International Cooperation in Law Enforcement: The Emerging Trend in Combating Cryptocurrency Crime

As globalization and digitalization continue to advance, the rapid growth of the cryptocurrency market presents new business opportunities while also posing significant challenges to global legal and regulatory frameworks. The increasing interaction between cryptocurrencies and fiat currencies has led to a rise in illicit activities such as money laundering and terrorism financing. Moreover, the complexity of blockchain technology, which is outside the traditional domain of law enforcement, makes it difficult to identify specific criminals. This poses significant challenges for law enforcement agencies in combating these illegal activities. Additionally, various incidents have shown that regulating cryptocurrencies not only requires local legal support but also necessitates international cooperation to tackle cross-border crimes, money laundering, terrorism financing, and other issues. That is why we believe international cooperation in law enforcement, combined with the use of blockchain data analysis technologies, is set to become a major trend in combating cryptocurrency crime.

Cryptocurrency and Criminal Activities

According to CoinMarketCap, the global market capitalization of cryptocurrencies has now exceeded $2 trillion. Cryptocurrencies are becoming increasingly popular due to their decentralized nature, anonymity, and cross-border transfer capabilities, providing many conveniences for users. However, these same features also make cryptocurrencies an attractive tool for money laundering, terrorism financing, and other illegal activities.

Statistics from the SlowMist Blockchain Security Incident Database indicate that since 2012, blockchain-related crimes have resulted in at least $33.4 billion in losses.

Cryptocurrencies can be used both for payments and investments, and their strong anonymity has led to a growing demand among transnational organized crime groups (such as those involved in ransomware and terrorism). In simple terms, cryptocurrencies significantly lower the operational costs for international criminal organizations, enabling them not only to leverage arbitrage opportunities to gain more funds but also to transfer large amounts of funds without raising suspicion. For instance, to circumvent regulatory measures implemented within the international banking system, some criminal organizations use online platforms that support anonymous donations to raise cryptocurrencies. Previously, Interpol revealed information about organized crime groups engaging in large-scale money laundering using cryptocurrencies. These cases highlight how the “virtual,” “anonymous,” “hard to trace,” and “cross-border” characteristics of cryptocurrencies make it difficult for any single country or region to regulate them effectively, presenting new challenges to law enforcement.

International Cooperation in Law Enforcement to Combat Cryptocurrency Crime

To address the law enforcement challenges posed by cryptocurrencies, we believe international cooperation is essential for effective regulation and enforcement. Law enforcement agencies from various countries need to work together to tackle the evolving methods and technologies of cryptocurrency crime, enabling precise action against criminal activities. Numerous successful cases of international cooperation in law enforcement in the cryptocurrency field have demonstrated the necessity and effectiveness of this trend:

– August 20, 2024: In collaboration between China and Thailand, China’s Ministry of Public Security successfully extradited Zhang Moumou, a suspect in economic crimes, from Thailand. Zhang was involved in organizing and leading pyramid schemes, marking a significant development in China-Thailand law enforcement and judicial cooperation. The group linked to Zhang engaged in online pyramid schemes by issuing virtual digital currencies, involving over 100 billion yuan and affecting more than 10 million members.

– May 2024: With the support of Eurojust and Europol, French police, in collaboration with authorities from Portugal, Germany, Italy, and Romania, arrested a suspect who used fraudulent means to cause losses of €700,000 to victims in Portugal. The suspect approached victims by expressing interest in acquiring commercial enterprises, gaining their trust, and convincing them to install cryptocurrency wallets, subsequently stealing their funds.

– February 19, 2024: The notorious ransomware gang LockBit’s website was seized during a joint law enforcement operation involving the UK’s National Crime Agency, the FBI, Europol, and Interpol.

– 2022 Operation “HAECHI III”: This enforcement operation seized illicit cryptocurrency proceeds worth $130 million, involving the participation of law enforcement units from 30 countries and regions, resulting in nearly 1,000 arrests of cybercriminals. Interpol also blocked nearly 2,800 bank and cryptocurrency accounts used for criminal purposes, including pig-butchering scams, investment fraud, online gambling, and cross-border money laundering.

