Seize and Desist podcast

S&D E11 - Blockchain analytics in modern asset seizures

Author
Lo Furneaux
Digital Content & Operations Coordinator

“The day will come that the world will begin to tokenise other real-world assets.”

In this episode, Aidan is joined by Gurvais Grigg, Chainalysis's Global Public Sector Chief Technology Officer and a former Assistant Director at the FBI. 

Together, they examine how blockchain analytics is transforming asset seizure practices by providing law enforcement with crucial new insights for financial investigations.

Gurvais offers his insights into the future of digital finance investigations and the influence of blockchain technology on various sectors. The conversation explores the significance of following the money, building effective infrastructure in digital finance, and creating a more frictionless economy by representing physical assets through blockchain tokens.

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Timestamps

06:00 - Following the Money to Combat Crime

09:00 - Gurvais’ Journey From Healthcare Fraud to Blockchain Analytics

11:30 - Explaining the Blockchain Assets to Non-Technical Audiences 

15:00 - The Power of Blockchain Analytics in Financial Crime Investigations

25:00 - Building Effective Asset Recovery Programs Amid Challenges

31:00 - Leveraging Blockchain Analytics for Tax and Asset Recovery

40:00 - Representing Physical Assets Through Blockchain Tokens

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Resources Mentioned

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About our Guest‍

Gurvais Grigg is the Global Public Sector Chief Technology Officer at Chainalysis and Former Assistant Director at the FBI.

With over 29 years of distinguished experience in national security, law enforcement, and private sector investigations, Gurvais has been instrumental in leading numerous high-stakes criminal and national security investigations, specialising in tracking suspected terrorists, spies, and criminals. 

His leadership extends to designing and implementing advanced operational and technical capabilities, positioning him as a recognised authority in the intersection of technology and security.

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Disclaimer

Our podcasts are for informational purposes only. They are not intended to provide legal, tax, financial, and/or investment advice. Listeners must consult their own advisors before making decisions on the topics discussed.  

Asset Reality has no responsibility or liability for any decision made or any other acts or omissions in connection with your use of this material.

The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Views and opinions expressed by Asset Reality employees are those of the employees and do not necessarily reflect the views of the company. 

Asset Reality does not guarantee or warrant the accuracy, completeness, timeliness, suitability or validity of the information in any particular podcast and will not be responsible for any claim attributable to errors, omissions, or other inaccuracies of any part of such material. 

Unless stated otherwise, reference to any specific product or entity does not constitute an endorsement or recommendation by Asset Reality. 

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Transcription

Speaker: Aidan Larkin

What do you see the digital investigators expect to be seeing over the next sort of two to three to four years if you were guessing? 

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Speaker: Gurvais Grigg

The day will come that the world will begin to tokenize other real world assets and make blockchain representations of those assets to make a more frictionless economy to allow for their trading. I foresee the day that a car rolls off the factory floor. As the parts go into that vehicle, they are registered to the blockchain, and that vehicle is registered on the blockchain from the moment it comes off the factory floor. As it goes to the car dealership, it is registered to the blockchain. Every time that vehicle is serviced, it goes to the blockchain location for that vehicle. Every time that vehicle is changed hands, it is registered to the blockchain. When Gurvais goes to buy that car from Aden, the only thing Gurvais and Aidan have to agree upon is a price because I can see on the blockchain everything I want to know about that vehicle's history. And then when I go to buy it, it is a smart contract. And Aidan only has to take that vehicle to a smart lot. He puts the keys into a box just like I go to that lot. If the smart contract is executed, I get the keys and I drive off with it if it meets the terms and conditions. 

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Speaker: Erin Mulderig

Hello, and welcome to Seize and Desist. My name is Erin Mulderig. I'm the Director of Strategic Initiatives here at Asset Reality. In this episode, which is recorded on May second, Aidan is joined by Gurvais Grigg, the global public sector chief technology officer at Chainalysis, and he's also the former assistant director at the FBI. With over twenty nine years of experience in national security, law enforcement, and private sector investigations, Gurvais has been instrumental in leading high stakes criminal and national security investigations, is frequently invited to speak at industry events and engage with government, law, and he is frequently invited to speak at industry events and engage with government, law enforcement, and associated corporate agencies worldwide. Aidan and Gurvais discussed the critical role of blockchain analytics and asset recovery, the development of effective infrastructure in the digital finance ecosystem. Alright. So this is gonna be a great episode, so let's dive right in. 

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Speaker: Aidan Larkin

Gurvais Grigg. How are you, sir? Thank you very much for joining us today on the podcast. 

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Speaker: Gurvais Grigg

Hi, Aidan. Glad to be here. 

