IOCTA 2020 – Internet Organized Crime Threat Assessment (Europol)

[DdmrDdmr]

I've looked over the content of the recently released IOCTA 2020 report (note: this links to a Europol website: https://www.europol.europa.eu/activities-services/main-reports/internet-organised-crime-threat-assessment-iocta-2020 and linked therein pdf), to see specifically what mentions are made on Bitcoin (the report is interesting to whip through per se, but I’m focusing on the Bitcoin derivate here). The document is runs 64 pages long, but if anyone wants a brief summary, I’ve extracted some verbatim quotes I consider interesting. Proper context though should be derived from the completeness of the referenced document itself:

1.4. Cryptocurrencies facilitate payment for all forms of Cybercrime
<…> These activities have been long established with Silk Road emerging in 2011 and Cryptolocker hitting its first victims in 2013. At that time, more than 20% of transactions were directly attributable to criminal activity. Although the level of criminal abuse has grown substantially, the legitimate use of cryptocurrencies grew at a much faster rate. In 2019, the overwhelming majority of bitcoin transactions were linked to investment and trading activity so, despite considerable abuse, criminal activity corresponds to only 1.1% of total transactions <…>

The latter information is bases on a report by ChainAnalysis.

<…> The last two years have seen an increase in extortion spam, where the suspect attempts to frighten the victim with a promise of a devastating event should they not receive payment in cryptocurrency, typically bitcoin corresponding to hundreds or even thousands of euros <…>
<…> According to a recent study analysing a subset of 4 million intercepted sextortion emails, over 12 500 bitcoin addresses were extracted, 245 of which received one or more payment <…>

The above is interesting, as it partly quantifies the sextortion emails, and shows the usage of way more BTC addresses than I’d expected.

<…> The obfuscation methods continue to develop. Centralised mixers troubled with exit scams and high fees seem to be gradually replaced by non-custodial mixing solutions where users do not need to send bitcoins to a third party. Privacy-focused service aside, the bitcoin protocol itself is expected to soon implement features that will make it less transparent to casual observers and investigators alike. <…>

5.3. ADMINISTRATORS AND USERS ADAPT AS THEY AIM TO ENHANCE SECURITY AND RESILIENCE

<…> Administrators are also looking to upgrade their security apparatus with other new features. Some marketplaces are already shifting to wallet-less and user-less markets, adopting multi signatures on Bitcoin and Monero, lacking registration requirements and enacting no JavaScript policies <…>

5.5. PRIVACY ENHANCING WALLETS EMERGE AS A TOP THREAT, AS PRIVACY ENHANCING COINS GAIN POPULARITY
<…> Initially, Darkweb markets relied solely on Bitcoin. However, over the past few years this has changed. An increasing number of markets are recognising the benefits of offering multiple coin alternatives, including Litecoin, Ethereum, Monero, Zcash, and Dash. While Bitcoin still remains the most popular payment method (mainly due to its wide adoption, reputation and ease of use), the use of privacy-enhanced cryptocurrencies has somewhat increased albeit not at the rate expected by their proponents. Monero is gradually becoming the most established privacy coin for Darkweb transactions, followed by Zcash and Dash. All these privacy coins may present a considerable obstacle to law enforcement investigations <…>

Now the above just assess the situation and framework for their recommendations, which start on page 60 of their report. Amongst those figure:

<…>There is a persistent need for better cooperation with hosting services, social media platforms, and ISPs. Companies need to be more proactive in illegal content and activity and blocking it as soon as they detect it. One way of improving this is to invest in technologies that make sure their platforms are clean. They should also be able to demonstrate more willingness to assist law enforcement agencies to deal with, for example, CSE, and show improved openness and transparency.<…>

<…> Considering the fast nature of cybercrime, it is important to make the exchange of information in light of international cooperation faster by implementing channels with, for example, the relevant ISPs at the European level (VPN, anonymisers, anonymous email providers, cryptocurrency exchanges, etc.).<…>

<…> Darkweb threat actors increasing reliance on encrypted email services, privacy-enhanced cryptocurrencies and BPH providers pose a substantial problem to law enforcement. This calls for increased KYC type policies.<…>

<...> Two years,  4 million intercepted, not all of them, and only 250 payments? <...>

Payment addresses, not single payments (1 address-> n payments).

