Bitcoin: Virtual currency to Finance Organized Crime, Terrorism, Human Trafficking and Pornography

ISIS. Are they Using Bitcoins to Fund Criminal Activities?

https://securityintelligence.com/isis-are-they-using-bitcoins-to-fund-criminal-activities/

The Islamic State of Iraq and Syria (ISIS) has been called the world’s richest terror group. While the group generates the majority of its funds through oil fields seized in northern Iraq and Syria, it still relies on a number of other ways to secure financing. Donations from wealthy sympathizers greatly helped ISIS when it was first established. However, now that global governments are aware of ISIS and actively look to track and block all funding efforts through banking channels, donations have become harder to receive. These difficulties have not stopped ISIS from seeking ways to bypass sanctions and money-laundering filters, however. The group has begun to use cryptocurrencies such as Bitcoins as it looks for anonymous and untraceable ways to transfer money.

The ISIS-Bitcoin Nexus

Like most forms of technology, fraudsters, criminals and terror groups will find ways to exploit them for nefarious uses — Bitcoin is no different. Due to its anonymity and untraceabilitiy, it is used for criminal activities such as laundering money, buying and selling illegal goods and services and transferring money to support criminal or terror activities. Al-Khilafah Aridat: The Caliphate Has Returned, a pro-ISIS blog, discusses how Bitcoins can be used to fund the caliphate. The post states that they are untraceable by Western governments and, therefore, they will not be stopped by regulatory screening processes. The blog then discusses the decentralized nature of virtual currencies, specifically stating that they are able to access markets that cross all borders and nation-state regulations to send money instantly and in a way that is untraceable by “Kafir” governments.

In an additional step to keep the senders’ and receivers’ identities secret, the blog post discusses the use of dark wallets. Dark wallets offer Bitcoin users more protection in relation to privacy and identity. It is also widely known that dark wallets may enable serious crimes such as murder, child pornography, drug and weapon sales and terror group financing.

According to the blog, Bitcoins are an entirely anonymous donation system that could send millions of dollars instantly from the United States, United Kingdom, South Africa, Ghana, Malaysia and Sri Lanka.

Child abuse imagery found within bitcoin's blockchain

https://www.theguardian.com/technology/2018/mar/20/child-abuse-imagery-bitcoin-blockchain-illegal-content

German researchers have discovered unknown persons are using bitcoin’s blockchain to store and link to child abuse imagery, potentially putting the cryptocurrency in jeopardy.

The blockchain is the open-source, distributed ledger that records every bitcoin transaction, but can also store small bits of non-financial data. This data is typically notes about the trade of bitcoin, recording what it was for or other metadata. But it can also be used to store links and files.

Researchers from the RWTH Aachen University, Germany found that around 1,600 files were currently stored in bitcoin’s blockchain. Of the files least eight were of sexual content, including one thought to be an image of child abuse and two that contain 274 links to child abuse content, 142 of which link to dark web services.

While the spending of bitcoin does not necessarily require a copy of the blockchain to facilitate, some processes, such as some mining techniques, require the downloading of the full blockchain or chunks of it.

“Since all blockchain data is downloaded and persistently stored by users, they are liable for any objectionable content added to the blockchain by others. Consequently, it would be illegal to participate in a blockchain-based systems as soon as it contains illegal content,” the researchers wrote.

Since mining is essential for the function of bitcoin, as the process records the transactions into the blockchain to verify trades and generates new bitcoin in the process, having illegal content such as child abuse imagery within the blockchain could cause significant issues for the currency.

“We anticipate a high potential for illegal blockchain content to jeopardise blockchain-based systems such as bitcoin in the future,” the researchers wrote.

This is not the first time warnings over the ability to store non-financial data within the blockchain have been issued. Interpol sent out an alert in 2015 saying that “the design of the blockchain means there is the possibility of malware being injected and permanently hosted with no methods currently available to wipe this data”.

The agency warned that the technology could be used in the “sharing of child sexual abuse images where the blockchain could become a safe haven for hosting such data”.

But this is the first time such content has been shown to actually exist, creating a moral and legal quandary around possession and the blockchain.

People are using bitcoin’s system to share child pornography, researchers say

https://www.washingtonpost.com/news/the-switch/wp/2018/03/22/people-are-using-bitcoins-system-to-share-child-pornography/?utm_term=.02d78dd68ae7

German researchers have found about 1,600 files of non-financial data, some of which link to or contain child pornography and other objectionable material, on the system that stores bitcoin transactions.

The discovery could place certain users of the bitcoin network in legal jeopardy, the researchers said, and could pose an obstacle for greater adoption and mainstream acceptance of bitcoin and other cryptocurrencies. Bitcoin “miners” and people who have volunteered to use their computers to maintain the network may be liable for the possession of illegal content, the researchers said. But people who own and trade bitcoin but don't participate in the bitcoin network are not directly affected.

