Accountant and certified cryptocurrency expert
A few months ago, new global regulations were recommended by the Financial Action Task Force (FATF) to help prevent and deter terrorists and criminals from using cryptocurrencies. However, it will take some time before countries adopt these regulations and have proper prevention and compliance programs in place.
In the meantime, there are other ways fraud examiners and investigators can prevent and detect illicit funds from being laundered through cryptocurrencies. Specific blockchain analytics tools and software can be used to parse through the data contained in blockchains and help catch criminals and terrorists who are exploiting the anonymity of cryptocurrencies.
Numerous firms that specialize in blockchain analytics have created software with the focus of preventing, detecting and investigating cryptocurrencies used for terror financing, money laundering, fraud and compliance violations. Here are three firms who should be on your radar because of the fascinating and groundbreaking work they are doing in the world of blockchain analytics.
Where: New York, New York, U.S.
What they do: Chainalysis offers activity monitoring reports to meet anti-money laundering (AML) and Know Your Customer (KYC) compliance obligations, enhanced due diligence tools to visualize and investigate the source and destination of suspicious transactions, and cyber threat intelligence which helps detect suspicious activity and emerging threats from the dark web.
Why you should know them: Two years ago, Chainalysis located 650,000 missing bitcoin stolen from Mt. Gox, which at the time was the largest cryptocurrency exchange in the world. Their sleuthing uncovered $1.2 billion in bitcoin (or $6.5 billion in current prices) that investigators thought was lost for good. Forbes has also reported that the Internal Revenue Service (IRS) uses Chainalysis software to help detect U.S. taxpayers who are using cryptocurrencies to avoid paying taxes on their income.
Where: Tel Aviv, Israel
What they do: Whitestream has been making waves with their sophisticated software platform which involves technology nodes that deeply index the blockchain in order to simplify the analysis process for the user.
Why you should know them: Whitestream recently found bitcoin wallet addresses on the Coinbase cryptocurrency exchange platform that referred to an official Hamas request for bitcoin donations. Hamas is a designated terror group in both the U.S. and Israel, among other countries. Furthermore, Whitestream identified Hamas-operated Coinbase accounts potentially sending bitcoin to a Binance account and a CoinPayments account.
Where: London, England, U.K.
What they do: Elliptic sells blockchain analytics software that can be used to investigate criminal activity and monitor transactions to prevent money laundering on bitcoin’s digital ledger. The Elliptic blockchain analytics software uses a transaction data set of known illicit transactions in conjunction with machine learning to help identify new illicit blockchain transactions.
Why you should know them: In September 2019, they raised $23 million in funding and are opening offices in Singapore and Japan. Elliptic recently discovered that the terrorist group Al-Qassam Brigades, the military wing of Hamas, was using a donation website to generate new bitcoin wallet addresses for each person who visited. By performing network analysis of transactions associated with the previous Hamas fundraising campaign, Elliptic was able to identify and trace where the money came from, and what Hamas did with the donations.
While fraud examiners, investigators, regulators and others wait for the full adoption of FATF’s global cryptocurrency regulations, it’s helpful to know that there are blockchain analytics tools and software available to help detect illicit financial activity. Terrorists and criminals are constantly trying to find new ways to move funds, so it’s critical for fraud examiners and investigators to adapt to new financial technologies and know some of the investigative tools at their disposal.