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[Charles-Tim]

In 2019, the overwhelming majority of bitcoin transactions were linked to investment and trading activity so, despite considerable abuse, criminal activity corresponds to only 1.1% of total transactions

I was wondering why United State SEC in a statement last year, 2019 says bitcoin is not used in money laundering and terrorism financing, I believed criminal activities of 1.1% is very low and would be the reason.

There is a persistent need for better cooperation with hosting services, social media platforms, and ISPs. Companies need to be more proactive in illegal content and activity and blocking it as soon as they detect it. One way of improving this is to invest in technologies that make sure their platforms are clean. They should also be able to demonstrate more willingness to assist law enforcement agencies to deal with, for example, CSE, and show improved openness and transparency

Centralization has helped to an extent, but it is very surprising that they are not able to handle malicious activities, only few are heard about while plenty are happening, that is why fiats which is more centralized is used in illegal activities as of now than bitcoin, and that is why centralized authorities are not able to handle scam activities correctly. I do not know why governments only want to be chasing scammers when they can also teach people how to avoid it, this has never even been a course of study in school. They are more focusing on what should not be the prerequisites, focusing on scam avoidance should be the first move while the rest can follow.

I do not even know what the governments are doing towards big companies like google that are helping scammers indirectly. But, while scammmers are using transparent fiats, they are able to handle it effectively as governments are not able to handle the scammers effectively. I also do not like blockchain not to be transparent, transparency do matters, which bitcoin provides.

With the level of scam seen in fiats, governments may be making ineffective efforts if they did not educate people how to avoid it irrespecrive of using bitcoin with transparent ledger or using cryptocurrencies  like monero that has non-transparent ledger, imo.

[joniboini]

I do not even know what the governments are doing towards big companies like google that are helping scammers indirectly. But, while scammmers are using transparent fiats, they are able to handle it effectively as governments are not able to handle the scammers effectively.

I think they won't do anything. I mean, Google and those big companies you're talking about probably send data to the government regularly. If anything, users action will probably affect them more than government's opinion especially if it is threaten their monopoly on the market.

That aside, expect more KYC in the future, and crackdown on exchanges/centralized services.

[jackg]

If European enforcement takes the leaves out of their own book then them. Having access to ISP information and vpn information in limited amounts is probably fine. Most vpns and they would probably not want to make it look like they've gleamed information that way as cybercriminals and standard privacy libertarians are normally a few steps ahead and can just move/obfuscate their data a different way...

The reduced number of fraudulent activities their claiming to happen on the chain now is definitely a positive sign and shows normal people are actually moving into crypto (rather than individuals using it for the anonymity).

[Upgrade00]

I was wondering why United State SEC in a statement last year, 2019 says bitcoin is not used in money laundering and terrorism financing, I believed criminal activities of 1.1% is very low and would be the reason.

The narrative that Bitcoin facilitates scams has been misleading and is getting less popular. It's not possible to make a direct comparison with alternatives like fiat, as it is far less transparent, but 1.1% is very low.

That aside, expect more KYC in the future, and crackdown on exchanges/centralized services.

This has been a recurring discussion for some time now; the increasing consequence of seeking privacy while using cryptocurrency. If more users of Bitcoin shifted away from centralized platforms, government agencies would not have a link that they can regulate.
Most users patronize CEXes for the liquidity and the convenience it offers as there is not enough P2P platforms to cater for global transactions. DEXes can offer such liquidity if more traders used it, but it is still somewhat regulated and can be shut down by governments or forced to request user information to operate.
I would also expect a lot more regulations as various governments consider establishing their CBDCs to control the digital market.