The researchers analyzed about 1,600 files on bitcoin's blockchain, the public ledger that serves as the infrastructure for cryptocurrency transactions. Most of the files were harmless, the researchers concluded, but some contained copyright violations and the disclosure of people's identifiable information, and at least eight files had sexual content. Some files depict or link to “mildly pornographic content,” and two files contain 274 links to child pornography websites, the researchers found. Another file is believed to depict a nude image of a minor, the researchers said.

“We thus believe that future blockchain designs must proactively cope with objectionable content,” the researchers from Aachen University and Goethe University Frankfurt wrote in their research paper, which was presented last month at an international conference on financial cryptography in Curacao.

Experts say that the files likely got there when people added the material as notes to transactions or inserted them as if they were transactions themselves. People using the blockchain can add non-financial data to describe a transaction's purpose, insert benign messages or record information for other financial services. Anyone with access to the bitcoin software has the ability to upload content to the blockchain, including miners, exchanges and other individual users.

It isn't known who uploaded the offending material. The seven researchers did not respond to a request for comment.

Although users on Facebook, Twitter and YouTube may see objectionable content posted by others, people who maintain aspects of blockchain-based systems may actually be in possession of such content even if they did not produce it themselves. That's because people who maintain the bitcoin network have to download the entire blockchain or parts of it.

“Since all blockchain data is downloaded and persistently stored by users, they are liable for any objectionable content added to the blockchain by others,” the researchers said. It's difficult to pinpoint who added the objectionable files because users on the bitcoin blockchain are pseudonymous and can generate a new address for every transaction.

The researchers said there is legislation in several countries, including the United States, that suggests that illegal content held on the blockchain would be unlawful to possess for all its users. The researchers suggested that technologists creating new blockchain designs could address these issues, perhaps by preventing people from inserting such files or halting their spread, to protect users from potential liability.

Christian Catalini, a professor and founder of MIT’s Cryptoeconomics Lab, said that the offensive material the researchers found in the blockchain does not present a major problem right now because the blockchain was not designed as a large-scale file storage system — meaning it’s still hard for people to use it to post offensive content. But as developers create new blockchains primarily for hosting files, the posting of offensive material could become an issue, he said.

As with certain communications platforms on the Web — such as social media, blog platforms and chat forums — engineers could set rules or create filters for illicit material. “The choice of accessing all sorts of content already exists, and that is a result of having the Internet,” Catalini said. “What's novel here is we have a new technology, but the solution is the same.”

While bitcoin's value soared last year, the cryptocurrency market has faced heightened scrutiny, even as more people are turning to virtual currencies as an investment option.  Google said recently that it will ban cryptocurrency-related advertisements on its platform, following a similar decision by Facebook earlier this year, in an attempt to stem misleading ads. The Federal Trade Commission is also cracking down on alleged cryptocurrency schemes and filed a lawsuit last week.

As of Wednesday, the total market capitalization of cryptocurrencies was more than $350 billion, according to the cryptocurrency tracker coinmarketcap.com.

‘Terrorist dream come true’ ISIS using Bitcoin to fund deadly attacks and buy weapons

https://www.express.co.uk/finance/city/902517/ISIS-Bitcoin-terrorist-attack-deadly-weapons-funding-cryptocurrency-money-laundering

Terrorists are using anonymous cryptocurrencies to fund their operations and evade detection as they move huge sums of money across international borders, former US Treasury advisor Elizabeth Rosenberg and Centre for a New American Security researcher Edoardo Saravalle have warned.

Ms Roseberg and Mr Saravalle said: “Bitcoin may be ushering in a new era when the United States finds it nearly impossible to stop the financing of terrorism.

“That’s a frightening development that could allow terrorists to go undetected – until they strike.”

The two experts revealed terrorists have already been caught using cryptocurrencies to fund potential attacks or send money to ISIS.

The purely digital setup means money can be sent anonymously around the world.

Ms Roseberg and Mr Saravalle said: “As a high-tech money laundering device, Bitcoin is a terrorist’s dream come true.”

Cryptocurrencies are completely decentralised and allow criminals to bypass financial institutions and their rules designed to fight terror funding.

In a report, the experts wrote: “Because bitcoin transactions can be completed anonymously, the virtual currency is an ideal way for criminals – including terrorists – to hide their financial transactions from government agencies and law enforcement.”

Al Qaeda finance chief Mustafa Abu al-Yazid lamented the impact of financial regulation on his deaths cult in 2007 noting “there are hundreds wishing to carry out martyrdom-seeking operations, but they can’t find the funds to equip themselves”.

A lab technician from New York has been accused by the US Department of Justice of using cryptocurrencies to fund ISIS.