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Speaker: Aidan Larkin

I'm grateful for your time. You and I have had the pleasure. I think I've been moderated by you on panel sessions, and I think maybe a couple. I think Links in London and Links in New York as well. So it's good to resume things and we paid a favor and have you have you on. What I'm really keen to do today is we set ourselves a mission with the podcast to interview the people that are driving a lot of the changes in the asset recovery sector, particularly people that sort of straddle both of those worlds. We talk a lot about things like public and private sector partnerships, talk a lot about improving asset recovery, and there are those that are involved in that sector. Who have seen both sides. And I sort of wanted to kick us off with a quote that I was reminded of earlier on today, and it's an Aristotle quote that gets often changed around. But the more you know, the more you realize you don't know. And I think that's incredibly true of the blockchain sector. And I sort of perish the thought when someone calls themselves an expert, but the more you peer in and you see just the sheer scale of everything, it's massive. And I would love if you would mind kicking things off by giving us a bit on how you got to be sitting in the position you're in now with Chainalysis and also the role that blockchain analytics plays in this overall asset recovery ecosystem. We're all about taking the assets off bad guys and building those cases, and it simply wouldn't be possible when we think of things like digital assets and non digital assets without the tools that you guys are developing. So I'd love to hear a bit about that if you don't mind. 

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Speaker: Gurvais Grigg

Yeah. Well, thank you, Aidan. And first off, let me just say I'm really excited to be here. You know, our friendship has developed and matured over these last several years, and I count myself very lucky to have met you a number of years ago and to develop this friendship over.

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Speaker: Aidan Larkin

Dedo. Thank you. 

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Speaker: Gurvais Grigg

Several years. It's been a great partnership, and so I was very honored to be asked to come on today, and I look forward to our discussion today and many more that will follow over the ensuing years. I feel very humbled to be part of this emerging ecosystem and to see how the blockchain is growing. And you're right. That quote is so true. As you begin to learn about how this ecosystem is growing, you come to realize you know so very little because it is really growing. And the more you know, the more you realize what you don't know. When you look at how this economy is emerging and how twenty first century finance has the potential to fundamentally change how value is transferred across the world. You see the potential. I was with a group just a few weeks ago, and we were talking about how this economy is changing and the potential for it to impact how people do business, to reduce the friction between transactions, and how today's consumers want a frictionless economy. How they want to be able to do business and reduce that overhead and they want speed of transaction. They want greater assurance and security in making these transactions. It's really exciting to be a part of it. You know, you and I will probably be long retired when we see the final maturity of where this will be a couple of decades from now. And we will look back and we say, remember when this was just emerging? 

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Speaker: Aidan Larkin

It's the first ten years. People are crazy when they talk about it like banking around. They've been doing it for a century and they haven't got everything right. And crypto for me is like dog years. We measure things but even just how much things have changed in a couple of years since we started diving into this topic, it's immense. I think it does a better job than it gets credit for. The sector, I think it gets unnecessarily kicked. I think there's high expectations assigned to it but I do think, as you say, what we've seen just in the last four or five years and what that will just compound and what that could look like is unimaginable over the next sort of ten, twenty, thirty years. 

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Speaker: Gurvais Grigg

Yeah. You were asking sort of how I got here, sort of my personal journey. You know, I joined the FBI back in the late nineties. I was a stock and bond broker, and my journey to the FBI was sort of an interesting story. I knew even though I really enjoyed finance, I felt that call to public service. And so an opportunity came to join the FBI, and I just really felt that sense of fulfillment being in public service. And I just loved the career with the FBI and spent twenty three years and spent a good bit of that working financial investigations and tracing bad guy money around the world and helping recover assets for victims. And, you know, being in the asset recovery business, that great sense of fulfillment to get money back for those victims, to deny despots being able to keep the money they've stolen, get money back for fraud victims. There's a great sense of fulfillment in that. Right? Or prevent the fraud from happening in the first place. I spent a good bit of my career working counterterrorism and terrorist financing. And, of course, as you know, it doesn't take a lot of money to conduct a terrorist attack. 9/11 cost, what, around a half a million dollars. In fact, Ramsey Yousef, who was the original mastermind of the World Trade Center attack in 1993, when he was arrested and they were flying him back to New York City and the helicopter going over coming up there. You know, they took off the blindfold and showed him the World Trade Center, and they said, you know, it's still there. And he said, yeah. Wouldn't be if I'd had more money. And, of course, that dream was realized just a few years later by his uncle, Khalid Sheikh Mohammed, and they took it down for half a million dollars. So, you know, following the money makes a big difference. 

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Speaker: Aidan Larkin

It's such an important part. I remember being part of presentations when I was in revenue and customs and financial investigators coming in and almost pleading with people to, you know, use financial intelligence. There are breadcrumbs here. There's data here. And it seems absurd that people were having to get convinced to, like, why would you wanna look at a terrorist bank records? I mean, you were having to connect the dots why in the way the kidnapping case? Why would you wanna check an ATM withdrawal? So I think, historically, we've always had to take new technology and sort of encourage people to use it. And you reminded me of the cost of terrorism. There was always a famous quote in, obviously, growing up on the island of Ireland. You know, we've had sort ofour own troubles. And it was famously coined that the troubles and it was famously coined that the cost of terrorism was ten pence because for ten pence you could use a payphone and call in a bomb scare. And I think famously they closed down one of the biggest racing events and it was a case of, you know, what is terrorism actually? You know, what is the cost behind that? But as you say it's the reason FATF exists in its current guise. It's all of the you can't and I think FATF really kicked into gear after nine eleven because it was that demonstration that these two things don't operate exclusively. If you follow the money, you will find the people and the perpetrators, but it's also the capital they use to carry out these crimes. And no more so have we seen that explosion of the art of the possible in blockchain analytics. But sticking with your career, take me through then. You're a financial investigator. You're in the FBI. What was your first sort of exposure that got you on this very digital path then? 