[Oshosondy]

This has been a recurring discussion for some time now; the increasing consequence of seeking privacy while using cryptocurrency. If more users of Bitcoin shifted away from centralized platforms, government agencies would not have a link that they can regulate.
Most users patronize CEXes for the liquidity and the convenience it offers as there is not enough P2P platforms to cater for global transactions. DEXes can offer such liquidity if more traders used it, but it is still somewhat regulated and can be shut down by governments or forced to request user information to operate.
I would also expect a lot more regulations as various governments consider establishing their CBDCs to control the digital market.

These are good points, centralized exchanges are more used by people, the centralized exchanges are hacked always. The best in term of hack proof are decentralized exchanges but people are not using it like cex, the main reason for this is because cex are flexible in trading orders while people do not still know about cex exchange that are hacked all the time, likely another one will be hacked before next year. For me I can not make use of cex because of the hack activities, I will prefer to buy using p2p and use the recommended wallet which is open-source non-custodial wallets having my privacy.

[pooya87]

In 2019, the overwhelming majority of bitcoin transactions were linked to investment and trading activity so, despite considerable abuse, criminal activity corresponds to only 1.1% of total transactions

I was wondering why United State SEC in a statement last year, 2019 says bitcoin is not used in money laundering and terrorism financing, I believed criminal activities of 1.1% is very low and would be the reason.

i'm skeptical about 1.1% too since it is still high and it is coming from a blockchain analyzing company and they always tend to exaggerate in their reports because if they say "we couldn't figure it out" or report the percentage to something minuscule they are basically making themselves obsolete.

if we think about it, this is not pre-2013 that bitcoin isn't really used for payments that much and people don't know it is not anonymous and the most popular thing is silkroad.
nowadays on one hand we have lots of bitcoin usage as payment both offline and online in a lot of countries, lots of usage as investment and even in some countries with failing local currency it is widely used as a hedge against their failing economy. on the other hand criminals stick to fiat or if they wanted cryptocurrencies they would use anon coins not bitcoin that provide them with a much better anonymity compared to bitcoin.

[hulla]

In 2019, the overwhelming majority of bitcoin transactions were linked to investment and trading activity so, despite considerable abuse, criminal activity corresponds to only 1.1% of total transactions

I was wondering why United State SEC in a statement last year, 2019 says bitcoin is not used in money laundering and terrorism financing, I believed criminal activities of 1.1% is very low and would be the reason.

It good to know that the US SEC was totally honest about the situation of cryptocurrency being used as an instrument of money laundering but I believe the reason why they rated crypto 1.1% being used to finance criminal activities was because of the 2 Trillion dollars money launder in the secret government documents that set off how the Western banking move trillions of dollars of dirty money. Mind you, the whole crypto market cap was not up to a Trillion dollars.

[posi]

I do not know why governments only want to be chasing scammers when they can also teach people how to avoid it, this has never even been a course of study in school.

First, I dont love politics or like the government strategy but we cant expect the government to do everything for us while fold hands or complain about the situation we know they dont care about. However, there are some TV shows/online site that teach people how to avoid scammer and how to understand phishing activities which this forum is among one of those site but how many newbies abide by the teaching? Do you know the numbers of newbies that later said they were scammed by the same siite they are advised to stay away from?
Second, there are some Universities and online courses where people can learn cybersecurity

They are more focusing on what should not be the prerequisites, focusing on scam avoidance should be the first move while the rest can follow.

Thats because once the scammers are apprehended most of the fund owner may not have any right to get it back. An example is Twitter hacker.

I do not even know what the governments are doing towards big companies like google that are helping scammers indirectly.

A billionaire family and rival once sued Google concern that but when Google explain the whole concept of their search engine they are find innocent cause their search used crawling, indexing and ranking to provide result it people that need to be careful of the content they submitted online.

