Trafficking: Use of online marketplaces and virtual currencies in drug and human trafficking

What the GAO found

Drug and human traffickers are increasingly using online marketplaces and virtual currencies to connect with buyers and hide the source of payments, according to agency documentation and interviews with law enforcement officials. ‘agency. However, according to the Department of Homeland Security, traffickers continue to use mostly cash. Online marketplaces facilitate traffic by providing anonymity, connecting buyers and sellers, and allowing a range of payment methods, including virtual currencies (see figure). These marketplaces often use the “dark web”, a hidden part of the Internet that users access using specialized software. Traffickers use virtual currencies and peer-to-peer mobile payment services because transactions are somewhat anonymous, making detection by law enforcement more difficult. However, all transactions on a public blockchain (the technology used by some virtual currencies) can be tracked to some degree.

Summary of participants involved in drug trafficking using online markets and virtual currency

Several federal law enforcement agencies investigate and prosecute trafficking cases involving virtual currency and online marketplaces, including through interagency partnerships. In addition, federal regulators oversee financial institutions’ processes and controls to comply with anti-money laundering requirements, including reporting potential trafficking activities to law enforcement. State regulations, such as licensing requirements for money transmitters and other virtual currency businesses, can also help prevent trafficking, although these requirements vary from state to state.

Law enforcement and others can use blockchain analysis tools to investigate suspected illicit activities that use virtual currencies, but these tools can be of limited effectiveness. Many virtual currency transactions are permanently recorded on public blockchains, allowing them to be associated with user information collected by virtual currency platforms that comply with anti-money laundering requirements. However, law enforcement’s ability to detect and track illicit uses of virtual currencies may be hampered by criminals’ use of privacy technology and by some market participants’ failure to comply with privacy requirements. anti-money laundering, according to law enforcement officials and analytics firms.

Why GAO Did This Study

Drug trafficking and human trafficking are long-standing and pervasive problems. Federal law enforcement agencies have noted the use of online marketplaces, such as social media sites and messaging platforms, in drug and human trafficking. Additionally, the agencies have expressed concern about the increased use of virtual currencies by traffickers, i.e. digital representations of value that are generally not legal tender issued by the government.

The National Defense Authorization Act for fiscal year 2021 includes a provision for GAO to review how a range of payment methods and systems, including online marketplaces and virtual currencies, are used to facilitate drug and human trafficking.

This report examines what is known about the use of online markets and virtual currencies by drug and human traffickers, the efforts of federal and state agencies to combat this trafficking, as well as the advantages and challenges of virtual currencies in detecting and prosecuting drug and human trafficking, among other purposes. .

GAO reviewed federal agency and industry documentation and all relevant previous GAO work; interviewed federal and state agency officials and industry and nonprofit organizations; and reviewed recently adjudicated cases involving the use of virtual currencies in drug or human trafficking.

For more information, contact Michael E. Clements at (202) 512-8678 or [email protected] or Gretta Goodwin at (202) 512-8777 or [email protected]

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