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Speaker: Gurvais Grigg

It really traces all the way back to when I was working healthcare fraud in the late nineties. We were working large record intensive investigations. And, of course, that's a very manual investigation. And you're going through these records trying to find fraud, and you're looking for patterns of how overbilling and billing for services not rendered. And I began to discover that lots of these records were printouts. And I thought, wow. These are coming out of computer systems. Wouldn't it be great if we could get the original records in digital format? But in those days, agencies didn't request them in digital format. So I began calling the insurance companies and saying, could we get these in electronic format? And they said, sure, but nobody asked for them that way. And I said, well, I'm gonna ask for it that way. And I don't know how to do that, but I'm gonna figure that out. So I went out and taught myself how to code. I taught myself how to build databases, and we started getting the records electronically. And then I thought, well, I can then start writing code to ask the same questions that I would ask manually against the records. So we started doing that sort of advanced data exploitation and started building databases to ask those questions. Then that led to saying, well, if we can do this for health care fraud, we can do it for other kinds of cases. And, you know, advanced, financial fraud cases and that expanded. And eventually, we started doing it for terrorist financing and lots of other types of cases. And I, ended up going around the country teaching other agents how to do that, and we started growing those kinds of programs. And it really blossomed that love of financial investigations and following the money and sort of those digital breadcrumbs that this type of illicit activity leaves behind. And that eventually blossomed into the career when it came time to retire saying, well, what is the digital equivalent for the twenty first century now of following those digital breadcrumbs? And I knew I wanted to support public service, and I knew I wanted to stay in technology, and I love financial investigations. But, well, what is the twenty first century equivalent now? And it was blockchain. And the chance to join the leading blockchain analytic firm, Chainalysis, I had an opportunity to sit down with Jonathan, one of our cofounders. And, you know, after about the second meeting with Jonathan, I asked it, okay, Jonathan. I'm all in. How do we make this happen? And, you know, he was great, and I just loved it ever since. Been with Chainalysis now three years and just love the opportunity, and I'm humbled by that and get a chance to go around the world talking with law enforcement and partners following these digital breadcrumbs. 

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Speaker: Aidan Larkin

Funny you say that. I was gonna ask that exact point. We talk about digital breadcrumbs, and, I mean, this is the epitome of digital breadcrumbs on steroids when you start to think about the breadcrumbs that are left on something like a blockchain. From the ethos of this podcast, it's about keeping it simple. We're trying to appeal to those people that maybe are too nervous, don't wanna raise their hands, don't wanna ask the questions that they think everybody else knows the answer to, and they often sort of sit on things and maybe they have that knowledge gap. You obviously must must get asked this question a thousand times, but how do you explain for someone is maybe it's their first foray, maybe you're speaking to a police chief that really doesn't get all of this blockchain stuff because they just have conflicting priorities and they have no limited budgets and they're trying to convince or someone's trying to convince their sort of superiors or budget holders. How do you frame this sort of role of the blockchain and financial intelligence of following the money? How do you weave that in for someone that maybe doesn't come from a particularly technical background? 

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Speaker: Gurvais Grigg

Yeah. That's oftentimes the kind of discussions that we have. And so oftentimes, I'll get the statement of, like, you know, I don't really understand this issue of blockchain, or how or why is this important to my department. I'm already covered up on dealing with violent crime, under resourced for my department. How can I devote time to doing this when I'm already covered up with these other issues? And that's a fair question. Or they'll say, you know, I don't really understand this issue of digital assets in crypto. And I'll oftentimes begin and I'll say, well, let me ask you something. Do you participate in a loyalty program? And they'll say, well, what do you mean? I said, well, do you participate in a loyalty program, let's say, with an airline or a hotel? And they'll say, oh, yeah. Absolutely. And I'll say, well, then you already own a digital asset that is a representation of value. The challenge is, of course, it's not very fungible. Meaning, you can't go and take, in most cases, that digital asset associated with that hotel and go spend it at, let's say, at your local grocery store. You know, sometimes there's partnerships between certain vendors and they allow for some medium of exchange between partners, but they're pretty limited and fungible. And they're certainly not recorded. 

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Speaker: Aidan Larkin

And there's always a central entity behind them and they're owned by somebody. 

