The Federal Financial Monitoring Service of Russia (Rosfinmonitoring) has commissioned an analytical tool for monitoring cryptocurrency transactions. The system will particularly focus on bitcoin, as reported by BBC’s Russian service.
Plug In, Baby
Rosfinmonitoring, whose responsibilities include countering financial fraud and terrorist financing, already use a bespoke Unified Information System. This allows for the input of disparate information about suspects in financial crimes, in order to find connections between them.
By the end of 2018, the system should have the added functionality to process information on bitcoin transactions and wallets. This, of course, relies on linking a wallet to a person, bank account, or phone number in the first place.
The contract went to the Moscow Institute of Security and Information Analysis (SPI). Along with other updates to the system, it will be worth a cool 195.5 million roubles ($2.87m US).
State-Sanctioned Exchanges
The legality of cryptocurrency use in Russia has long been in question, although a draft law “On Digital Financial Assets” is currently being read in the State Duma. If passed into law, this will mean that only licensed operators can process cryptocurrency transactions.
One can assume that these operators will have to pass all information gathered through KYC/AML procedures directly to the Russian authorities. With this information, the system could link one suspect to others through movement of funds.
Law enforcement agencies in the US and Europe use similar tools to ‘follow the trail of breadcrumbs’ in financial crimes.
A Microbe in a Drop of Water
Internet expert Anton Merkurov believes that the system could actually have the opposite effect. He thinks that such monitoring will only lead to more obfuscation from cryptocurrencies in order to make them impenetrable to governing bodies.
Perpetrators are also able to confuse the tracking attempts of law enforcement agencies by creating a new wallet for each transaction.
He also points out that in comparison to the total amount of laundered funds, that laundered through cryptocurrency is relatively small. The turnover through LocalBitcoins is up to 1 billion roubles per week. Compare this to Colonel Zakharchenko, a police officer who was found with around 9 billion roubles.
Merkurov likens this process to trying to find a microbe under a microscope in a drop of water.
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