Financial Intelligence ordered a service to track Bitcoin transactions :: RBC.Crypto

Rosfinmonitoring ordered the creation of a module for monitoring cryptocurrency transactions. One of its tasks is to analyze the behavior of market participants in order to identify them. The work will be performed by a structure controlled by “Sberu”

The Federal Service for Financial Monitoring (Rosfinmonitoring), which performs the functions of financial intelligence in Russia, has selected a contractor for “work on the creation of a module for monitoring and analyzing cryptocurrency transactions using bitcoin.” This is evidenced by the data of the website of state purchases. The contract went to the RCO company, which offered to perform the work for 14.7 million rubles. According to SPARK, control in RCO belongs to Rambler Internet Holding LLC, which belongs to Sberbank through a chain of companies.

The development of a module for monitoring and analyzing cryptocurrency transactions using bitcoin is intended to solve the following tasks, it follows from the documentation.

  • Tracking the chain of movements of digital financial assets;
  • Maintaining a database of cryptocurrency wallets related to illegal activities and financing of terrorism;
  • Monitoring the behavior of participants in the cryptocurrency market in order to identify them, drawing up profiles of participants and assessing their role in economic activity, as well as identifying the likelihood of their participation in illegal activities.

Back in August last year, Rosfinmonitoring offered to include in the federal project “Artificial Intelligence” the system “Transparent blockchain” – analytics of cryptocurrency transactions using artificial intelligence. By that time, a prototype of the system had been developed and tested in the field of countering drug trafficking. In February of this year, the head of Rosfinmonitoring Yuri Chikhanchin at a meeting with President Vladimir Putin saidthat the “Transparent blockchain” will allow the agency “to see all movements with cryptocurrency, that is, attempts to hide behind cryptocurrency.” “We have developed a digital service that allows us to analyze crypto transactions. This will enable us to track these transactions in cryptocurrency, and most importantly, we are now working out the signs and criteria that, in the general flow of transactions, could show us where there is a crime, there are already criminal cases, ”Chikhanchin said.

Representatives of Rosfinmonitoring declined to comment on the “Transparent blockchain” and disclose the details of the project.

Why should the authorities track cryptocurrency transactions

According to the procurement documentation, control of cryptocurrency transactions is necessary to “increase the level of law-abiding financial institutions” taking into account the risks of money laundering and terrorist financing. In addition, Rosfinmonitoring plans to use the cryptomonitoring module to reduce the risks of financing illicit drug trafficking, as well as “to ensure the safety and targeted use of budget funds.”

In March, Rosfinmonitoring called the most popular cryptocurrencies used by cybercriminals for criminal purposes. According to the ministry, Bitcoin, Ethereum and Monero are most often used for illegal activities.

Is it legal to monitor crypto transactions

In a public blockchain such as Bitcoin or Ethereum, all transactions are public by default, anyone can study them, explains Moscow Digital School expert Efim Kazantsev. According to him, various companies are already engaged in the analysis of cryptocurrency transactions in public blockchains.

If analytical services collect statistics on the movement of digital assets for its analysis and subsequent compilation of statistics, then the Rosfinomonitoring system will be aimed at de-anonymizing users suspected of illegal activities, Kazantsev said.

In addition to public blockchains, there are also closed commercial blockchains, for example, RippleNet, Roman Yankovsky, a member of the Commission on Legal Support of the Digital Economy of the Moscow branch of the Russian Lawyers Association, recalled. He noted that in this case, everything will depend on the agreement on the use of such a blockchain. This document may prescribe the conditions under which information on the movement of assets within the blockchain cannot be used by third parties.

RippleNet is a blockchain developed by Ripple that enables financial institutions to make cross-border payments in seconds and at minimal cost.

Regulators and law enforcement officers will most likely be able to gain access to closed information subsystems only as part of operational or investigative measures, the Moscow Digital School expert added.

What they can actually learn about transactions

When considering systems that track cryptocurrency movements, it is important to understand that there is information that is stored in the blockchain and that is stored outside the blockchain, explained Maria Stankevich, Development Director of the EXMO crypto exchange. When a user commits a transaction, he commits it against some person or organization that identifies him. It is also worth considering that, for example, bitcoin transactions are sent in unencrypted packets over the Internet, which makes it possible to track the sender’s IP address, the expert added.

“Knowing the IP address, it is not difficult to find out personal data: Internet providers are obliged to keep this information even after the termination of the contract. By the activity of the wallet, you can determine the time zone of the owner, ”explains Stankevich.

You can even track transactions and identify their participants in anonymous blockchains like Monero and Zcash, says Nikita Zuborev, senior analyst at BestChange.ru. According to him, comparing the time and size of the transaction, it is possible to determine the chain of transfers with a certain degree of reliability, especially considering that inside such blockchains, criminals neglect precautions, considering themselves to be absolutely protected by the blockchain itself.

This information was confirmed by Dmitry Plakhov, the chief expert of the research center in the field of distributed registry systems based at Innopolis University (he also participated in the competition for the creation of the module). He explained that modern tools for analyzing big data, that is, indirect information about the sender or recipient, make it possible to put forward certain hypotheses, as well as explore them using neural networks.

“In our time, it is the symbiosis of technologies that allows us to make a rapid leap forward in the development of the system. Just a transaction log scanner won’t do any good, ”Plakhov added.

According to Plakhov, the system being developed for monitoring cryptocurrency transactions will be able to track operations that are performed on the blockchain without the intermediation of crypto exchanges (directly from the sender to the addressee). “The system can track the movement of funds in all open-type blockchains. Our developers already have experience in analyzing such networks as Ethereum, Tron, Tezos, EOS, Cardano, Stellar, etc. “, – said Plakhov.

RCO representatives did not respond to RBC-Crypto’s request on how the monitoring system will work.

How the creation of the system will affect the crypto market

Now the financial security of users for most organizations related to cryptocurrency is in the first place, said Gleb Kostarev, director of Binance in Eastern Europe. According to him, leading crypto exchanges, including Binance, require clients to undergo mandatory verification to gain access to the functionality of the trading platform.

“All these tools have a clear and understandable task – to fight against illegal money laundering, terrorist financing, drug trafficking, cybercrime,” says Kostarev.

According to a Binance representative, the “Transparent Blockchain” system may become another tool that will work in conjunction with existing tools to combat illegal transactions.

The emergence of such a system as “Transparent Blockchain” should be considered rather an advantage, says Sergey Arestov, co-founder of industrial mining operator BitCluster. According to him, if an investor officially mines cryptocurrency, exchanges digital assets on officially registered cryptocurrency exchanges and pays taxes, then he has nothing to fear.

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