– DarkMarket, one of the largest dark web markets globally, primarily facilitated illegal transactions using Bitcoin and Monero. In January 2021, German police, in coordination with law enforcement agencies from the US, UK, Denmark, Switzerland, and 15 other countries, successfully shut down DarkMarket, arrested key suspects, and froze millions of dollars in virtual assets.

These cases underscore the importance of international cooperation and targeted technological support. Regardless of where the illegal profits are located, international collaboration to recover assets and combat crime effectively reduces the risk of illegal activities involving cryptocurrencies.

The Role of Blockchain Technology in Combating Cryptocurrency Crime

In addition to international cooperation, the effective utilization of blockchain technology is crucial in combating cryptocurrency crime. Blockchain itself is a highly transparent and traceable distributed ledger, meaning that advanced analytical tools and machine learning algorithms can be employed to monitor transaction activities in real-time, identify abnormal transaction patterns, and effectively combat money laundering and other illicit transactions.

For example, specialized blockchain companies can analyze vast amounts of data they possess to prevent, identify, and trace cryptocurrency-related money laundering crimes, making technology a vital aid in preventing cryptocurrency crime and conducting investigations. Furthermore, while on-chain transaction data is publicly transparent, its anonymity and decentralized nature make it challenging to directly associate on-chain behavior with specific individuals. This necessitates law enforcement agencies to possess the technical knowledge required to effectively identify and collect evidence, seize illicit proceeds, and this can only be achieved through professional on-chain tracking and investigation training. In this context, blockchain security and compliance solutions like SlowMist AML (https://aml.slowmist.com) play a critical role in detecting, analyzing, and preventing cryptocurrency-related crimes.

Key Services

1. Compliance: SlowMist AML can perform risk identification on all wallet addresses and counterpart addresses within a client’s business system, helping clients avoid any potential associations with financial crimes or sanctioned entities while actively cooperating with and meeting regulatory requirements. Leveraging the SlowMist InMist Lab threat intelligence cooperation network, clients can stay informed of the latest hacking incidents and regulatory developments worldwide, enabling effective responses.

2. Investigation: SlowMist AML provides 24/7 emergency response for theft incidents, including analysis, tracking, and fund interception. By investigating any traces or information left by hackers, especially account information on centralized exchanges, OTC platforms, and wallet apps, SlowMist AML can create hacker profiles. It monitors and blacklists addresses where funds are held, intercepts funds, and attempts to negotiate with hackers using various methods to recover stolen assets. Supported by the SlowMist InMist Lab threat intelligence cooperation network, SlowMist assisted clients, partners, and public hacking incidents in freezing approximately $24.39 million in the first half of 2024.

3. Malicious Address Database: As a leading blockchain security company, SlowMist has been deeply involved in threat intelligence for many years, building a solid global threat intelligence cooperation network. Additionally, SlowMist AML utilizes artificial intelligence technology combined with blockchain big data to continuously accumulate on-chain and off-chain label data. Currently, it has amassed over 300 million address entity labels, covering more than 1,000 project entities, 500,000+ threat intelligence data points, and over 90 million risk addresses.

Case Studies

Here are some examples of SlowMist AML’s collaboration with global law enforcement agencies to recover stolen or defrauded assets:

– Assisting Chinese Mainland Police in Solving a Theft Case with Losses Exceeding $2.7 Million: In 2024, a user in Mainland China suffered a cryptocurrency theft with losses exceeding $2.7 million. Through close collaboration and technical support from Mainland Chinese police and SlowMist, the suspect was ultimately apprehended, and the stolen assets were fully recovered and returned to the victim.

– Assisting US Police in Freezing Over $1.2 Million: In 2024, a US-based company experienced a cryptocurrency theft incident with losses exceeding $1.2 million. With SlowMist’s technical assistance, US police promptly contacted relevant platforms to freeze the funds, preventing the stolen assets from being transferred and laundered by criminals.

– Assisting Taiwan Police in Solving a Fraud Case: In 2024, the SlowMist AML team assisted the Criminal Investigation Bureau of Taiwan, the Judicial Reform Foundation, and the XREX exchange platform in solving a cryptocurrency fraud case. This case may be the first in Taiwan’s judicial history where, without specific information on suspects or defendant identities, advanced blockchain tracking technology was used to prove the flow of illicit funds and the ownership of cryptocurrency assets, assisting law enforcement agencies in freezing and seizing assets, ultimately returning funds to the victims.

