The Criminal Intelligence Service Canada states that financial crimes committed by organized crime groups are costing Canadians around $5 billion a year. They further state that every one of these groups in Canada participates in some form of financial crime. Using the internet, they can actively and successfully reroute money to foreign countries, or try to legitimize it (launder it) through the stock market, online gambling sites, and anywhere else that presents an opportunity.
Many government officials are pointing a finger at digital currencies such as bitcoin as a haven for money launderers, even though it has an open, permanent, immutable ledger of every transaction that has ever occurred.
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DCEBrief had the opportunity to sit down for an interview with retired RCMP Chief Superintendent Marty Cheliak, whose 35 year law enforcement career saw him occupy a number of high ranking positions, including time spent leading a commercial crime unit.
DCEBrief: What role(s) could cryptocurrency play in financial crime prevention?
Marty Cheliak: Cryptocurrency would reduce counterfeiting opportunity. If security is sound there would be less chance of credit scams, and skimming would be more difficult.
DECBrief: Do you have any advice for cryptocurrency developers interested in financial crime prevention?
Marty Cheliak: Ensure the systems are impenetrable, with security as strong or stronger than banks. Make sure your clients have a full sense of security and know their investments are protected. Verify who you're doing business with, so you're not operating within an organized crime circle.
DCEBrief: If law enforcement fails to gain a better understanding of digital currencies like bitcoin, how could criminals exploit it?
Marty Cheliak: Organized crime infiltrates any faction of society where there is opportunity to make money. Law enforcement needs to stay abreast of all cryptocurrencies, knowing how they are being used and manipulated.
DCEBrief: Is a warrant required for law enforcement to obtain information on cryptocurrency users?
Marty Cheliak: Yes. The process of obtaining information from a cryptocurrency user should be the same as obtaining it from a bank. A warrant is required, otherwise it is a rights violation, being an unlawful search and seizure.
DCEBrief: The IRS recently issued a 'John Doe' summons to Coinbase, an online bitcoin exchange and wallet provider, requiring them to disclose client transactions. What are your thoughts on this matter?
Marty Cheliak: They should have a specific target for investigation. It would be like law enforcement going to a bank and demanding the name of everyone who has an account with over 100 thousand dollars in it.
DCEBrief: Some digital currencies are adding privacy enhancing layers on top of blockchains to increase the anonymity of their users. Will they run into any legal problems?
Marty Cheliak: The systems they have are set up so they are impenetrable by hackers, criminals, and law enforcement. But they must be accessible when law enforcement has a legal right to acquire the information.
DCEBrief: Know Your Customer rules are in place and must be adhered to by financial institutions, exchanges, etc. With some cryptocurrencies being 100% anonymous, will it hamper their adoption not knowing where the funds come from? Does having an open and transparent transaction network where only your personal information is protected, as well as a reputable and verifiable team, improve your chances for adoption and long term success?
Marty Cheliak: I think so, but being able to understand it is the biggest issue. People are afraid of what they don't understand. There is still a large portion of our population who hides their money under a mattress because they don't trust banks.
DCEBrief: Do you own any cryptocurrency?
Marty Cheliak: I'm an investor in two different cryptocurrencies. I'm not sufficiently knowledgeable on the technology, but as an investor I look forward to seeing what happens in the future. I didn't want to be left behind!
DCEBrief: Thank you for taking the time to share some of your expertise with us Marty.