Following the e-money

Anonymity that comes with digital currencies has been seen as a foolproof way to avoid detection when it comes to laundering cash, however, recent successes in tracking transfers could lead to criminals deserting the financial dark web. When the cryptocurrency bitcoin was launched in 2008, it was immediately recognised as a global game-changer for crime. The untraceable internet currency offered drug-dealers and fraudsters unprecedented anonymity in criminal transactions. Indeed, a report published last year by Europol noted that more than 40 per cent of illegal online transactions were made using bitcoin. Although items ordered from darknet marketplaces such as Silk Road 3 and AlphaBay must ultimately be delivered to a ‘physical address, the level of anonymity makes it virtually impossible for law enforcement to prove the recipient had any involvement in placing the order. However, a team of investigators from Denmark’s specialist cybercrime unit has developed a software system that can track bitcoin transactions – which is being seen as a pivotal moment for police work in this field. Most recently, the software was used in a case in Denmark. Tracked bitcoin transactions were used to link a 20-year-old defendant to purchases of large quantities of methamphetamine, cocaine and ketamine. He was jailed for eight years at Herning court in January. It was the second case in Denmark in which bitcoin-tracing evidence had played a vital part. Kim Aarenstrup, head of the National Cyber Crime Centre (NC3) of the Danish National Police, said the perspective was “groundbreaking”. “Where the investigation previously hit a dead end, we can now proceed,” he told the Danish newspaper Berlingske. “We are pretty much unique in the world at this point because no one else has managed to use these tracks as evidence. Everyone is looking towards Denmark in this field, and we are in close dialogue with a number of other countries right now so we can further develop methods and teach them how we do it here.” Danish authorities have been paying particular attention to the digital currency for some time. A 2015 strategic analysis report by the Danish National Police mentioned bitcoin as a key focal point to counter cybercrime. While details of the workings of the specialist software have not been made public, it reportedly correlates two separate transactions in which bitcoins used to purchase illegal goods are matched against those listed on the blockchain – a public ledger where all bitcoin transactions are recorded and confirmed. These listings are then compared to listings of the marketplace and other information about users. Although bitcoin is described as ‘anonymous’, enabling ‘currency’ to be sent and received without providing any personal information, this is not strictly accurate. When purchasing bitcoin from an online retailer, buyers are often required to supply a picture of their passport or other identification. They must also create a bitcoin wallet, which requires an address – even though both wallet and address are effectively anonymous. All transactions made using bitcoin are then coded into the blockchain, a publicly distributed ledger maintained over peer-to-peer networks. Sending and receiving bitcoins is similar to writing a book under a pseudonym. If an author’s pseudonym can be linked to their true identity, then all works under that pseudonym can also be linked to them. In bitcoin, the user’s pseudonym is the address to which they receive bitcoins and every transaction involving that address is stored indefinitely in the blockchain. The blockchain is a shared record of events, and once information is entered it cannot be altered. If an ‘address’ can be linked to a ‘real-world’ identity, then anonymity is compromised. For this reason, Mr Aarenstrup believes it is better to refer to bitcoin as ‘pseudonymous’ rather than anonymous. “Bitcoin – and digital currency in general – is used a lot for trafficking in weapons and drugs, ransom and extortion cases,” Mr Aarenstrup e