AI Agents Aid in Crypto Crime and Fraud Investigations
Artificial Intelligence (AI) is increasingly playing a crucial role in crypto crime investigations. This technological assistance has become invaluable as criminals and fraudsters turn to AI to automate and scale their operations. According to a report by Chainalysis, a crypto monitoring firm, scams that leverage AI generate an average of $3.2 million per operation, a stark contrast to the $719,000 fetched by operations that don’t use AI. This clearly shows that AI has become a game-changer in the realm of crypto crime, necessitating its use by investigators to gain an upper hand.
AI is being used to aid inexperienced financial crime investigators understand cases, research suspicious crypto transactions, and even interact with fraudsters to gather information about their operations. This comes at a time when more banks are considering offering crypto trading to their customers, thus escalating the urgency to safeguard against crypto crimes.
The Role of AI in Crypto Crime Investigations
AI has always been a darling of tech-savvy criminals, who use it to scale their operations and probe potential vulnerabilities. “Bad actors have always been the earliest adopters of any new technology, and AI is no different from that,” noted Simone Maini, president of crypto monitoring firm Elliptic. However, she also pointed out that crypto watchdogs can leverage the same technology and techniques against these criminals, turning the tide in the ongoing cat-and-mouse game in financial crime detection.
For instance, Chainalysis and Elliptic, the go-to companies for most banks and DeFi firms for crypto transaction monitoring, are using AI to keep an eye on crime operations. AI is used to identify suspicious transaction patterns, wallet behavior, clustering, and links to known illicit actors. This is faster and more efficient than manual review alone, but it still requires human judgment for compliance.
Chatting with Criminals
Chainalysis has recently begun using AI to create fake fraud victims that chat with scammers. These AI agents are designed to understand the behaviors of scammers and criminals, and pass this information along to customers to help them make risk decisions. “We spent 12 years using manual effort to make transactions to interact with threat actors… But now we augment that work with the ability for our analysts to orchestrate AI agents… so the analyst is validating the work of those agents, and those agents are able to have conversations with threat actors at scale,” explained Chainalysis CEO, Jonathan Levin.
The company also gathers information about these criminals’ activity on traditional payment networks, further enhancing the capability of financial institutions to prevent victims from sending money to scammers.
Doing Research for Financial Crime Investigators
Elliptic, another player in the crypto transaction monitoring space, uses AI to speed up and increase the efficiency of overall compliance operations. The company uses AI to do some of the repetitive work performed by compliance teams, freeing up specialists to focus on cases that are ambiguous or highly risky. This is similar to how many anti-money-laundering software companies are using AI to help investigate cases.
Elliptic also uses AI to provide real-time natural language context, helping inexperienced digital asset compliance teams understand the cases they are handling. This allows them to make decisions faster and more accurately.
However, it’s important to note that while banks can use companies like Chainalysis and Elliptic, they cannot outsource their compliance obligations. “Regulators will still expect banks to maintain their own risk-based AML controls, monitoring, escalation and oversight,” warned Felix Shipkevich, a law professor at Hofstra University and principal at Shipkevich PLLC. Banks should treat crypto as a higher-risk product, not just another trading feature, and maintain independent compliance governance, he added.
The use of AI in crypto crime investigations is a testament to the ever-evolving nature of technology and its impact in different domains. With bad actors continually upping their game, the use of AI in fighting crypto crimes is not just a trend, but a necessity.
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