Canadian police tackling crypto crime are now using Chainalysis software to trace transactions, track suspects, and see where funds have been deposited, an upgrade that they believe will allow them to return more stolen funds to victims.
Sergeant Kevin Talbot of the Lethbridge Police Service (LPS) Economic Crimes Unit announced on Friday that the force would be adopting a software program called Reactor developed by the blockchain forensics expert.
As reported by the Lethbridge Herald, according to Talbot, it’s unusual for local police forces like the LPS to have such tech.
“We’ll get to the point where we have transaction data but we’re unable to trace it because it requires special programming to do these things,” Talbot said (Via the Lethbridge Herald).
The adoption comes at a time when police are seeing a trend of crypto investment scams according to Talbot. Now, he says, the force has its “own training and programming to do it ourselves.”
Read more: Ontario ‘crypto king’ allegedly held ransom by investor who lost $740K
How does the new software work?
First, police input wallet addresses and transactions. They can then track crypto from a victim’s wallet address as it makes its way to an exchange. Once they’ve discovered the exchange, they can use judicial powers to uncover who the account holder is and if there are any remaining funds that can be seized.
Talbot says they’ve had a 100% success rate in tracing crypto to exchanges but have only seized funds from an exchange on one occasion. Despite this, Talbot remains optimistic and says, “We expect we’ll have more success in [seizing crypto] in the future.
“Our priority is to find out where the funds went and seize them and return all or a portion of those funds back to our victims. That’s our ultimate goal.”
Read more: UAE-based scammer gets 8 years in US prison after forfeiting 151 bitcoin
It’s not all smooth sailing, however. According to Talbot, “We’d love to prosecute someone but often individuals involved are out of the country which makes it a little more difficult to prosecute.” He added, “There are occasions where they’re local or at least in North America.”
According to the Chainalysis website, the software allows “users with minimal training to create powerful visualizations of cryptocurrency flows. Trace the flow of funds through an unlimited number of ‘hops’ and link suspicious activity to real-world entities.”
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In the recent article discussing Canadian police using Chainalysis software to combat crypto crime, several key concepts are highlighted:
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Chainalysis Software:
- Chainalysis is a company that specializes in blockchain analysis and provides software solutions for tracking and investigating cryptocurrency transactions.
- The software, in this case, is called Reactor, developed by blockchain forensics experts. It is designed to help law enforcement trace cryptocurrency transactions, track suspects, and analyze the flow of funds.
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Lethbridge Police Service (LPS) Economic Crimes Unit:
- The LPS Economic Crimes Unit is a specialized division within the Lethbridge Police Service focused on investigating financial crimes, including those involving cryptocurrency.
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Crypto Investment Scams:
- Sergeant Kevin Talbot mentions a trend of crypto investment scams. This refers to fraudulent schemes where individuals or organizations deceive others into investing in fake or non-existent cryptocurrency projects.
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Blockchain Forensics Expert:
- The article mentions that the software is developed by a blockchain forensics expert. These experts are individuals with specialized knowledge in analyzing blockchain transactions and identifying patterns or anomalies that may indicate illegal activities.
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Tracking Crypto Transactions:
- The police input wallet addresses and transactions into the software to track the movement of cryptocurrency from a victim's wallet address to an exchange.
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Seizing Funds:
- Once an exchange is identified, law enforcement can use judicial powers to uncover the account holder's identity and determine if there are funds that can be seized. The goal is to return stolen funds to victims.
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Challenges in Prosecution:
- Sergeant Talbot acknowledges the challenges in prosecuting individuals involved in crypto crimes, especially when they are located outside the country. The global nature of cryptocurrencies can make it difficult to bring perpetrators to justice.
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Chainalysis Software Features:
- According to the Chainalysis website, the software allows users with minimal training to create visualizations of cryptocurrency flows. It enables tracing the flow of funds through multiple transactions and linking suspicious activity to real-world entities.
This information demonstrates the Canadian police's proactive approach to combating crypto crime by leveraging advanced blockchain analysis tools like Chainalysis' Reactor software. The challenges faced in prosecution highlight the need for international collaboration in addressing cryptocurrency-related crimes.
