From January 22nd to 24th, 2020, a specialist conference of the Austrian police with a focus on cybercrime and cryptocurrencies took place in Vienna.

The most important thing about cryptocurrencies and investigations in brief:

  • Currencies are not bad per se, but they are used by fraudsters
  • Different forms of fraud
  • Investigators can intervene

Mimikama was invited in advance to present the planned training points and was able to gain insight into the police work of Department C4 of the Federal Criminal Police Office regarding cryptocurrencies.

The World Wide Web has become an indispensable part of our everyday lives over the last few decades, especially with the widespread introduction of smartphones. Whether it's communicating via messenger or ordering goods, without the Internet our world would hardly be at its current level of development.

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But the rapid development is also increasingly bringing its dark side to light, as criminals are also increasingly using the Internet for their machinations.

The Cybercrime 2018 management report (published by the Federal Criminal Police Office and the Federal Ministry of the Interior) shows that the number of crimes on the Internet has increased by 16.8% in Austria alone. In absolute numbers, this amounts to 19,627 crimes in 2018. For comparison, in 2012 there were only 8,866, less than half.

The perpetrator profile is clear; of the 7,980 suspects, 70.1% were men and 29.9% women and almost half were under 39 years old. The types of offenses range from internet fraud, sexual harassment, stalking and re-engagement.

An effective and simple method of becoming criminally active on the Internet and at the same time leaving as few traces as possible is to carry out all financial machinations using cryptocurrencies. There are currently dozens of different currencies, the best known of which are Bitcoin and Etherium.

INFOBOX: Cryptocurrencies – Bitcoin
cryptocurrencies are virtual means of payment.
These are based on decrypting cryptographic tasks. Cracking such tasks is called mining. The principle behind it is simple, individual cryptocurrencies are created in limited numbers. The more individual tasks, i.e. currency units, that are cracked as “mined”, the more difficult the next one is, similar to digging deeper and deeper for gold. While the initial tasks only take a few seconds, after a certain amount of time this can require the computing power of entire data centers. The individual unlocked currency units are stored in digital wallets and are encrypted by a private key that can be traded online. The passing on of the key is stored on a so-called blockchain. The value of the cryptocurrency depends on the trading volume and the difficulty of mining. Cryptocurrencies are particularly interesting for speculators because there is no government regulation and they can be passed on on an anonymous basis, meaning that states cannot collect taxes.

In Austria, trading Bitcoin is relatively easy and unregulated; you can buy it in any tobacco shop or at a suitable ATM, for example. Many small and medium-sized businesses also own Bitcoin or accept it as a means of payment.

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How does the interaction between cybercrime and cryptocurrencies work?

Mimikama has often warned about internet fraud in the past. Please refer:

Initially, a virus or encryption algorithm is written and offered for sale on the Internet. The police call this approach “Crime as a Service”. The malware is then purchased in a package containing thousands or even millions of email addresses by a criminal group (the logistical effort is often too complex for an individual) and sent.

Such emails are also called ransomware or blackmail Trojans.
The recipient of the email is either threatened or deceived into opening the email attachment or carrying out a download, which then results in the computer being encrypted by an algorithm. The user or owner of the computer is then blackmailed into saying that their PC will only be unlocked again when a certain amount of money is transferred to the blackmailer. The injured party must first purchase this sum in Bitcoin and transfer it to the perpetrator or perpetrators.

The advantage of blackmailing with Bitcoin or other cryptocurrencies is obvious.
Although Bitcoin trading can be verified, the perpetrators do not appear with their real names, but only with a user ID, which is anonymous so that it is not possible to identify who is behind the recipient. This chain of transfers is stored in so-called blockchains.

INFOBOX: Blockchains
Blockchains are a virtual, continuously expandable list of data sets. These are connected to each other using cryptographic methods. Each block contains the timestamp and transaction data of the previous block. Using cryptocurrencies as an example, the transfer, recipient and client are stored for each block. The system is considered particularly secure because encryption takes place in every single block.

Although this chain is visible to everyone, there is still the problem of anonymity online.

Nevertheless, at this point there is an opportunity for the investigators to actively intervene.
Since Bitcoin is just a cryptocurrency, using it in everyday life (paying rent, taxes, duties and insurance) is much more difficult. Ultimately, the perpetrator is interested in exchanging the cryptocurrency for real money such as dollars or euros. It is precisely this interface between the Internet and the real world that is the key for officials to stop the criminals. If the perpetrator has the equivalent of the Bitcoin transferred to his account, for example, the police can prove this and track down the owner of the account.
The big disadvantage of this method, however, is that this does not have to happen within a certain time. If the virtual currency is never paid out but is kept online, anonymity can be maintained.

Problems with tracking

Another problem is cross-border crime. If the perpetrator lives abroad, the investigative authorities are dependent on cooperation with foreign colleagues. But it is particularly important to note at this point that the networking of police internationally has increased enormously over the last few years and that the number of “safe spaces” for criminals is continuing to decrease.

In summary, it can be seen that crime is increasingly shifting to the Internet and occurs there primarily in combination with cryptocurrencies. The challenge for the investigating authorities is, on the one hand, to catch the perpetrators at the interface, i.e. the payout of virtual currencies into real money, and, on the other hand, in the global network of investigative authorities, since the perpetrators also operate across borders.

We recommend further reading our articles: “Security tips for everyday life on the Internet” and “How investigative authorities practice dealing with cryptocurrencies”

Information from the Cybercrime 2018 situation report, Federal Ministry of the Interior, Federal Criminal Police Office


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Notes:
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