UN Official: Crypto Makes Policing Child Trafficking 'Exceptionally Difficult'

A top United Nations (UN) official said cryptocurrencies are making international efforts to combat terrorist financing, money laundering and cyber-crime “exceptionally difficult.”

Neil Walsh, chief of the Cybercrime and Anti-Money Laundering arm of the UN's Office on Drugs and Crime, said that the anonymizing and pseudo-anonymizing attributes of cryptocurrencies provide a “new layer of secrecy that favors the criminals,” when speaking to the Australian Broadcasting Corporation's Linda Mottram.

Specifically, Walsh raised concerns about the role cryptocurrencies play in the clandestine child trafficking industry.

"In the past, when we looked at some of the really big high-threat areas like kids getting abused online, it had to be paid for and now, with the use of cryptocurrencies, it's exceptionally difficult for investigators to track that and try and manage that risk down," Walsh said.

Walsh said the trade now runs on cryptocurrency, later adding that "child abusers are successful when they can create secrecy," adding:

"When you add a layer that is encrypted that is anonymous or pseudo-anonymous, then it makes it very difficult for investigators to counter that challenge and also, it really makes it easier for the bad guys to do what they do, and that creates risks, especially for our children."

Further, Walsh said efforts should target crypto exchanges where illicit funds may be washed. Added security protocols would not interfere with the average user, he suggested, as “there isn’t really a large amount of risk around declaring who you are and that you have an interest in moving value.”

Walsh highlighted efforts put forward by the Financial Action Task Force (FATF) as one possible way of tracking who might be moving value using cryptocurrencies.

In June, FATF, the intergovernmental organization devoted to combating money laundering and terrorism financing, finalized its recommendations on regulating cryptocurrencies for its 37 member countries, including a rule that “virtual asset service providers” (VASPs), meaning crypto exchanges, enact the so-called "travel rule."

Under this stipulation, exchanges and wallet providers would be required to have know-your-customer information not only for their own users, but also for the users of wallets or exchange accounts that funds are being sent to.

"We're still waiting to see how that plays out," Walsh said, but he added that the U.N. has brought together policymakers and experts to work on finding the best policy to regulate the space.

"We've brought together those policymakers, lawyers, those cryptocurrency experts to try and look what policy might look like in this space, because when we look at some of the really high-risk crime where we see kids, I'm talking babies very, very young, six months old and younger, who are in pay per view live online child sexual abuse streaming websites," Walsh said, adding:

"That's getting paid for by cryptocurrencies. We need to have some sort of options. We need to know how we try and challenge that threat and reduce the risks for kids and reduce the opportunities for criminals to get involved. And it's gonna take lots of different brains. It's going to take technologists, policymakers, philosophers, the whole nine yards."

United Nations image via Shutterstock