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Speaker: Gurvais Grigg

Right. And, of course, they're not necessarily managed in most cases on a blockchain. Now some of them participate in some of limited forms of blockchain. So we begin with something that they know and understand. Some of them may use certain types of value transfer systems, monetary capabilities where they transfer money between each other. And so once they start walking through, they realize that they actually know more about value transfer system, digital asset transfer systems than they realize. And then we begin to talk about, do you realize that this up and coming generation are using these capabilities all the time? Then we begin to talk about, see, how often do you and your officers seize digital devices from the subjects of your investigations? And they say, all the time. And then we say, how often do you think bad guys do their banking on mobile devices? And they say, all the time. Then I say, how often do you conduct financial transactions? And they say, all the time. Then I say, when was the last time you walked into a financial institution and did a financial transaction? And they say, maybe once a month. Then I say, what is the likelihood that there's financial intelligence on one of those devices that you seized from the bad guy? They say very likely. Then they began to realize there is financial intelligence opportunities sitting on those devices seized from those bad guys that could lead to greater insights in their investigations that might help them understand what the bad guys are doing, open up new avenues of investigations, or shortcut the time of investigation, thereby saving them investigative resources, which is a time saver for them. Maybe reveal new investigative avenues. Right? Revealing crimes greater than the one they began to investigate or in some cases, clear the individual, which is just as important so that they don't waste time of the department and agency nor in protect the rights of that citizen. So as we begin to look at those opportunities, they begin to realize these can both be time savers as well as investigative aid by following the money. And then lastly, they realize if they find assets associated with the less of activity, now there are asset forfeiture opportunities to seize and recover those assets either for the victim or proceeds of crime. And so as we start to have those conversations, they then begin to realize a whole new world of opportunities that were not present at the beginning of the conversation. 

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Speaker: Aidan Larkin

And I think you've hit on a point that I'm going to ask you about. It was that though they're not just crypto cases that I think a lot of people when we're presented with you know, this term public private partnership gets thrown around a lot. But when we're speaking to an agency and it's maybe their first asset seizure case involving digital assets or they've never been involved in a blockchain investigation, quite often it's, we don't have those types of cases here. We don't have crypto cases. And, of course, you guys have a tremendous amount of data that sort of points to that, which we'll get to in a second, just about the global adoption of crypto to give people an idea of just the sheer scale. But maybe you could you could talk about the fact that there isn't always a digital asset seizure at the end of this. Sometimes that we've heard anecdotal cases where someone's been able to make applications to the judge to freeze other associated assets because of the activity. Even if you come across a they use blockchain analytics and you discover that the wallet's empty, well, you've got your evidence baked in right there. Could you talk a little bit about that and about how Blockchain Analytics has been used evidentially and what we're seeing? It's not just always, selfishly. A man who's interested in asset seizure, it's not just all about asset seizure. With this, it extends into, you know, compliance monitoring, transaction monitoring. It could it's a whole other set of tools. 

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Speaker: Gurvais Grigg

Sure. Let me give you a couple of examples and make one additional point to pull that thread just a little bit more. It isn't always about crypto. For example, it really isn't relevant sometimes about how much crypto the subject of your investigation have or doesn't have. Sometimes it's just the fact that they used a little crypto because what can crypto tell me about them? Because they have crypto and if you have proper legal authority, you can learn all kinds of things about them. Where they bank. Right? And other biographical details about them in the event that you serve legal process on the holder of their crypto. Right? And what investigative insights will that yield? But using your example there, let's say an individual engages in illicit activity involving crypto buying or selling narcotics on the dark web. But by the time the investigative agency stumbles across this activity, they find the crypto wallet and its balance is zero or a micro fraction left over of a little bit of Ethereum. Nothing hardly worth seizing. Or if they do, it's a micro amount. But they find that they cashed out all of that crypto at the crypto exchange, and that exchange then sent the money to your friendly neighborhood bank. And when it arrived at the friendly neighborhood bank, that money has been wired to another institution, and they purchased this piece of real property, maybe a house, a car, a diamond ring, whatever the case may be. Now that is a real piece of property in the real world. And now asset forfeiture and a seizure or a civil suit can be filed by the government against that cash, against that real world piece of asset because they can trace that that real world piece of asset was combined with other funds. And those funds, some of which came from that illicit activity from the blockchain and that dark net market narcotics activity. It's fascinating. Or they may find that it's sitting there in that bank account, and a civil suit can be filed against that cash. And the owner of that cash can challenge that law suit. Oftentimes, they never come forward and challenge that lawsuit. 

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Speaker: Aidan Larkin

That for me is the single… selfishly from an asset forfeiture perspective. That for me is single handedly one of the most valuable roles that blockchain analytics plays. Because when you think of the different burdens of proof that is required for something like a criminal prosecution versus a civil forfeiture, I don't think I've actually ever heard of a case involving blockchain analytics where it's been traced to an illicit wallet with connections to the dark web, where a civil forfeiture where someone has said, we've got the breadcrumbs that show we think this is a suspicious wallet and that's served on an exchange. No one comes forward. And when I'm trying to explain to people why people wouldn't come forward, I often use the example of kind of like a bag of cash and guns and gold bars that has been left outside customs at an international airport, and you said, now would the owner of the bag of cash please come forward? There's some federal officers who would like to answer some questions about how you obtained these assets. People just don't come forward, and that's why we're seeing such phenomenal civil forfeiture cases that has been sort of enabled by blockchain analytic. For me, I'm often posing it as it can give you another tool in the arsenal in terms of evidential collection that could build your case. And as you say, point to real world assets, point to other assets, and not always just be an asset seizure. 

