Chapter 3 - Crime Areas

3.5 Criminal finances online - Law enforcement considerations

Within the constraints of national legislation law enforcement should pursue the possibility to obtain evidence from virtual scheme operators as they would do from any other financial institution. Investigators should also have the possibility to have accounts and funds frozen for the purposes of confiscation.

Decentralised schemes offer significant challenges to law enforcement. It may be possible to obtain addresses that the suspect uses through other investigative means, but with no central body to approach for additional information this is of limited value. Potentially an investigator could follow the flow of funds to and from that address on the blockchain to identify transactions with a real world entity such as an exchanger, online casino or other merchant. Should that outlet be approachable by law enforcement it may be possible to obtain a link to the address holder. Another barrier for law enforcement is that, other than by physically seizing the device on which a suspect holds his e-wallet, there is no way to confiscate, freeze or otherwise block access to the funds held by the suspect. Moreover, the variety of payment mechanisms used by cybercriminals presents an additional challenge.

Virtual currencies represent an example of technology overtaking legislation. Few jurisdictions recognise virtual currencies as a currency or have managed to adopt adequate regulatory controls. As such the law enforcement response between jurisdictions varies significantly. Some jurisdictions consider virtual currencies to be goods or property; some consider them to be taxable assets. Some jurisdictions regulate only centralised services, some only regulate the services surrounding them such as exchangers. Such disparity across Europe creates additional challenges for law enforcement and opportunities for criminal exploitation. The freezing and subsequent confiscation of criminal assets is an integral part of many investigations, but the combination of unseizable cryptocurrencies and inadequate legislation clearly causes issues. For cybercriminals, cryptocurrencies may become the offshore accounts of the future.

The activity of mule herders may be detected through monitoring ads relating to home-based, part-time positions such as ‘payment processor’ or ‘regional agent’. Another position advertised is that of ‘mystery shopper’ [86], where mules are asked to purchase goods from high street shops and send them over to the fraudster along with completed satisfaction questionnaires.

Wire transfers remain a popular method for onward transfer of funds for criminals and frequently feature in both traditional as well as cybercrime investigations. This is likely due to a perceived diminished risk of detection due to less stringent customer identification and verification procedures as well as availability of these services worldwide.