Matthew Allen, an assistant director of domestic operations with the Homeland Security Investigations (HSI) division of ICE, discussed the role of cryptocurrencies in drug trafficking during an October 3 hearing before the U.S. Senate Caucus on International Narcotics Control.
Perhaps most notably, he noted that HSI is having some level of success in tracking criminals who use cryptocurrencies to launder proceeds from drug sales.
While cryptocurrencies make transferring value relatively easy, he contended, criminals still need to convert cryptocurrencies into fiat – and vice versa – during the process. “Whenever monetary exchanges are made, a vulnerability is created,” he went on to say.
“This is the time when criminals are most susceptible to identification by law enforcement means and methods,” Allen stated, explaining:
“Utilizing traditional investigative methods such as surveillance, undercover operations, and confidential informants, coupled with financial and block-chain analysis, ICE-HSI is able to disrupt the criminals and dismantle the [transnational criminal organizations], as well as the cryptocurrency exchangers who typically launder proceeds for criminal networks engaged in or supporting dark net marketplaces.”
Allen went on to discuss multiple types of cryptocurrency exchanges and how they may be used to facilitate money laundering. Peer-to-peer exchanges in particular, referring to startups which refuse to register as a money services business and do not follow compliance laws, are often used to ensure users remain anonymous.
“We train investigators … in an effort to deter organizations from laundering proceeds or using cryptocurrencies to fund the purchase of fentanyl/opioids or other narcotics,” he said.