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Speaker: Gurvais Grigg

In this example, there could be a reasonable explanation. And the owner of that cash or crypto is welcome to come forward. There may be a reasonable explanation to do that. Just like in the real world, that gun and that cash and that bag of gold coins or bars, they can come forward and explain it. 

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Speaker: Aidan Larkin

There could be a reason there. 

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Speaker: Gurvais Grigg

There could be a reason. Our experience, my training experience, and yours is more often than not, they never do. 

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Speaker: Aidan Larkin

And that's why we're seeing and we actually had Jarod Koopman from IRS-CI on the podcast before you talking about some of these examples of cases where we have got blockchain analytics tools playing such a key part in the following the money and identifying welcome to video case. Would you like to share some of your thoughts on that and any other sort of cases that you think really demonstrate the sort of role that analytics can play in dismantling, disrupting, deterring, and obviously taking down some of the most heinous actors in the world? 

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Speaker: Gurvais Grigg

Yeah. The welcome to video case and, you know, any of your listeners can literally just put that term in welcome to video and pull up details about that case. At the time, it was one of the largest, and I think it still stands as a Hallmark case to illustrate the power of blockchain analytics. And it happened early in the history of using blockchain analytics. It was just a horrific example of the purveying of child exploitation material. 

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Speaker: Aidan Larkin

I think it was back in 2019. I was quickly googling it before we spoke, operated out of South Korea. 

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Speaker: Gurvais Grigg

Yeah. Where a site administrator would take crypto in essence for the selling and purveying of child exploitation material. And individuals around the world could buy, sell, and trade this exploitation material. Long and short was investigators were able to stumble across this. And by tracing these crypto transactions, not only be able to prove that the administrator owned and operated this site, but they then were able to trace purveyors of this information, the ones that were purchasing that. And as a result, we're able to not only find contributors and perpetrators buying and selling this material, but then we're able to find them in multiple countries around the world, which led to the rescuing of children and multiple arrests in multiple countries by cooperating agencies. So it's a great example of how blockchain analytics can have a real world impact to not only dismantle and take down this site to prevent future victims, but also arrest individuals in multiple countries to bring them to justice and rescue these children that were active victims of these horrendous crimes and prevent the future victimization of those children and future children. 

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Speaker: Aidan Larkin

It did, for me it was one of the ones that I enjoyed using it as a case study because of that impact, because it just hit. And I think it demonstrates because I get frustrated when I keep hearing this sort of, like, the reductive descriptions of these important tools and technologies crypto case. And if anything, I think of it now just in the same way we think of digital forensics. Virtually every crime committed, every fraud investigated, there will be some sort of digital footprint to that that's virtually impossible otherwise. And I think that that's where we'll see the future direction of travel is that every 401K, every asset portfolio, every someone somewhere will touch a digital asset or digital asset ecosystem. It could be that banks have exposure to crypto cases. They just don't know it because maybe their customer is using PayPal or using Revolut or using something that is inherently linked to an underlying crypto offering as well. What you have the fortune and the sort of the position now that you're working with different government agencies around the world. Let's take your the fictional character you were talking about earlier on. Let's say this chief is saying to you, I don't really have the resources. Let's elevate that above. When you're talking to at a country level, I mean, how do you first think of how a country if someone sort of listening who's in the role right now where they're responding to a FATF assessment, they're thinking about developing their infrastructure in line with the new FATF requirements and enhancements on asset recovery. How do you start to think about how a country because there's no magic wand for this. Countries don't have massive amounts of money available at all times. How do we think about building infrastructure to build an effective asset recovery program that deals with the threats of digital assets, particularly those countries that have maybe a large digital asset footprint, whether it's high adoption or multiple exchanges? How do those conversations normally play out? 

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Speaker: Gurvais Grigg

Yeah. So one of the first things that those countries need to do is become informed as to the nature of their environment. So I spend a lot of time, as you say, helping to educate and inform. So what you'll find happen in those type of environments is coming and sitting down with the leadership in that country and talking to them about what's going on in their ecosystem and their economy. And using the data that we have that you mentioned is helping them paint what's happening in their environment. We'll talk a little bit about what's happening globally, what's happening regionally, and then what's happening in their country specifically based on what we can see on the blockchain. We'll look sort of at pattern trends over the last several years. We'll look at what we're seeing both inflows and outflows within their geographic sphere. We'll look at what's happening based on illicit flows and then what we see happening in the various crime types. How much of that's related perhaps to sanctions evasions? Or how much of that's related to dark net market activity or child exploitation material or ransomware and the like. And so that they can have a better understanding of both illicit activity as well as commerce related activity. And that's helpful in several ways. One, so that they can frame perhaps legislative agendas because many of these countries are trying to get their arms around what type of economic policies, legislative agendas they need to do, promote commerce, and put together policies and procedures, right, to adopt what works for them with regard to these FATF guidelines and recommendations. And so oftentimes, they're looking for information from companies like us who understand the blockchain to help inform so they can make informed decisions. Additionally, their law enforcement and regulatory entities are looking for and trying to understand what's their crime problem look like. So we can help provide data like that to help them make some of those decisions and be informed. So that's oftentimes what we'll be doing is having those kinds of conversations to provide that type of information. And then based on that, then they start looking at, well, what do they wanna do about that? And it varies geographically. Some parts of the world have different crime problem types. Right? And some of your listeners have probably seen some of the reports that we put out. We put out an annual geography report, which looks at crypto adoption around the world, and you can see how some geographies are adopting crypto at different rates. We also put out an annual crime report, which tracks how crypto crime is progressing both globally and regionally. And so countries and parts of the world look at that data to help them better understand those trends and patterns. 

