British police forces have made impressive seizures of cryptocurrencies, but their total collection may be a fraction of the illicit funds being used in the UK.
This is the conclusion of the New Scientist, after it used Freedom of Information (FoI) requests that revealed 12 of the UK’s 48 police forces have seized bitcoin and other cryptocurrencies worth £322 million during criminal investigations during the past five years.
That startling stat comes after blockchain analysis firm Chainalysis on Thursday warned that cryptocurrency-linked crime surged to a record high last year in terms of value in 2021, with illegal addresses receiving $14 billion in digital currencies, up 79 percent from $7.8 billion in 2020.
But those numbers don’t tell the full story, warned Chainalysis, and said cryptocurrency usage is growing faster than ever before.
Across all cryptocurrencies tracked by Chainalysis, total transaction volume grew to $15.8 trillion in 2021, up 567 percent from 2020’s totals.
Chainalysis said that given that strong adoption, it’s no surprise that more cybercriminals are using cryptocurrency. But the fact that the increase was just 79 percent – nearly an order of magnitude lower than overall adoption – might be the biggest surprise of all.
Sometimes the police stumble upon cryptocurrencies by mistake.
In May 2021, police in the West Midlands launched a raid at what they thought was a cannabis farm stealing electricity.
However they were surprised when the location turned out to be a bitcoin mining operation instead.
Meanwhile the data from the New Scientist pointed out that while British police had seized cryptocurrencies valued at almost a third of a billion pounds during criminal investigations over the past five years, this figure may be only a tiny fraction of the illicit funds being used in the UK.
This is because UK police face significant technological and legislative hurdles when investigating crimes involving cryptocurrencies.
And The New Scientist said the actual seized figure may be far higher because 15 police forces didn’t respond to requests or refused the request to provide information.
Bitcoin represented over 99.9 percent of the value of seized cryptocurrencies in the UK. That said, small amounts of Ethereum, Dash, Monero and Zcash were also reportedly confiscated.
Detective chief inspector Joseph Harrop of the economic crime unit at Greater Manchester Police was quoted as saying that the adoption of cryptocurrencies by criminals was unexpectedly fast, and forces are scrambling to gain new skills to deal with cases and seize funds.
His strategy has been to recruit civilian staff with relevant technical experience in cryptocurrencies and train them to work with detectives.
One of the issues for British police, is that even if wallets are found, there are legal hurdles they have to overcome in order to acquire them.
The UK’s Proceeds of Crime Act 2002 gives police the ability to seize cash if there is a suspicion that it was gained from criminal activity, even if there has been no conviction.
But it seems that police powers to seize non-cash property, including cryptocurrencies, are narrower in scope and require a conviction, even though cryptocurrency funds are essentially used as cash.
And finally the biggest problem posed to British police (and indeed all law enforcement around the world, is that cryptocurrencies are protected by extremely strong encryption, meaning that police might discover a wallet but still find it impenetrable without an encryption key that suspects are unlikely to reveal.
“If we recover laptops, USB sticks, they might have a level of encryption on and, yes, there’s a difficulty in getting inside it,” Harrop reportedly said, unless suspects have written down their password, which happens more often than you might think.
“As daft as it sounds, sometimes people do leave golden nuggets or strong evidence where they might literally have the stuff that we need written down on a piece of paper,” he reportedly said.
The UK’s National Crime Agency refused to say how much cryptocurrency it has seized, and the organisation, like intelligence agencies MI5 and GCHQ, is exempt from FoI legislation.
The news that British police has seized over £300 million in crypto assets drew a reaction from Jake Moore, who used to be the head of digital forensics at Dorset Police, but who is now the global cybersecurity advisor at ESET.
“Police forces have come so far in digital investigations yet the final step of confiscation is simply too difficult to examine in many situations,” noted Moore. “The key design of cryptocurrencies is to keep them secure from interception from anyone, whether that be a threat actor or law enforcement plus they were not intended to have a back door for any reason.”
“This naturally causes a problem for police forces wanting to seize through the original procedures they are all used to with old fashioned finances,” said Moore. “In some cases, criminals may be locked up without giving away access to their funds only to see huge returns on their release from jail.”
“Digital investigations still remain in their infant phase and require far more resources to improve fighting this growing criminality,” said Moore. “Cybercriminals are very aware of the well documented evasion tactics available but policing is improving at a rate that will slowly catch up in time.”
Moore suggested that deploying better surveillance techniques on known suspects, increasing intelligence and improving the profiling on those who are thought to be involved will help build stronger evidence to recover and seize funds.
But Moore said the cost of this could potentially outweigh the amount that is recoverable in many cases.