Russia Seeking to Track Crypto Wallet Activity of Criminal Suspects

The Russian Federal Financial Monitoring Service (Rosfinmonitoring) is seeking to develop an analytical tool for tracking cryptocurrency transactions, specifically Bitcoin. BBC Russia reports that Russian authorities will attempt to use the new tracking system to detect cases of financial fraud and terrorist financing.

While rampant crypto crime remains a black mark on the digital currency community, the proposed tracking system nevertheless presents itself as an affront to the freedoms enshrined by cryptocurrency supporters.

Details of the System

Scheduled to be ready by the end of 2018, the Unified System of Rosfinmonitoring will release an analytical software package designed to detect scattered information about criminal suspects in financial crimes. The software will act as a central network connecting a wide range of criminal and financial databases. After being entered into the system, Russian authorities will be capable of retrieving a suspect’s bank accounts, cell phone information, and specific data pertaining to electronic wallets and cryptocurrency transactions.

The nearly 200 million ruble ($2,937,202) program is being developed by the Moscow Institute of Security and Information Analysis (SPI), in partnership with analytical programming company iRule and Rosfinmonitoring. Following its completion, the system will be distributed to select law enforcement agencies, credit organizations and insurance companies.

All of the above parties declined to comment on the project when contacted by the BBC.

“The content of information systems of the service makes up information of limited access, in this regard, a comment is impossible,” said Rosfinmonitoring.

Rosfinmonitoring is reported to have a long history of criticizing cryptocurrencies, having previously stated that all cryptocurrency transactions should be deemed illegal by the Russian government.

At present, a draft for regulations ‘On Digital Financial Assets’ is being read by the Russian State Duma. The proposed law would allow exchange transactions of cryptocurrency to be carried out by special operators selected by governing bodies. The first deputy of the Bank of Russia Olga Skorobogatova has stated that the Central Bank does not consider in necessary to allow the free exchange of cryptocurrency.

“Due to anonymity and the inability to find sources of transactions, cryptocurrencies are used in a gray area,” said German Klimenko, an ex-advisor to Russian President Vladimir Putin and longtime opponent to cryptocurrency. “For example, in the Darkweb to purchase weapons, drugs or violent videos. Lawmakers in many countries are concerned about this phenomenon which was confirmed by the analysis that we conducted on behalf of the president [Vladimir Putin].”

Suggested Reading : Learn more about Bitcoin in our beginner’s guide.

An Infringement on Freedom

Not surprisingly, the proposed infringement by government into the anonymous protections central to cryptocurrency is sparking vocal opposition among digital money advocates. The BBC contacted Internet expert and editor-in-chief at Satoshi.fm Anton Merkurov who said that crypto monitoring by Rosfinmonitoring will do little in helping to detect crime and will likely violate the privacy of innocent actors in the space.

“If you look at the entire volume of laundered funds, the share that is laundered through the crypto currency is very small,” said Merkurov.  He added that trying to trace laundered money through the cryptocurrency economy is like “trying to find a microbe in a drop of water under a microscope… This should not be a priority.”

Merkurov also thinks that criminals will find ways around government detection if they suspect their crypto transactions are being monitored. This could be as simple as creating a new wallet for every transaction.