often gives criminals a less traceable means of paying for illicit services.

The use of cryptocurrencies like Bitcoin and Ethereum has become the preferred payment for internet-based human trafficking and sexual exploitation services, which include blackmail porn and the sexual assault of minors and children, according to forensics firm Chainalysis.

While the perception is that cryptocurrencies like Bitcoin and Ether can be used anonymously, sophisticated analysts are now actually using the underlying blockchain technology against criminals as all transactions are immutable and traceable.

Recently, 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. Reece’s blockchain analysis led to an international criminal investigation of one 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. All through blockchain traceability.

Silk Road Programmer Pleads Guilty for Covering Up His Darknet Involvement to FBI and IRS

Silk Road computer programmer Michael R. Weigand pleaded guilty for providing false statements regarding his involvement with the darknet marketplace.

Silk Road programmer confesses

Weigand served as a tech advisor for the darknet leaders, and also utilized his skills as a programmer to fix any vulnerabilities the illicit marketplace encountered. Serving as a backend technician, the Silk Road operator also confessed that he had previously lied to the IRS and FBI about his involvement with Silk Road darknet market.

In addition, he had used Bitcoin (BTC) on the darknet website for his own gains. Finally, the computer programmer was alleged to have removed evidence leading to Silk Road from a London apartment in 2013.

Weigand is sentenced to five years in jail for his wrongdoings. The US Department of Justice (DoJ) chose to charge him for concealing his involvement with the darknet and misinforming the FBI and the Internal Revenue Service (IRS), rather than for the crime itself. Weigand’s five-year prison term is nowhere as hefty as that of Silk Road founder, Ross Ulbricht, who is sentenced to prison for life.

Speaking about the now-defunct Silk Road and the charges against Weigand yesterday in US court, acting attorney Audrey Strauss said:

“Silk Road was a secret online marketplace for illegal drugs, hacking services, and a number of other criminal activities. When Weigand was questioned by law enforcement in 2019, he falsely claimed not to have done anything at all for Silk Road. For his various false statements, Weigand now faces potential prison time.”

Weigand’s sentencing is scheduled for December.

For some law enforcers, this serves as a perfect depiction of how Bitcoin’s underlying public ledger has made it hard for cybercriminals to hide from law enforcement forever, as the transactions that they conduct run on a blockchain, which can be easily accessed.

Crypto makes financial crime easier to track

Paxful chief compliance officer Lana Schwartzmann brought up the advantages of cryptocurrency adoption in a regulatory discussion about cryptocurrency, by indicating that digital assets could easily be traceable and tracked.

She referenced the infamous Twitter Bitcoin hack targeting moguls such as Bill Gates and Elon Musk that overtook the internet by storm a few months ago, and how the huge crypto heist that ran on the platform was resolved within a matter of weeks. The culprits were also caught and punished accordingly by US law enforcement.