Page 34 - Understandinging Forensic Technology Landscape

Investigating blockchain ledgers is similar to and certain other businesses to perform customer
investigating other ledger activity. The goal is to trace due diligence to ensure they know their customers.
activity among accounts or across periods to identify This type of compliance is monitored by the Treasury
the source of the activity and/or whether transactions Department’s Financial Crimes Enforcement Network
are appropriate. Typically, information is gathered to (FinCEN). The Department of the Treasury’s Office
determine the timeline of transactions, the activity, and of Foreign Asset Control (OFAC) offers a secondary
the parties involved in the transactions. The benefit mechanism for investigators in its publication of digital
of tracing activity on a blockchain is that transactions currency addresses that can assist compliance officers
initiated on the ledger are validated to ensure the in determining prohibited transactions. Indeed, in
transaction actually took place. Once validated, the November 2018, OFAC identified two digital currency
transaction cannot be altered (for example, to give addresses associated with malicious activity.
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the appearance of activity during a different period
or between different parties). Free tools such as One well-reported example of an investigation involving
Blockchain.com or Etherscan.io can aid in tracing tracing activity on a blockchain ledger involves the
cryptocurrency transactions. In addition, there are investigation into Silk Road, an online black market
several subscription tools such as ChainAnalysis, that used bitcoin blockchain technology as the form
Qlue and CipherTrace. of payment. When Silk Road was taken down by the
federal government, tracing activity between addresses
Although the owner of a cryptocurrency address led to the discovery that federal agents were involved
may not be known, following activity between and in inappropriate activity. The discovery of forged
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among addresses can still be accomplished either documents was one piece of information that assisted
through the use of blockchain explorers or proprietary in the discovery that federal agents were benefiting
technology. Forensic practitioners may be asked to from illicit activity. As one of the federal agent’s
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investigate blockchain activity related to Know Your cryptocurrency increased, it triggered certain KYC
Customer (KYC) and anti-money laundering compliance. reporting requirements by the digital exchange where
Financial regulations require financial institutions the federal agent had established his account.
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36 Treasury Designates Iran-Based Financial Facilitators of Malicious Cyber Activity and for the First Time Identifies Associated Digital Currency Addresses, November 2018.
home.treasury.gov/news/press-releases/sm556, accessed November, 27, 2019
37 Former DEA Agent Sentenced for Extortion, Money Laundering and Obstruction Related to Silk Road Investigation, October 19, 2015. justice.gov/opa/pr/former-dea-agent-sentenced-
extortion-money-laundering-and-obstruction-related-silk-road, accessed November 27, 2019; Former Secret Service Agent Sentenced in Scheme Related to Silk Road Investigation,
November 7, 2017. justice.gov/opa/pr/former-secret-service-agent-sentenced-scheme-related-silk-road-investigation. Accessed, November 27, 2019
38 Stealing bitcoins with badges: How Silk Road’s dirty cops got caught; Cyrus Farivar and Joe Mullin, August 17, 2016. arstechnica.com/tech-policy/2016/08/stealing-bitcoins-with-badges-
how-silk-roads-dirty-cops-got-caught/, accessed November 27, 2019
39 United States of America V. Carl Mark Force IV, et al, United States District Court for the Northern District of California, Gambaryan Affidavit, p. 36: 18-21. justice.gov/sites/default/files/opa/
press-releases/attachments/2015/03/30/criminal_complaint_forcev2.pdf, accessed March 18, 2020

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