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Speaker: Aidan Larkin

Again, I think it's incredibly helpful and I would recommend anybody to download the geography report and the crime report. It's part of my essential sort of reading every year. But I imagine you must also find yourself in a rock and a hard place sometimes because, certainly, when asset reality has been involved in country deployments helping countries try and build out their their infrastructure for asset recovery, I often find we're sort of stuck between often warring parties and you've got, you know, a country on one side will have a push for innovation and wants to be open for business and they want the exchanges, they want the the VC money coming in. They wanna do all of those things and run really fast. And then you've got the other side of the country that might have a central bank governor that wants to ban crypto. Or you might have in some countries, we've seen no religious reasons being the reason that, like, in Indonesia, for example, where there's been a stifling of any sort of regulatory decisions because we're going to ban crypto or we're going to license the use of holding of crypto or or making an offense to pay in crypto, but not stop people actually holding it. It all becomes a bit gray, and then there's the regulatory uncertainty. And then you've got the crime report or the geography report. Those showing irrefutably that there's adoption in the country, you know. You can imagine you must have been in an and obviously I appreciate that there's maybe certain things you can and cannot go into, but hypothetically, like, what's that like when you're in the middle? When you've got all of this publicly available data, you've got information that talks about adoption, I'm sure you've got people shouting and saying well actually how do you discount things like VPNs and how can you actually know? For those that really haven't deep dived into blockchain analytics, I mean, when we talk about those, the reports, for example, how is that data gathered or presented or allocated or attributed in a layman's way just for people to understand what is degree of confidence. I appreciate there's always a regular, but we can say that this activity is happening. This adoption is happening. How do you have those conversations when you've got people saying it's not a problem here? 

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Speaker: Gurvais Grigg

Well, you know, as you say, as a private company, we don't have or express opinions one way or the other for any country. That's for them to decide. They have their own sovereign opinions to that. All we can do is provide data and make that available for consumers to look at. And then they can and you make decisions that work best for them. We just publish information. The blockchain is available for any and everybody to look at. The challenge is, of course, it's not human readable, and that's one of the expertise that we apply. We allow… we are able to as experts in that, able to help individuals understand what's going on in the blockchain. And we're happy to do that and publish that for the world to look at. But there is that natural tension, right, between the economy and enforcement and regulatory and legislative. And so as you say, the world is constantly struggling with that and it varies across the continent. So we definitely see that as I travel the world, and I see and hear that type of argument, and it varies. We publish that information, and people pull it in in various directions. With regard to, you know, how people use it, I see it across the spectrum. As you know, the vast majority of crypto and digital assets are for lawful and legitimate purposes. We see really a micro fraction of this economy is used for illicit purposes. I think there's probably no other asset class that can boast the same or equivalent fraction identified for illicit purposes that digital assets can say. Obviously, there's always under reporting. So no matter what number we say we can track and attribute to illicit purposes, there's always a number somewhere north of that that's actual and true because you never get actual and full reporting but based on the numbers that we do have and the reporting that is made, there’s no other asset class that can at least publicly report those same kinds of numbers.

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Speaker: Aidan Larkin

And I think it would to be fair to crypto effectively, when you compare it against something like traditional finance and cash, we have long given up trying to figure out what amount of cash is laundered every year. UNODC puts it at two to five percent of GDP. I mean, it's trillions of dollars of a variation. I know that you and I sort of unanimously agree on this is the fact we've talked about it a lot. It's almost absurd that illicit actors would choose to use a traceable asset, an asset with such an immutable footprint, but it's a reflection on the fact that they're exploiting weaknesses in the sense of everyone doesn't have the tools and the training and the resources, and there's just a maturity. Criminals will break the law all the time. They will launder money all the time. It's, you know, safety in numbers. They're just hoping they don't get detected. 

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Speaker: Gurvais Grigg

I mean, bad guys still rob banks and they know their cameras in the bank. 

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Speaker: Aidan Larkin

People aren't watching CCTV every day of every week. It's the same, the blockchain still has traffic as well. 

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Speaker: Gurvais Grigg

Absolutely. 

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Speaker: Aidan Larkin

You mentioned sort of economic policies and governments, and you reminded me, we think about enforcement, we think about crypto and following the money and these really important cases, and a lot has been published around, you know, sanctions of Asians. And, again, you have an immutable ledger and a blockchain and all of these benefits. Talk to me a little bit about one of the things that I don't think it's enough airtime and it's incredibly important and enabled accurately on the blockchain is nonpayment of tax. When we think about revenue generation opportunities for countries I mean, as a former criminal tax inspector, I mean, I'm sort of selfishly interested in tax. When we think about proceeds of crime returns each year, like, the tax number is always by an enormous factor so much bigger. I mean, what are you seeing countries now doing? Is it right to assume that we're going through that progression now where the big serious organized crime, the follow the money, the dark web stuff, Are you seeing now countries are starting to realize there is billions of dollars to be collected and the blockchain is a mutable legislator where beyond any doubt you can see when someone held an asset, realized an asset, calculate again. Could you give us a bit of what's going on in the blockchain world of tax and enforcement? 

