Speaker: New Technologies Bring New Challenges for Law Enforcement

Chris Gaetano
Published Date:
Nov 29, 2018
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While the rapid pace of technological change has brought new tools to the fingertips of law enforcement, it has also created worrisome roadblocks that New York County District Attorney Cyrus Vance Jr., a speaker at the Foundation for Accounting Education's Anti-Money Laundering Conference Nov. 28, said have stymied efforts to combating financial crime.

One of the major sources of worry he pointed to was the development of cryptocurrencies such as bitcoin, due to both their general lack of oversight as well as their largely anonymous nature. Following the money is an essential part of many criminal investigations, but this has become more difficult to do as cryptocurrencies rise in popularity. 

"What many fail to recognize when it comes to cryptocurrencies is there's no oversight virtually, unlike established markets where bad behavior is identified and punished. Instead, bad actors are often able, with impunity, to use cryptocurrency in commission of crimes, and it's very difficult for law enforcement to track these transactions," he said. 

Because of the difficulty in tracing them, he said, cryptocurrencies have become the preferred way to pay for criminal services or contraband goods. He also pointed to their increasing role in ransomware attacks, noting that hackers used to demand payment in U.S. dollars but now almost always ask for cryptocurrencies instead. The field has also become fertile ground for scammers of all stripes, ranging from sellers taking tokens for goods or services they never deliver to investment scams that lure victims with promises of outlandish returns. 

"In one case, investors were led to believe they were funding the development of a new type of cryptocurrency, and they lost hundreds of thousands when it was revealed the entire operation was a Ponzi scheme," he said.  

Vance also pointed to the increasing efficacy of cryptography and tech firms' recent unwillingness to help law enforcement break through it. He noted that, until about 2014, prosecutors could access the contents of any smartphone provided they had a warrant. After that point, though, Apple changed its devices so that not even the company could see inside, with other companies soon following suit. Vance estimated that, since then, law enforcement can get into only half the devices they try to access, and that's even with outside experts coming to help. This, he said, is a major problem. 

"Everyone in the criminal world uses smartphones, just like all of us do," he said. "Criminals have moved off paper like you have, and smartphones are used for every aspect of criminal enterprises. ... If we can't access the device, we can't access the information necessary to prosecute the individual." 

He said his office right now is working on a case involving what he said was a very significant recruiter for ISIS who communicated with prospects only on encrypted messaging platforms. 

These two developments play into another major challenge to law enforcement in general: the rise of cybercrime. Vance said that he is overwhelmed by what he sees as a "45 degree angle rise in cybercrime" and that it seems as though the United States is "still trying to get its head around what we can do about this." 

"Today, cybercrime is unremitting, it is borderless, and it changes so quickly in terms of techniques and skill sets that it truly makes it very difficult, and in some cases impossible, to have a prosecution strategy, a getting guys in court strategy, that is actually effective enough to deal with the volume of problems and situations we are facing," he said. 

Addressing cybercrime in the past decade, he said, has led to a philosophical change in criminal prosecution that incorporates prevention as a major component alongside the more traditional investigation and prosecution angles. To illustrate, he drew a parallel with gun trafficking.

"I think it's clear and obvious in the world of gun trafficking that if I can keep the gun out of the hands of a 16-year-old, it's a far better outcome than prosecuting that young man who used the gun to kill someone," he said. 

Much of these prevention efforts, though, require a coordinated global effort, and Vance said that the criminals targeting New York are often  the same ones targeting other major cities such as  London. With this in mind, he and other law enforcement professionals around the world have formed a nonprofit organization called the Global Cyber Alliance, which seeks to provide both education and tools for businesses and organizations to protect themselves against incursions, particularly those that can't afford to spend $10 million on a sophisticated cybersecurity system. 

"For this prosecutor, if I can stop 300 million phishing emails, that's a much bigger impact on crime fighting than if we had arrested 50 cybercriminals in that same time period, so our focus will be very much on prevention, to bring in allies to help spread the work of the Global Cyber Alliance," he said. 

However, not every challenge is technological. Vance also said that another major obstacle in combating financial crimes is the United States' lack of transparency when it comes to incorporating businesses. Determining the actual beneficial owner of a U.S.-based entity can be very difficult, in contrast to doing so for entities based in many other countries; he said this lack of transparency has time and time again been a thorn in the side of prosecutors. 

"In any investigation of a white-collar nature, we must follow the money to identify what the evidence is and who is most culpable, which means issuing subpoenas to financial institutions and pursuing leads we hope their records will provide," he said. "But today, and it has been this way for the nine years I've been DA, too often these leads go nowhere, and our investigators have eaten up days and months only to hit a wall."

On a "near daily basis," his office encounters a company or network involved in a suspicious activity but is unable to determine who is actually controlling and benefiting from it. Consequently, his office cannot identify an actual suspect. He ruefully noted that if the company had incorporated in the Cayman Islands, which does collect beneficial ownership information, a prosecutor would actually be better positioned to root out financial crimes than if they'd formed in the United States instead. 

"Ironically, the U.S. is one of the easiest places in the world to open anonymous companies to launder money, often time with impunity," he said. 

He called for a federal law that requires beneficial owners to be identified on state incorporation forms. This, he said, would improve prosecutors' ability to attack not just financial crime but terrorist financing and a host of other crimes as well. It would also, he said, improve the United States' credibility with law enforcement partners. 

"We routinely collaborate with foreign law enforcement agencies, but it's detrimental to these partnerships and frankly embarrassing when we have to tell international law enforcement we can't assist them in taking down U.S. criminal enterprises because the identity of the owners is beyond our reach," he said. 

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