How do you track assets that exist only as digital data?
U.S. law enforcement agencies, whose powers include asset forfeiture, have had to face this question with the rise of the use of cryptocurrency by bad actors.
Cryptocurrency, or crypto—despite not being recognized as legal tender nor being tied to anything of intrinsic value—has become so common that you can buy it at the local supermarket’s coin counting machine. It has also proven popular with criminals seeking to hide or launder their criminal proceeds from federal, state and local—and international—law enforcement agencies. Cryptocurrency combines the convenience of credit cards with the perceived privacy—near anonymity—of cash.
The value of these assets can be significant. The Internal Revenue Service seized over 50,000 Bitcoins, worth over $3.3 billion at the time, in its Silk Road investigation in 2022. The Secret Service announced in April 2022 that it had seized over $102 billion in various cryptocurrencies through several recent investigations.
These are just a couple of examples of the value that is increasingly found in digital currency. Law enforcement agencies are figuring out how to seize, store, track and dispose of these assets, but the challenge may be growing faster than the solution.
Asset forfeiture statutes empower some law enforcement agencies to seize property under certain circumstances, especially property used in the commission of crimes, or that is the proceeds of a crime. At the U.S. federal level, the U.S. Marshals Service (USMS) serves as the primary custodian for the Department of Justice’s (DOJ) seized assets. In a 2022 audit, DOJ’s Office of the Inspector General found that the department had seized about $466 million in cryptocurrency assets as of September 2021.
The problem extends beyond the nation’s borders, and lawmakers are paying attention. The House Financial Services Digital Asset Subcommittee held a hearing in mid-November 2023 on the use of digital currency in illicit financing, including the funding of international terrorist organizations.
Is your IT up to the task?
Because crypto presents a relatively new challenge to law enforcement, and many agency IT systems predate the rise of digital currencies, keeping track of those assets can be difficult. The problem isn’t confined to legacy systems; even some relatively recent installations may not be well equipped to handle cryptocurrency. Some agencies have resorted to spreadsheets to track seized cryptocurrency, which separates that information from all of the other data the agencies maintain. While it might be the best workaround available, it offers no real-time insight or transparency.
There is more to the matter than just knowing where the assets reside (whether digital or physical). In criminal and civil cases, law enforcement agencies must maintain a chain of custody—that is, a continuous, documented account of everyone who has touched an asset since it first came into the department’s possession. If the chain of custody breaks down, a defendant could argue that gaps represent opportunities for tampering with the evidence.
Because of this and other mission priorities, agencies managing assets linked to legal matters must ensure the status of seized assets is completely transparent, from the moment of seizure to disposition. Obviously, a spreadsheet is not the ideal solution.
Modernization is the answer
Modernizing older systems to be work-flow driven platforms, with Application Programming Interfaces (APIs) that allow them to work with multiple agency case, asset and/or evidence management systems would provide law enforcement with a better customer experience, greater flexibility and scalability. In addition, technologies like wallet and blockchain provide real-time transparency into each asset’s place in the process.
Many agencies—whether federal, state or local—are in this position, managing digital assets with aging systems. As agencies develop modernization plans for the short term, we believe modernizing asset management systems that manage forfeitures and evidence—and other financial management systems, for that matter—should be a priority.
Modernization is an ongoing initiative in virtually all government organizations, and the rise of digital assets has become a significant driving factor. Digital media and records are a large part of it, but cryptocurrency is growing in influence. Agency systems must adapt to changing needs, which is never easy.
At CGI, we bring our global resources, capabilities and strategic partnerships, such as AWS and ServiceNow, to bear in solving these complex challenges. Modernized, cloud-based and workflow driven solutions provide the transparency and control needed to effectively manage digital assets. CGI brings proven experience delivering innovative asset management solutions to meet mission-critical needs, preparing law enforcement agencies to operate in this emerging world order. Learn more about our work here.