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Speaker: Gurvais Grigg

Tax and enforcement agencies are beginning to leverage blockchain analytics for asset recovery and tax recovery in tremendous and powerful ways. Unlike any other asset class, blockchain analytics offers tax and regulatory agencies an opportunity to close the tax compliance gap like no other. We are seeing tax agencies around the world beginning to adopt blockchain analytics as a solution to help them close that gap. You cannot have trillions of dollars being moved and exchanged on the blockchain and not create taxable opportunities. And they are realizing that there are underpaid taxes in their economies that have not been accounted for to the tune of billions of dollars. And so we are seeing adoption growing around the world by tax agencies. And because this data is publicly visible and publicly independently verifiable, they are turning to blockchain analytics as a way to assist their agencies in fulfilling that tax compliance gap and becoming crypto literate at an accelerating pace. It is no accident as well that federal agencies in the United States, for example, in the last three years, including tax agencies, have recovered over eleven billion dollars in crypto asset recoveries. And we have seen billions more in agencies around the world. 

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Speaker: Aidan Larkin

There's no doubt for me as I say with my former role, the thought of having an immutable ledger with all of these breadcrumbs where I can quantify programmatically the exact amount of the evasion amount and the interest. We got to see actually at the Links event some of the demos from companies like TaxBit and the calculations that took a very long and I say all of this as this is not a sponsored post or an ad. This is just watching sort of these technologies, like, the capabilities to be able to, you know, programmatically deal with large amounts and then, you know, correspond. I've seen good success with agencies like the IRS CI using John Doe summons, serving notices on exchanges. I think all in all, it just sort of tightens the net. And I say this not as some activist wanting to sort of chase everybody down like a phrase tax inspector, But I think that the cost of noncompliance is the reason we as global citizens pay more in tax. The reason our agencies can't respond to serious and organized crime is because they don't have enough money to do so. I think it's such an exciting field, and I know that one European agency recently posted statistics showing that they had collected more in digital asset related gains than the entire country has done over the last four or five years in regular receipts because they're just starting to target and tell the community, come and pay your tax. Otherwise, we're gonna knock on your door. 

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Speaker: Gurvais Grigg

You know, and that's a very good point to think about is when we have compliance, then that reduces the burdens on lawful taxpayers. So as we get greater compliance in lawful payment of taxes, that reduces the tax burden on the lawful taxpayers. When we get compliance across the board, that reduces that payment gap because it's the lawful taxpayers that are having to make up the gap for the unlawful taxpayers. Additionally, when you can machine compliance into the payment of taxes, that reduces the friction in the economy with regard to that. So, yes, we are seeing adoption in the block chain space by tax agencies to do that, and it is reducing that tax compliance gap and friction. 

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Speaker: Aidan Larkin

I think that that's where in regular tax and regular compliance at scale, that's where we'll truly see the benefits of these tools and the ability to issue those computations, collect tax. One of the things that I regularly talk about in the asset forfeiture world as well, and I just wanted to quickly get your view on it and then we'll wrap up, but it would be remiss of me not to mention it. When we sell a seized asset, usually when you sell a yacht or a painting or a gold bar, you lose the trail and you don't really know who's buying it. And you could do some due diligence around the buyer, but we've seen lots of cases around the world where criminal organizations through shell companies have bought back their seized supercars to just embarrass the agencies, basically improve They're very liquid with capital. Tell us about the fact that actually now if you're realizing assets or you're putting assets back in, we've made use of tools where we can actually track and monitor where the asset is going. So, actually, if, let's say, the, a US law enforcement agency is selling their seized crypto, there's actually more compliance can be done on the other side to watch that transaction after the event. Tell us a bit about that. 

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Speaker: Gurvais Grigg

So with the blockchain, because it's an immutable ledger, the ability to watch and monitor that transaction. First off, being able to vet the receiving wallet and do the counterparty analysis at the first to make sure that the receiving party is not a sanctioned entity or a prohibited buyer. Additionally, then be able to monitor that post transaction to ensure that three hops from now, it doesn't find its way to go back through a beneficial ownership and land ultimately back into the person or persons, whereas previously you just have no way of doing that with any other type of asset class that has that ability to do that persistent monitoring and make sure that it doesn't ultimately land back in the pocket of the bad guy. Right? Just powerful capability to do that. 

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Speaker: Aidan Larkin

Huge. And that that has never existed when we think of things like all of the regular assets. Gurvais, I wanna wrap up because I'm very, very grateful for your time and for joining us today. What do you think the future holds? Everyone hears of AI and metaverse, and there's so much things thrown around with hyperbole. I mean, Chainalysis is the eight hundred pound gorilla in this space and has been around the longest. What do you see as the new products, the new tools, the new technologies? What can the digital investigators expect to be seen over the next sort of two to three to four years if you were guessing? 