– Assisting Vietnamese Police in Recovering Some Defrauded Assets: In 2024, a user lost over $1.2 million after entering their mnemonic phrase on a fraudulent website. SlowMist provided on-chain technical assistance and contacted exchanges to freeze the funds. Through close cooperation with Vietnamese police, the victim ultimately recovered over 60% of the defrauded assets.

– Assisting Hong Kong Police in Investigating Several Cryptocurrency Crimes: In 2024, SlowMist assisted Hong Kong police in analyzing and investigating several cryptocurrency-related criminal cases, helping identify and analyze leads related to cryptocurrency wallets and trading platforms, significantly aiding in solving related cases.

– Assisting Singapore Police in Solving a Theft Case with Losses Exceeding $1.7 Million: In 2023, a user in Singapore had their cryptocurrency wallet stolen, with losses exceeding $1.7 million. SlowMist’s technical analysis helped identify the hacker’s profile and location, assisting the victim and Singapore police in successfully apprehending the suspect and recovering all stolen assets.

– Assisting Ukrainian Police in Freezing and Recovering Over $250,000: In 2022, a company suffered a hacking incident with losses close to $500,000. SlowMist provided on-chain technical assistance and contacted relevant exchanges, freezing and recovering over $250,000 worth of ETH.

– Assisting Canadian Police in Solving a Home Robbery Case: In 2022, a user in Canada was robbed, losing over $10 million in cryptocurrencies. With SlowMist’s technical support, Canadian police eventually helped the victim freeze and recover over 60% of the robbed assets and arrested multiple suspects.

Additionally, SlowMist AML offers on-chain investigation training for financial institutions and law enforcement agencies. For instance, SlowMist was previously invited to conduct training on tracking illegal cryptocurrency funds for the Hong Kong Police Force’s Cyber Security and Technology Crime Bureau (CSTCB), participate in the CCTC conference (Combating Cybercrime and Technology Innovation Conference) to deliver a speech on “Cryptocurrency Analysis and Tracking,” share insights on blockchain technology and cybersecurity defense in cybersecurity training sessions, and teach blockchain security offensive and defensive courses at the People’s Public Security University of China.

Conclusion

As the global digital economy continues to develop, cryptocurrencies are playing an increasingly important role in the financial system, and related regulatory issues are becoming more complex. We can anticipate that international cooperation will become more frequent and in-depth in the cryptocurrency field, covering various aspects of cryptocurrency regulation and enforcement. We believe that through such collaboration, the world can better address the new challenges posed by cryptocurrencies, helping to combat illegal activities and maintain market order, ensuring the security and stability of the financial system. SlowMist will also continue its efforts to build a safer blockchain ecosystem.

About SlowMist

At SlowMist, we pride ourselves on being a frontrunner in blockchain security, dedicating years to mastering threat intelligence. Our expertise is grounded in providing comprehensive security audits and advanced anti-money laundering tracking to a diverse clientele. We’ve established a robust network for threat intelligence collaboration, positioning ourselves as a key player in the global blockchain security landscape. We offer tailor-made security solutions that span from identifying threats to implementing effective defense mechanisms. This holistic approach has garnered the trust of numerous leading and recognized projects worldwide, including names like Huobi, OKX, Binance, imToken, Crypto.com, Amber Group, Klaytn, EOS, 1inch, PancakeSwap, TUSD, Alpaca Finance, MultiChain, and Cheers UP. Our mission is to ensure the blockchain ecosystem is not only innovative but also secure and reliable.

We offers a variety of services that include but are not limited to security audits, threat intelligence, defense deployment, security consultants, and other security-related services. We also offer AML (Anti-money laundering) solutions, Vulpush (Vulnerability monitoring) , SlowMist Hacked (Crypto hack archives), FireWall.x (Smart contract firewall) , Safe Staking and other SaaS products. We have partnerships with domestic and international firms such as Akamai, BitDefender, FireEye, RC², TianJi Partners, IPIP, etc.

By delivering a comprehensive security solution customized to individual projects, we can identify risks and prevent them from occurring. Our team was able to find and publish several high-risk blockchain security flaws. By doing so, we wish to help spread awareness and raise the security standards in the blockchain ecosystem.

💬Website 🐦Twitter ⌨️GitHub