Crypto is Famously Private — Is it Being Used By Traffickers?
Penned by Clea Graysen
Human trafficking is a hidden crime, making estimating the number of victims difficult — and the pandemic has possibly worsened the situation. This is because traffickers target the most vulnerable people, and the pandemic-induced recession has resulted in people being out of work or school, and without social support. Victims are exploited in various ways; women are typically trafficked for sexual exploitation, whereas men are mostly used for forced labor. Other reasons for being trafficked include forced marriages and organ removal.
Offenders have successfully integrated technology into their business model to make trafficking easier, from recruitment to exploitation. But a relatively new addition to their process is the use of cryptocurrency as payment. The use of crypto is especially evident in child sexual abuse material (CSAM). This is due to child sex trafficking being perhaps the most common form of human trafficking. The connection between crypto and CSAM was established when Law Enforcement Agencies (LEA) found identifiers to crypto wallets in CSAM forums. Mentions of crypto can be seen on a “Send me a private message” post, or the first page of some CSAM Dark Web forums where there is a login wall. Cryptocurrency requirements seem to sometimes be a step for membership candidature in certain forums. CSAM, and human traffickers in general, are aware that both human traffickers and people from LEA lurk on the dark web, so they’re careful of how they operate. This makes it a challenge to track them down.
Why is cryptocurrency being used for trafficking?
Crypto has anonymizing features that make it an attractive option for criminals to pay for human trafficking activities as it helps them avoid detection. The Government Accountability Office has reported an increase in the use of cryptocurrency by criminals. Crypto kiosks are a kind of crypto ATM that can be located in public places like convenience stores. They allow more people to access virtual currencies through a tangible and familiar process.
Paige Stewart, AML Investigations Analyst at DigitalMint, explains that “in the case of sex trafficking, these kiosks are typically used to buy ads that are posted on adult service websites. This method is also used by escorts. One sign of trafficking includes multiple women using the same bitcoin wallet or one account being used to purchase multiple ads.”
Over the past two years, crypto kiosks have skyrocketed from 6,369 to 34,500 worldwide — and about 30,508 of those are in the U.S. Companies that make these crypto kiosks are required to register with the Treasury Department’s Financial Crimes Enforcement Network. However, they don’t need to routinely report the specific locations of these machines. This makes it difficult for the government to identify whether kiosks are placed in areas of high risk for trafficking. The ease of using crypto and the difficulty of the government to trace transactions of crypto kiosks make crypto an ideal way for criminals to pay.
What is being done to stop trafficking?
Cryptocurrency has been known as a decentralized and anonymous, and thus safe, way to conduct transactions. This also gives the impression that crypto makes tracking those who are paying for human trafficking impossible. Fortunately, law enforcement is managing to grow along with the crypto industry. Thanks to ever-evolving criminal justice training programs, computer forensic investigators are being taught the latest digital trends, which now cover the criminal use of blockchain and cryptocurrencies.
Crypto can be created, moved, and stored outside the reach of government and financial institutions. However, transactions are actually out in the open because payments are recorded on the blockchain. Blockchain is a shared digital ledger that records and stores data of any kind — including crypto transactions. The technology is named such because it can be thought of as a “chain” made up of individual “blocks” of data. Identical copies of this chain are held on multiple computers called nodes.
Aside from this setup, the process of adding new blocks to the chain is what makes blockchain highly secure. Before a new block is added to the ledger, most of the nodes must verify and confirm the legitimacy of the data of that block. In the case of crypto, it’s ensuring that the transactions were not fraudulent. Some of the transaction details on the ledger include the amount, time, the wallet that money was sent from, and the wallet that received the money.
Crypto can be traced by these investigators with the help of “digital breadcrumbs” — which is a difficult, but not impossible, process.
Stewart says that “there are blockchain forensic tools that can analyze bitcoin wallets and group them into clusters to provide attribution. Some examples of these tools include Chainalysis, CIphertrace, and Elliptic. They can identify exchanges, capture information from darknet markets, adult service websites, and other illicit actors.”
Data is also sniffed by mining crypto, and past internet histories of criminals are utilized. Then the accumulated data is cross-referenced with KYC information from crypto exchanges to identify wallet owners. From there, analyzing transactions made by those same wallets is relatively easier.
Though the process of tracking funds seems complicated, it’s actually faster compared to using banks, which can lead to months or years of navigating paperwork.
Aside from directly tracking down perpetrators, governments and organizations can also interrupt the process before payments can be made or before the exploitation can be done. For instance, transportation and hospitality services can be heavily regulated, since 80% of sex trafficking involves hotels and motels. Enhanced customer vetting and the use of suspicious activity reports can also help service businesses, like Uber and Airbnb, be more aware of how they can be used by human traffickers and prevent it.
The U.S. government has also released the Executive Order on Combating Human Trafficking and Online Exploitation in the United States in 2020. The policy aims to provide resources to aptly prosecute criminals, assist victims, and give prevention education to prevent human trafficking.