As Secret Service launches task force, Coinbase criticized for licensing blockchain software

The U.S. Secret Service has announced a new task force that merges two existing task forces into one, just as Coinbase Inc. has come under criticism for licensing its blockchain analytics software to the agency.

The new Cyber Fraud Task Force combines the services of the Financial Crimes Task Force and the Electronic Crimes Task Force into one unified task force to prevent, detect and mitigate cyber-enabled financial crimes with the goal of arresting and convicting perpetrators. The CFTF model is said to allow for improved data sharing, institution alliances and investigative skills development.

In a press release last Thursday, the Secret Service said that the announcement comes as the agency has been focusing its efforts on disrupting and deterring criminal activity that could hinder an effective response to the COVID-19 pandemic as well as recovering funds stolen from Americans.

“In today’s environment, no longer can investigators effectively pursue a financial or cybercrime investigation without understanding both the financial and internet sectors, as well as the technologies and institutions that power each industry,” the Secret Service said. “Nearly all Secret Service investigations make use of digital evidence and the greater technological sophistication by bad actors has led to a proliferation of blended cyber-enabled financial crimes.”

The announcement was welcomed by security professionals. Brandon Hoffman, chief information security officer and head of security strategy at infrastructure monitoring firm Netenrich Inc., told SiliconANGLE that the unified task force is a strong move that shows how important this issue has become.

“Cybercrime continues to grow at a rate beyond anybody’s expectations. Approaching this problem in a fragmented way has proven to be less than comprehensive,” Hoffman said. “Many other nations around the world have national-level programming focused on cybercrime activity. The benefits from these programs or agencies include things like aggregated threat intelligence across sectors, focused investigations and investigation support, data and attack sharing for prevention, and much more.”

Tim Wade, technical director and chief technology officer at threat detection company Vectra AI Inc., noted that the announcement is an acknowledgment of the fact that the digital world has converged with the physical world to the degree that digital activities often dominate their physical counterparts in breadth of reach and impact.

The Secret Service specifically mentions working with partners, but these days companies working with law enforcement agencies are often subject to criticism. One partner, Coinbase, which according to The Block licensed its blockchain analytics software to the Secret Service in a four-year deal worth $183,750 in May, defends its decision.

Chief Executive Officer Brian Armstrong took to Twitter to defend the deal, saying among other things that transactions on public blockchains are already traceable even without the company’s software and that there was a need to comply with existing laws.

“Exchanges that maintain connections into the existing financial system (i.e. ability to connect your bank account, do wires, etc so you can convert fiat to crypto) need to follow [anti money laundering] laws and this often includes utilizing blockchain analytics software for transaction monitoring,” Armstrong said. “There is a lot that could be better about existing AML laws, and we didn’t create them – but those are the rules to operate a fiat to crypto exchange legally.”

Coinbase is reported to be preparing for an initial public offering later this year or early next year.

Photo: Wikimedia Commons