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Speaker: Gurvais Grigg

Well, I don't think this is a guess. I think this is actually what's gonna happen. Right now, Aidan, we're talking about a few trillions of dollars of digital representation of cryptocurrencies. Digital assets in the form of cryptocurrencies. The Ethereum, Bitcoins, and all the other thousands of those cryptocurrencies. We haven't even moved into digital representations of values or other real world assets, your vehicles, the hundreds of trillions of dollars in real world property assets. The day will come that the world will begin to tokenize other real world assets and make blockchain representations of those assets to make a more frictionless economy to allow for their trading. Right now, we spend tons of money using property title companies to facilitate the transfer of real world properties because we need to be able to do the pedigree searches to make sure that Aidan Larkin really does own that property because he's selling it to Gurvais Grigg. Right? Aircraft, other things. I foresee the day that a car rolls off the factory floor. As the parts go into that vehicle, they are registered to the blockchain, and that vehicle is registered on blockchain from the moment it comes off the factory floor. As it goes to the car dealership, it is registered to the blockchain. Every time that vehicle is serviced, it goes to the blockchain location for that vehicle. Every time that vehicle is changed hands, it is registered to the blockchain. When Gurvais goes to buy that car from Aidan, the only thing Gurvais and Aidan have to agree upon is a price because I can see on the blockchain everything I want to know about that vehicle's history. And then when I go to buy it, it is a smart contract. And Aidan only has to take that vehicle to a smart lot. He puts the keys into a box just like I go to that lot. If the smart contract is executed, I get the keys and I drive off with it if it meets the terms and conditions. We are going to see the day where value transfers are happening. 

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Speaker: Aidan Larkin

Couldn't agree more because when you think about it as futuristic as that can sound, it's a vending machine transaction at the simplest level. So all we hear about at conferences all around the world like yourselves, we spend a lot of time in private sector events, and you just have to follow the noise. When you're at things like Digital Asset Summit, Feet crypto events, you're at these events where there's no it's the JP Morgans of the world. It's them talking, some of the biggest crypto skeptics and all they keep talking about is tokenization of real world assets, twenty four seven trading, three hundred sixty five day borderless trading. If there is capitalism and profitability to benefit from this, it is just an inevitability. And as you rightly say, that's exciting for us at forfeiture. It's exciting for us at recovery prospects, but we are only as good as the tools and training we have to exploit these datasets. 

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Speaker: Gurvais Grigg

And when you begin to look at that, that's hundreds and hundreds and hundreds of trillions of dollars of assets that become tokenized and then are being traded. And the frictionless economy that that creates and the… about the ability to bring billions of people that are currently unbanked onto the economic grid and the economic freedom that that offers. But with that will come criminals who will follow the money onto the blockchain and look for opportunities to steal and perhaps steal on a scale they've never done before. So with that will need to come innovation to how to protect those assets and technology innovations that look to protect it in twenty first century solutions. 

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Speaker: Aidan Larkin

Gurvais, that's a perfect summary. I'm reminded of the folks from, I think, Ribbit Capital who were on stage at Linx a couple of years ago talked about crypto being the wild west, but in a good way in the sense of from a frontier technology point of view, from a this is the early days of what we will look back on in a hundred years' time. But with that comes the risk that there will be casualties. There will be severe repercussions for people who get it wrong or put themselves at risk. But as you sort of perfectly sum up, I think that this sector also has its own solutions. The same tools that we can be afraid of that enable things to go wrong are also the savior in all of this. Gurvais, thank you very much for your time and for joining us today. It's been fascinating. We could've I feel probably sat here for another couple of hours and kept going. So hopefully, this is the first of many, my friend. 

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Speaker: Gurvais Grigg

I hope so too. 

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Speaker: Aidan Larkin

Thanks so much, Gurvais. 

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Speaker: Gurvais Grigg

Alrighty. Bye bye. 

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Speaker: Erin Mulderig

We appreciate Gervis for taking the time to share his valuable insights with us. Explore Chainalysis' reports for an in-depth look at the cryptocurrency landscape. If you've enjoyed today's conversation, like and subscribe to the Seize and Desist podcast on your preferred platform. Leave a comment and any suggestions for future episodes. Next time, Aidan will be joined by author, speaker, and podcast creator, Geoff White, an investigative journalist specializing in the intersection of organized crime and technology. Geoff's work has been featured by BBC News, Channel 4, Sky News, and the Sunday Times, among many others. Aidan and Geoff will discuss his latest book, Rinsed, which explores the impact of technology on money laundering, the role of investigative journalism in uncovering financial crimes, and the future of cyber enabled criminal financing. You won't wanna miss this next episode. It's gonna be awesome. Seize and Desist is brought to you by Asset Reality. Thank you so much for listening. 

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Speaker: Lo Furneaux

Our podcasts are for informational purposes only. They are not intended to provide legal, tax, financial, and or investment advice. Listeners must consult their own advisers before making any decisions on the topics being discussed. 

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