[co-author Timothy Whittle]
On October 6, 2021, the United States Department of Justice (DOJ) announcement its plans for increased surveillance of the cryptocurrency market with the creation of a National Cryptocurrency Implementation Team (NCET) to conduct criminal investigations and actions against the misuse of cryptocurrencies. The NCET will focus on “crimes committed by virtual currency exchanges, mix-and-tumble services and money laundering infrastructure players” and will also help locate and recover assets lost due to ransomware payments and other fraud and extortion.
The creation of the NCET follows the directives of the DOJ October 8, 2020, publication of “Cryptocurrency: An Enforcement Framework”, which provides an overview of emerging threats and application challenges related to cryptocurrency. The published framework detailed three areas of enforcement intervention: (1) financial transactions associated with the commission of offenses; (2) money laundering and the protection of legitimate activities against taxes, returns or other legal requirements; and (3) crimes, such as theft, directly involving the cryptocurrency market itself.
The NCET will report to Kenneth A. Polite Jr., Deputy Attorney General of the Criminal Division. The team will combine the expertise of the Money Laundering and Asset Recovery Section and the Computer Crime and Intellectual Property Section to target cryptocurrency exchanges, infrastructure providers and other entities to combat “the misuse of cryptocurrency and related products to commit or facilitate criminal activity.” . The DOJ also announced its intention to develop its expertise in cryptocurrency and blockchain technologies across the agency to increase the application of ‘dark markets’.
The DOJ explained that the NCET will work closely with other federal agencies, such as the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Department of the Treasury, to pursue the following goals:
- Investigating and prosecuting cryptocurrency cases, which is a central part of a nationwide enforcement effort to combat the use of cryptocurrency as an illicit tool.
- Develop strategic priorities for investigations and prosecutions involving cryptocurrency, in consultation with the USAO, components of the department and investigative agencies involved in cryptocurrency investigations.
- Identify areas requiring increased attention in investigation and prosecution, including professional money launderers, ransomware programs, human traffickers, narcotics traffickers, and financial institutions working with cryptocurrency.
- Build and improve relationships with AUSAs and cryptocurrency-focused prosecutors with other components and litigation offices in the department to conduct cryptocurrency investigations and prosecutions.
- Develop and maintain relationships with federal, state, local, and international law enforcement agencies that investigate and prosecute cryptocurrency cases.
- Train and advise federal prosecutors and law enforcement agencies in developing investigative and prosecution strategies. This training and advice will include the provision of advice regarding search and seizure warrants, restraining orders, criminal and civil confiscation allegations, indictments and other pleadings.
- Support the coordination and sharing of information and evidence between law enforcement offices to maximize the effectiveness of ministry investigations, prosecutions and confiscations involving cryptocurrency.
- Collaborate and build relationships with private sector actors with expertise in cryptocurrency to advance the law enforcement mission.
NCET’s announcement is part of a larger federal effort to increase cryptocurrency enforcement. In June 2021, the DOJ announced that it had seized approximately $ 2.3 million in bitcoin as a result of a cyber ransomware attack. In September 2021, the Department of the Treasury Posted its very first sanctions against a cryptocurrency exchange to facilitate financial transactions for ransomware players.
Cryptocurrency exchanges, traders, and financial institutions engaged in the cryptocurrency market must be prepared to navigate an increasingly complex application environment due to the growing security interests of the federal government in ” financial systems, blockchain technology, tracing transactions and applicable criminal laws ”.