[stompix]

When I read the title first time I understood "IOTA -Internet Organized Crime", I thought another scandal has hit that coin  

Now, back to the document:

1.4. Cryptocurrencies facilitate payment for all forms of Cybercrime
<…> These activities have been long established with Silk Road emerging in 2011 and Cryptolocker hitting its first victims in 2013. At that time, more than 20% of transactions were directly attributable to criminal activity. Although the level of criminal abuse has grown substantially, the legitimate use of cryptocurrencies grew at a much faster rate. In 2019, the overwhelming majority of bitcoin transactions were linked to investment and trading activity so, despite considerable abuse, criminal activity corresponds to only 1.1% of total transactions <…>

If we consider 2013 with an average ~50k tx compared to right now, chain analysis would mean that today we're seeing half of the number of transactions being used by criminals, 10k in 2013 to 5k right now.
Well, I find it a bit hard to believe, not the last number but the first, I seriously doubt the 20%, remember that we're talking about a period when SD was "spamming" the network and all the records in the number of daily tx we're mainly its fault I  think they are overestimating usage back in those days.

Probably because they consider this:

Although Initial Coin Offering scams and a wide range of Ponzi schemes abusing the increasing popularity of cryptocurrencies dominated criminal abuse by volume, most of the crimes reported to law enforcement included various forms of extortion.

Back in the day you sent directly coins to an address and got scammed, now you do it via an exchange and it might look as it's a normal trade but the user still gets scammed and fleece because the ICO/IEO/DeFi he invested in is garbage.

<…> The last two years have seen an increase in extortion spam, where the suspect attempts to frighten the victim with a promise of a devastating event should they not receive payment in cryptocurrency, typically bitcoin corresponding to hundreds or even thousands of euros <…>
<…> According to a recent study analysing a subset of 4 million intercepted sextortion emails, over 12 500 bitcoin addresses were extracted, 245 of which received one or more payment <…>

The above is interesting, as it partly quantifies the sextortion emails, and shows the usage of way more BTC addresses than I’d expected.
[/quote]

Two years,  4 million intercepted, not all of them, and only 250 payments? I don't think its something out fo the ordinary, one payment every 3 days out of at least 20 000 targeted people in that period, probably it's indeed way higher than the Nigerian Prince scheme but also those were way more targeted and could have indeed hit home in a lot of cases.

Skimmed through it, mainly looking for numbers, I think the report although it wants to highlight threats and how criminals might adapt and pose new threats to new things like IoT it still paints a neutral situation, it's not all smile and sunshine but it's not getting out of hand either.

[MinMan]

I like the fact that Bitcoin and some other cryptocurrencies creates privacy, but sometimes I don’t like this privacy because some dumb people are taking it the wrong way. But, I also like the fact that one of the statements shows that this time around most of the uses for cryptocurrency is investment and trading which is true, although that still doesn’t change the fact that there are still those that are using for the wrong purpose and they need to be punished for it.

[CryptopreneurBrainboss]

I like the fact that Bitcoin and some other cryptocurrencies creates privacy, but sometimes I don’t like this privacy because some dumb people are taking it the wrong way.

They're not dumb instead they're smart as it take a smart individuals to the advantage bitcoin offers to choose it over other fiat. Without the introduction of the currency, these crimes would had still be functioning and getting the funding through others means that the general public feel is safe and secure which isn't the case. Every payment options is been used illegally in one way or the other. The government are just mad that of bitcoin gives the power back to the individuals and not a centralized body for them to oversee it.

Excluding the fact that it's a blockchain company that's providing this information still it should not be surprising that their findings came out with an impressive result of bitcoin been used mainly as an investment options and also for trading, just like other currency and digital payment option the rate at which this currency are used for crime can't overshadowed the legitimate used of the currencies since the currency wasn't developed for the crime purpose.

I would also expect a lot more regulations as various governments consider establishing their CBDCs to control the digital market.

This is something we can't just ignore, the community is searching for more global acceptance, therefore we'll have  no option but to scarify our privacy for that to be happen.

[BTCappu]

I was wondering why United State SEC in a statement last year, 2019 says bitcoin is not used in money laundering and terrorism financing, I believed criminal activities of 1.1% is very low and would be the reason.

Yeah, I have read a news last week that there were some people caught in this act of financing terrorism, they were using cryptocurrency gift cards or something. If I can remember, I think this happened in France. Can’t remember much about how it happened again.

