Senators Elizabeth Warren and Bill Cassidy Raise Alarm Over Crypto's Role in Child Sexual Abuse Material

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Senators Elizabeth Warren and Bill Cassidy are urging the Department of Justice and Department of Homeland Security to intensify their efforts in combating the use of cryptocurrency to finance online child sexual abuse material (CSAM), which they argue has escalated.

In a bipartisan open letter dispatched Thursday to Attorney General Merrick Garland and Secretary of Homeland Security Alejandro Mayorkas, the senators highlighted the anonymity inherent in crypto transactions, enabling CSAM traders to elude law enforcement detection.

Source: Elizabeth Warrens and Bill Cassidys Letter

The senators wrote:

"We are writing to express our concerns regarding the use of cryptocurrency in the illegal trade of child sexual abuse material and to obtain information about the tools needed by the Department of Justice and Department of Homeland Security to end this illicit trade."

Cryptos Alleged Involvement in Child Sexual Abuse Material

They emphasized that cryptocurrency has emerged as the preferred payment method for those involved in child sexual abuse and exploitation, citing findings from the US Treasury's Financial Crime Enforcement Network (FinCEN), Chainalysis, and the Internet Watch Foundation, a CSAM-focused charity.

Additionally, they referenced a 2021 report by the International Centre for Missing and Exploited Children.

According to a report by FinCEN, out of 2,311 received reports, 2,157 specifically implicated bitcoin as the primary cryptocurrency used in online child sexual exploitation (OCSE) and human trafficking activities.

The remaining filings did not specify any currency.

FinCEN further identified over 1,800 unique Bitcoin wallet addresses linked to suspected OCSE and human trafficking offenses.

While the scale of the crypto-based market for CSAM decreased in 2023, Chainalysis found that increased seller sophistication allowed them to evade detection for longer periods than before.

The senators assert that participants in online CSAM trading employ various methods to conceal their activities, including the use of crypto mixing services and ATMs to obscure the origin of funds and launder proceeds.

The senators expressed their concerns:

"These are deeply troubling findings revealing the extent to which cryptocurrency is the payment of choice for perpetrators of child sexual abuse and exploitation."

The senators also referenced a recent "Crypto Crime Report" by blockchain analysis firm Chainalysis, which highlighted the adoption of privacy coins like Monero by vendors involved in CSAM activities.

While Chainalysis acknowledged the challenge of directly verifying Monero's role on-chain using standard blockchain analysis techniques, it could identify the use of Monero-friendly instant exchanges by CSAM vendors as an indirect indicator.

The report by Chainalysis wrote:

"Many CSAM vendors have adopted Monero in recent years, though Bitcoin is by far the most widely used cryptocurrency for CSAM purchasing. The data suggests Monero’s role is more prevalent in CSAM vendors' efforts to launder their on-chain earnings, rather than to obscure the purchases themselves."

Cryptocurrency gained favour as a payment method due to the belief that it provided anonymity for transactions.

However, advancements in analytical tools and law enforcement strategies have raised questions about this perception.

While some of the data on crypto usage referenced by lawmakers is dated, the recent review by Chainalysis highlighted it as an ongoing issue.

Deadline Given by the Senators for a Response

To initiate a proactive response, the sentaors have urged the DOJ and DHS to release findings from their own investigations into the extent of cryptocurrency's involvement in the CSAM issue, along with insights into the specific hurdles encountered in prosecuting such crimes.

The senators have set a deadline of 10 May for the agencies to provide answers to their inquiries.

They explained that:

"…and we are committed to ensuring that Congress and the administration have the full suite of tools needed to end CSAM and punish sellers of this material…Existing anti-money laundering rules and law enforcement methods face challenges in effectively detecting and preventing these crimes – and we seek to ensure that Congress and the administration are doing their part to address these challenges. We therefore request answers to the following questions by 10 May, 2024."

Source: Elizabeth Warren's and Bill Cassidy's Questions

Beyond requesting a breakdown of the agencies' immediate requirements, the letter seeks an updated evaluation of cryptocurrency's role in enabling CSAM transactions, inquiries into any distinctive obstacles faced in detecting and prosecuting these offenses, and an overview of ongoing initiatives to combat them.

How is Crypto Involved in Purchase & Distribution of Child Sexual Abuse Material

Criminals have exploited the pseudonymous and decentralised nature of cryptocurrencies to conduct illicit transactions, including the purchase and distribution of CSAM.

But how then, is crypto involved?

Anonymity: Cryptocurrencies provide a degree of anonymity to users, making it challenging for law enforcement agencies to trace transactions back to individuals involved in CSAM-related activities.

Global Reach: Cryptocurrencies enable transactions across borders without the need for intermediaries like banks, making it easier for perpetrators to engage in illicit activities internationally.

Difficulty in Tracking: The decentralised nature of blockchain technology, on which cryptocurrencies are built, can make it difficult to track and identify individuals involved in CSAM-related transactions.

Privacy Coins: Certain cryptocurrencies, known as privacy coins (e.g., Monero, Zcash), are specifically designed to provide enhanced privacy and anonymity, making it even more challenging for authorities to track transactions.

To put it bluntly, prevention might not be attainable but there are steps we can take to minimise crypto's involvement.

Regulatory Measures: Governments can enact regulations to increase transparency and accountability in cryptocurrency transactions, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.

Collaboration with Exchanges: Cryptocurrency exchanges can implement stricter KYC and AML procedures to verify the identity of users and monitor suspicious transactions.

Blockchain Analysis Tools: Law enforcement agencies can use blockchain analysis tools to trace and monitor cryptocurrency transactions associated with CSAM-related activities.

Education and Awareness: Increasing public awareness about the risks associated with cryptocurrencies and the importance of responsible use can help deter individuals from engaging in illicit activities.

Technological Solutions: Continued development of technologies and tools to enhance the transparency and traceability of cryptocurrency transactions can aid in preventing their misuse for illegal purposes.

While these measures can help mitigate cryptocurrencies' involvement in CSAM, it is essential to recognise that addressing this issue requires a multi-faceted approach involving collaboration between governments, law enforcement agencies, cryptocurrency industry participants, and other stakeholders.