The United States Postal Inspection Service (USPIS), the law enforcement arm of the US Postal Service, has conducted an internal review of the way it conducts crypto-related investigations and has determined that there is significant room for improvement.
It is noteworthy that in the two fiscal years examined – 2019 and 2020 – USPIS processed only a small number of crypto-related cases, with a total of four closed cases being seized by postal inspectors as evidence during an investigation, and nine other cases being managed under of the “Cryptocurrency Fund Program” from USPIS, which was founded in 2017.
This program should establish standards and guidelines that can help account for cryptocurrency transactions during investigations and reduce any associated operational risks. As the report points out, this is particularly important as “the anonymity of cryptocurrency transactions and the significant fluctuations in the value of cryptocurrencies when used in law enforcement activities create opportunities for abuse or theft”.
Despite the small amount of crypto-related activity, the USPS Office of Inspector General (OIG) had determined earlier this year that a self-initiated review is required as cryptocurrencies can often be the “preferred medium of exchange” for illegal activities such as ransomware campaigns, online Fraud and money laundering.
When assessing business operations in the two fiscal years examined, the audit report found a “lack of standardized training” for USPIS employees in relation to cryptocurrencies. This meant that postal inspectors conducting undercover investigations and buying crypto as part of their activities were not following the guidelines set out under the Cryptocurrency Fund program.
While inspectors have used the program in some cases to keep track of crypto transactions that they are making for investigative purposes, the audit found that there are many legitimate cases where it may not be possible to use the program, such as when certain crypto transactions Provider payments only in the form of. accept certain private cryptocurrencies.
In these cases, the inspectors had to request standard investigation funds in the form of US dollars and were personally responsible for all crypto-fiat conversions and managing unused investigation funds.
In these scenarios, the audit found a malfunction in communications between management and inspectors, which means that the program’s managers are currently “unable to take into account the total amount of cryptocurrency used for investigative purposes across the postal inspection service”.
The auditors therefore had to perform a manual keyword search for various crypto-related terms in order to determine whether or not crypto was used in certain investigations. They found 1,064 unique case numbers that now have to be checked manually. On this point, the audit report comes to the following conclusion:
“The program is incapable of fulfilling any of its primary purposes – helping postal inspectors cope with the challenges associated with the inherent volatility of cryptocurrencies – ultimately making the postal inspection service vulnerable to theft, misuse, and mismanagement of federal funds.”
The audit report has recommended that in the future, the USPIS should ensure that the Cryptocurrency Fund program has the information it needs for oversight and that the agency also develops a comprehensive cryptocurrency training program for all inspectors. In addition, it has recommended a revision of current data management for investigative transactions that have been inaccurate and contain duplicates, which in turn affects the agency’s ability to closely track and manage its crypto-related law enforcement activities.
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According to Margaret McDavid, Assistant Assistant Inspector General of the Inspection Service and Information Technology Directorate for the OIG Office of Audit, USPIS was “involved in the 2019 joint effort to dismantle the Wall Street Dark Web Marketplace,” resulting in the seizure of over $ 25 million in crypto.