He’s no Jimmy Kimmel but Secretary of the Treasury, Steven T. Mnuchin helped kick off the third annual Law Enforcement Awards ceremony for the Financial Crimes Enforcement Network (FinCEN) at the U.S. Department of the Treasury today. Each year, FinCEN presents awards to law enforcement agencies that use Bank Secrecy Act (BSA) reporting provided by financial institutions in their criminal investigations.
“The scope and quality of the data that we are collecting through Bank Secrecy Act reporting is constantly improving, and FinCEN has made great advancements to provide law enforcement and stakeholders faster and easier access to financial intelligence that will assist with investigations and prosecutions,” Mnuchin said at the opening of the awards ceremony. “These success stories highlight the value of our ongoing efforts to strengthen partnerships to combat money laundering, fraud, corruption, criminal trafficking, and other illicit activities.”
The awards ceremony is intended to recognize law enforcement agencies that made effective use of financial institution reporting to obtain a successful prosecution and to demonstrate to the financial industry the value of its reporting to law enforcement. There are six award categories: Suspicious Activity Report (SAR) Review Task Force, Transnational Organized Crime, Transnational Security Threats, Cyber Threats, Significant Fraud, and Third-Party Money Launderers. Winners are selected from federal, state, local, and tribal law enforcement agencies.
The 2017 award recipients included Internal Revenue Service-Criminal Investigation (IRS-CI), recognized for its work with cyber threats.
According to FinCEN, the multi-year, multi-agency investigation led by IRS-CI focused on several targets selling drugs on the dark web. The primary targets of this investigation conducted their online activity through The Onion Router, sometimes called Tor (or TOR). Tor’s big advantage is privacy. It’s designed to conceal the true Internet Protocol (“IP”) addresses of the computers accessing the network, and, thereby, the locations and identities of the network’s users. It also allows websites to operate without easily being detected: Silk Road was a site on the dark web which reportedly operated using Tor. In this case, the targets used Tor to access several dark websites which they used to sell methamphetamine and marijuana.
The targets shipped the drugs to their customers through the U.S. Postal Service. To avoid detection, they disguised the drugs inside packages filled with markers and drawing paper and used multiple return addresses and sender names. Eventually, postal inspectors were able to determine that the suspicious packages were coming from the same place.
Investigators obtained search warrants and were able to intercept multiple packages. Next, investigators were able to determine through internet service provider (ISP) records that the username associated with several of the undercover purchases on the dark web belonged to the same individual sending the packages of drugs through the Postal Service. Investigators determined that over a six-month period, one individual sent 435 suspicious packages on at least 50 different occasions.
But the investigation didn’t stop there. Sensitive financial information identified during the investigation indicated that those involved were using Bitcoin in an effort to keep the transactions anonymous. Bitcoin is a digital currency which exists entirely on the internet. It doesn’t rely on an exchange of paper, and there is no centralized bank that records your transaction. There is also no third party reporting requirement. That makes it easy to hide financial activity – and that’s what it’s alleged happened here.
Payment for the drugs was made in Bitcoin. The Bitcoin was then sent through a Bitcoin “blender” to conceal their source and was subsequently redistributed through a number of Bitcoin exchangers before being converted into dollars and deposited into numerous bank accounts. If that sounds familiar, it’s because that’s what happens in “normal” money laundering: “dirty” money which is obtained through illegal activities is eventually replaced with legitimate cash so that it can’t be traced.
The targets of the investigation were arrested on various drug charges. They were indicted and pleaded guilty to various drug and money laundering charges.
I know what you’re thinking: no tax charges? Drugs and money laundering? So why was the IRS even involved, much less the lead agency for this award? Easy: the IRS-CI, which has been around since 1919, tackle crimes focusing on tax, money laundering and Bank Secrecy Act laws. IRS-CI, which brought down Capone, is renown for “following the money.” Their financial investigators are regarded as some of the finest in the world.
For more on the work of the IRS-CI, check out this prior article.
