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White Paper

HOW TO COMBAT THE ILLEGAL USE OF CRYPTOCURRENCY

Cryptocurrency has many legitimate uses, but it is also

used in illegal transactions. It is the favorite currency on

the dark web used for buying and selling weapons, drugs,

hacker toolkits, for ransom payments, to name just a few.

It is also used for financing terror, human trafficking and

criminal operations. Due to its blockchain technology,

cryptocurrency transactions are hard to trace by law

enforcement agencies.

However, these transactions do leave digital footprints

behind that can be traced. This entails that law

enforcement agencies need tools that can do much more

than analyzing internal data such as criminal records and

prior cases. They need a solution that can analyze the

technical details of electronic activities, online behavior,

and other cyber information online, especially on the

deep web and dark web.

Only an AI powered WEBINT solution will be able to assist

by extracting comprehensive intelligent insights. That is

why Cobwebs Technologies has developed its powerful

WEBINT solution utilizing its proprietary technology and

the latest machine learning algorithms to extract targeted

intelligence from collected big data. This allows law

enforcement agencies to get generated critical insights

automatically for taking immediate action such as

sending out terror alerts or making arrests.

WEBINT IS THE PROCESS OF COLLECTING AND ANALYZING WEB DATA TO GAIN VALUABLE INSIGHTS

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GLOSSARY

INTRODUCTION

AI Artificial IntelligenceICO Initial Coin OfferingOSINT Open Source Intelligence ToolsOTC Over The CounterWEBINT Web Intelligence Solution

Russian dark web marketplace Hydra (known for buying and selling illegal goods and services) has filed an investment document at CoinDesk for an ICO in which it is seeking to raise $146 million by selling tokens for Bitcoin. According to the document, Hydra will issue 1,470,000 tokens sold for $100 worth of Bitcoin each (720,300 tokens can be bought by the general public). Hydra plans to launch a new worldwide anonymous service called Eternos that would include a cryptocurrency exchange, Tor-like browser,

encrypted messenger, and an OTC marketplace.

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Since its inception in 2009, cryptocurrency (defined as any kind of peer-to-peer

digital money powered by the blockchain technology) is recognized and used as

a legitimate alternative for legal tenders that are controlled by central banks. The

most popular cryptocurrencies include Bitcoin (BTC), Litecoin (LTC), Ethereum

(ETH), and Ripple (XRP). They are popular with legitimate users since the secure

transactions bypass traditional financial institutions thus avoiding bank costs and

exchange rate losses.

From the beginning, criminal elements have recognized the use of cryptocurrency

for their transactions, making the “follow the money” strategy of law enforcement

problematic. Cryptocurrency is used on the dark web to buy and sell illegal

merchandise, stolen data, hacker software, drugs, and weapons to just name a few.

CRYPTOCURRENCY AND CYBERCRIME

Figure 1- The number of legal vs illegal bitcoin users 2009-2017

Cryptocurrency is also used for ransom demands as part of ransomware

attacks and for sponsoring terrorist activities. Dark web transactions are often

opened and closed with cryptocurrencies leaving hardly any trace. Intelligence

agencies and their analysts are left with only a few scraps of evidence to piece

together who financed what for which purpose.

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Figure 1 shows legal bitcoin users (the dashed line) and illegal bitcoin

users (the solid line). The numbers are based on two empirical models.

(Source: Sex, drugs, and bitcoin: How much illegal activity is financed

through cryptocurrencies? by the University of Sydney.

The researchers concluded that approximately one-quarter of bitcoin

users are involved in illegal activity, and that around $76 billion of illegal

activity per year involves bitcoin (46% of bitcoin transactions). Their

findings suggest that cryptocurrencies are transforming the black markets

by enabling “black e-commerce”.

Figure 2 below is a schematic representation of a criminal cash flow using

bitcoins. (Source: Money Laundering and Terrorist Financing Awareness

Handbook for Tax Examiners and Tax Auditors published by the OECD.)

Figure 2- Criminal Cash Flow Using Bitcoins

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As mentioned before, cryptocurrency is used by terrorist organizations

and their affiliates to finance activities and weapons, and to get paid. Since

these transactions are executed with encrypted digital coins and smart

contracts, the identity of the parties is obfuscated and almost untraceable.

The agility of cryptocurrency enables terror to be easily financed,

especially since extremist groups and terrorist organizations like to

recruit tech-savvy lone wolves to do their bidding, such as conducting

cyberattacks and data breaches, and enabling encrypted communication

to designated locations to inform conspirators of the time and place of the

attack or to send instructions.

Figure 3- Assessment of Terrorist Activities Regarding Cryptocurrencies

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In its research report “Terrorist Use of Cryptocurrencies, Technical and

Organizational Barriers and Future Threats”, the RAND Corporation identified the

usefulness of cybercurrency for financing terrorism (See Figure 3).