[NotATether]

If European enforcement takes the leaves out of their own book then them. Having access to ISP information and vpn information in limited amounts is probably fine. Most vpns and they would probably not want to make it look like they've gleamed information that way as cybercriminals and standard privacy libertarians are normally a few steps ahead and can just move/obfuscate their data a different way...

But look at the collateral damage government inspection is doing to normal VPN users. Most of the time, law enforcement can't catch the real criminals because they use too much anonymizing technology, or they get a lead but there is too much bearaucracy higher up to pursue it, so what happens is innocent people start getting arrested and raided just for using a VPN that's sharing an IP address with criminals.

Plus there's no evidence that law enforcement pursues cryptocurrency crimes with priority, they usually give more attention to crimes that have a risk of interfering with their political interests (such as the bitcoin doubler twitter hack that could have been used to manipulate US election results instead).

The end result is half-hearted attempts to abstain people from using privacy tools, aggressive inconveniences for people who still use such tools (in the the form of captchas and IP range bans) without reducing cybercrime rates at all, and even law enforcement doesn't get what it wants, to apprehend it's wanted people.

[jackg]

But look at the collateral damage government inspection is doing to normal VPN users. Most of the time, law enforcement can't catch the real criminals because they use too much anonymizing technology, or they get a lead but there is too much bearaucracy higher up to pursue it, so what happens is innocent people start getting arrested and raided just for using a VPN that's sharing an IP address with criminals.

Plus there's no evidence that law enforcement pursues cryptocurrency crimes with priority, they usually give more attention to crimes that have a risk of interfering with their political interests (such as the bitcoin doubler twitter hack that could have been used to manipulate US election results instead).

The end result is half-hearted attempts to abstain people from using privacy tools, aggressive inconveniences for people who still use such tools (in the the form of captchas and IP range bans) without reducing cybercrime rates at all, and even law enforcement doesn't get what it wants, to apprehend it's wanted people.

Has this happened, people getting caught using the same ip as a criminal? Surely they have some sort of defense in that case if they're using a vpn?

I'd rather get democratic countries to have to cosign each others Warren's but I can't see that working out well... (they'd just say "sign ours and we'll sign the same.number of yours"...

[Francis Freeman]

I do not even know what the governments are doing towards big companies like google that are helping scammers indirectly. But, while scammmers are using transparent fiats, they are able to handle it effectively as governments are not able to handle the scammers effectively.

I think they won't do anything. I mean, Google and those big companies you're talking about probably send data to the government regularly. If anything, users action will probably affect them more than government's opinion especially if it is threaten their monopoly on the market.

That aside, expect more KYC in the future, and crackdown on exchanges/centralized services.

Everybody knows that money laundering is something which happens more in fiat than using Bitcoin. The main issue the government wants to do this is to stop something which they can't have control over.
So they are introducing strict measures and making it harder to buy bitcoins and other form of currency exchange which they can't have control over.

[NotATether]

Has this happened, people getting caught using the same ip as a criminal? Surely they have some sort of defense in that case if they're using a vpn?

I'd rather get democratic countries to have to cosign each others Warren's but I can't see that working out well... (they'd just say "sign ours and we'll sign the same.number of yours"...

Yeah it happened a few times.

https://www.abajournal.com/magazine/article/tor_technology_police_warrants_innocent
https://www.computerweekly.com/news/252456885/Innocent-people-arrested-following-surveillance-blunders-IPCO-reveals
https://nakedsecurity.sophos.com/2018/01/02/ip-address-errors-lead-to-wrongful-arrests/

Though all of these cases were ISPs sharing IP addresses between people. One ISP even lead the police to a random location (!) on multiple occasions because the ISP couldn't find a more specific location for them.

I haven't seen any cases involving VPNs yet (the way Hola VPN was designed put its users dangerously close to police searches like these, but none happened fortunately), but at the same time there's nothing stopping a VPN provider from giving police a wrong lead like those ISPs above did, especially the ones that keep logs.