The goal of this project proposal is to research innovative solutions for the identification, prevention and reduction of organized financial crime, such as money laundering, with particular regard for virtual currencies (or more exactly decentralised virtual cryptographic currencies). According to a recent report of the European Central Bank, virtual currencies “could represent a challenge for public authorities, given the legal uncertainty surrounding these schemes, as they can be used by criminals, fraudsters and money launderers to perform their illegal activities.” The BITCRIME stakeholders – the Austrian Ministries of the Interior and of Finance – and their German counterparts in this bi-lateral cooperation, share these concerns.
In its social, economic and legal aspects, the project will deliver a detailed survey including the collection and evaluation of information about the social and political landscape as well as trend prognoses created jointly with stakeholders. One part of the survey will describe the current situation regarding financial crime and its patterns, and will analyse existing financial institutions, products and supply chains, particularly in the context of virtual currencies. A second part will analyse existing virtual currencies, the role they play, and the problems they create. Information gathered from both Germany and Austria will be shared throughout the project and yield enhanced insights and analyses. The results will be made available in the form of four written reports, two available at the end of the first project year, and two available at the end of the second project year.
In the technical part of the project, we plan to test two hypotheses. First, in the context of the social, economic and legal survey, we will catalogue the characteristics of transaction patterns in organised financial crimes (money laundering, extortion, drug trade, etc.). Our first hypothesis is that similar patterns can be found in criminal transactions with virtual currencies and that it is possible to detect such patterns in virtual transaction networks using quantitative analysis methods. Our second hypothesis is that the application of a heretofore unique combination information sources (transaction, social media and Darknet analyses) to the problem of de-anonymization can contribute to a higher degree of efficiency in identifying actors in virtual currency transactions. The resulting identifications should provide law enforcement agencies with information necessary to further an investigation, for example by providing evidence necessary for subpoenas, warrants, or wiretaps. The confirmation of our hypotheses will be demonstrated through software that will be installed, tested and evaluated by the project stakeholders.
Dr. Ross King, AIT Austrian Institute of Technology GmbH
AIT Austrian Institute of Technology GmbH
Xylem - Science and Technology Management GmbH
IRKS Research GmbH
SBA Research gemeinnützige GmbH
M2D MasterMind Development GmbH