TRACING CRYPTOCURRENCY BY LAW ENFORCEMENT

With the growing popularity of cryptocurrency, its use by threat actors, criminal

elements and terrorists is expanding exponentially. This, combined with data

volumes reaching record heights, law enforcement agencies all over the world

are looking for tools to analyze the many layers of the dark web and related

digital platforms to battle crime and terrorism.

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Tracing cryptocurrency is already a “significant” issue and becoming a bigger one for the FBI. “We are looking at it from an investigative perspective, including tools that we have to follow the money even in this new world that we’re living in. Christopher Wray, Director of the FBI

Threat actors as well as criminal elements and organizations leave a digital

footprint during their wheelings and dealings that are normally detected by

solutions that analyze the technical details of electronic activity, online behavior,

and cyber information such as IP addresses, timestamps, device indicators, etc.

Although such solutions are useful, they are unable to give the full picture.

Complex financial networks can be hard to detect due to various masking methods

used to remain obfuscated. Law enforcement agencies are often relying on internal

data such as transactions, criminal records and prior cases which only provides

limited information. With only 5% of information publicly available on the open web

and 95% present in the deep web and dark web, an AI powered WEBINT solution is

needed to extract comprehensive intelligent insights.

THE NEED FOR AI WEBINT SOLUTIONS

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Threat actors as well as criminal elements and organizations leave a

digital footprint during their wheelings and dealings that are normally

detected by solutions that analyze the technical details of electronic

activity, online behavior, and cyber information such as IP addresses,

timestamps, device indicators, etc. Although such solutions are useful,

they are unable to give the full picture.

Complex financial networks can be hard to detect due to various masking

methods used to remain obfuscated. Law enforcement agencies are

often relying on internal data such as transactions, criminal records and

prior cases which only provides limited information. With only 5% of

information publicly available on the open web and 95% present in the

deep web and dark web, an AI powered WEBINT solution is needed to

extract comprehensive intelligent insights.

“Online illegal money transfers are often the basis of criminal and terrorist activities. Since these money transfers take place on the dark web, social networks, databases, forums and blogs, only an AI WEBINT solution can comb through all these masses of data, and trace back to the right profile” Udi Levy, Co-founder and CEO of Cobwebs Technologies

THE IMPORTANCE OF AN AI WEBINT SOLUTION

Search AnalyzeCollect game-changing data from the world’s vast digital channels in real-time

Analyze and connect the dots to discover hidden leads & extract intelligent insights

Build suspect profiles, reconstruct social circles, identify various threats and generate evidence.

Engage

The Cobwebs Technologies Process

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Only such a solution can detect criminal activities even when those are deeply

rooted in encrypted domains such as the dark web and mobile apps in order to

locate and prevent the financing of terror with cryptocurrencies through various

platforms and mobile apps. Such a solution must integrate leading forms of AI to

pinpoint initiators of terrorist communication as well as the detection of individuals

who support, assist or fund terror. In short, such a solution should enable law

enforcement agencies to transform collected data into measurable clues.

To assist law enforcement agencies, Cobwebs Technologies has developed its

state-of-the-art web intelligence platform that extracts targeted critical insights

automatically from big data utilizing advanced and powerful AI machine learning

algorithms. It allows law enforcement to untangle terror financing networks,

analyze terrorist financing web posts, decompose the various elements used (e.g.,

bitcoin payments, messages, emails, etc.), and trace bitcoin transaction from the

source via the transactions network to the destination. Law enforcement agencies

will get insight into all the financial interactions between tagged wallets, local and

foreign exchanges, dark web marketplaces, donors, and the tagged terror.

The powerful web intelligence solution monitors online activity, collecting and

analyzing data of endless digital channels – from open, deep and dark web, to

mobile and social. To illustrate, the utilized streamlined AI enables detection

of physical objects (e.g., weapons), identification of landmarks (e.g., Palace of

Westminster), OCR in text messages, and facial recognition. Webpage topics are

analyzed for tracking digital fingerprints, reconstruction profiles, and correlating

date to rebuild real-world data.

Figure 5 - Dark web Profiles Connections Analysis

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The powerful WEBINT solution utilizes proprietary technology to

extract targeted intelligence from the collected big data, using the

latest machine learning algorithms, for generating critical insights

automatically.

With Cobwebs Technologies, law enforcement and governmental

organizations will be able to monitor social media and the open, deep

and dark web, process vast amounts of public data to detect threats,

analyze the results automatically, and use the streamlined automated

insights for immediate action such as sending out alerts in real-time.

www.cobwebs.com

Cobwebs Technologies is a global leader in Web Intelligence, providing innovative

solutions tailored to the operational needs of the public and private sectors by

identifying threats and generating insights in real-time.

The Company’s advanced artificial intelligence and machine learning algorithms,

deliver powerful threat intelligence by deciphering the intricacies of web layers and

analyzing the complex details of structured and unstructured data.

Its web intelligence platform monitors these vast sources of data for revealing

hidden clues and generating insights for intelligence-enhanced security to keep the

world safer.

ABOUT COBWEBS TECHNOLOGIES