Cybersecurity forms the bedrock of trust and innovation in the Web3 space, ensuring the integrity and security of digital assets and transactions. With the rapid expansion and development of the global digital landscape, maintaining comprehensive security within the Web3 industry remains a crucial yet complex task.
The root of cyber threats in blockchain is often not the technology itself but rather the human element and malevolent players within the industry. Of course, this is no different than elsewhere in the global financial system. From professional hackers performing cyber attacks to ‘hijack’ personal information, to sneaky trojans and viruses lurking in cyberspace, there are emerging cyber threats which can undermine and threaten user security.
From addressing vulnerabilities in blockchain infrastructures to continuously monitoring threats, organizations and authorities must start adapting and elevating the best law enforcement practices to maximize user protection. The good news is that inflows to illicit addresses have decreased year-on-year. Based on data from Chainalysis, the total value received by illicit addresses in 2023 was $24.2 billion, a significant drop from $39.6 billion in 2022.
Akbar A., Binance’s Head of Investigations for APAC, said: “In recent years, Binance has been making massive investments in building its compliance talent, processes, and technology. We draw immense pride from the continued collaborations between our Investigations team and law enforcement agencies around the world. While law enforcement agencies continue to spearhead the fight against cyber crimes, industry players are primary allies who can help elevate existing efforts in maintaining cybersecurity. This collective commitment will ensure the creation of robust defense mechanisms that can effectively safeguard the industry.”
You may ask, is there a difference in managing cybersecurity with the rise in Web3 technology as compared to, for example, 10 years ago? This article will explore the importance of cybersecurity in the context of Web3 technology, as well as the potential of a collaborative approach to fight cyber crimes.
Strengthening cybersecurity through KYC and AML measures
The establishment of secure and clear blockchain protocols and platforms within the industry is necessary to ensure that fraudulent practices can be curbed amidst growth and innovation. In particular, custodians and digital asset exchange platforms are key industry players who are responsible for upholding the integrity of users’ funds and data.
One of the primary ways in which private sector entities, enterprises, and Web3 organizations can strengthen cybersecurity is through the implementation of the Know-Your-Customer (KYC) process and the Anti-Money Laundering (AML) measures.
As its name suggests, the KYC process involves the identification of users by taking numerous factors into consideration, such as customer risk - Politically Exposed Persons (PEP) status, sanctions nexus, adverse media exposure - and geographical risk. In most cases, personal information, such as government-issued identification, proof of identity, and address, is collected and verified.
AML measures are designed to detect and prevent illicit financial activities, particularly money laundering and terrorist financing. Implementing proper AML procedures allows the platform to monitor transactions, identify unusual patterns, and report suspicious activities to relevant authorities. This mitigates the risk of the platform being used for illegal financial activities.
As the leading industry player, Binance continues to invest in best-in-class localized KYC vendors and product solutions to prevent malicious actors from infiltrating the platform while enhancing user experience. They have also built a robust compliance program that incorporates anti-money laundering principles and tools used by financial institutions to detect and address suspicious activity.
Private-public collaboration to fight cybercrimes
Known for its robustness and transparency, blockchain technology has been ushering in a new wave of security standards across numerous industries due to its decentralized and distributed structure. In fact, blockchain technology has proven to be one of the most powerful tools for authorities and companies’ anti-money laundering efforts and fighting digital asset crime, allowing them to uncover and trace digital transactions more easily.
With that being said, this does not mean that it is immune to cyber threats and vulnerabilities. There are still many layers to the blockchain, combined with the fact that it is still a nascent technology in need of more understanding and refinement. Therefore, ensuring comprehensive security within blockchain networks requires proactive collaboration between industry stakeholders, global regulators, and law enforcement.
In fact, there is immense potential that lies within Web3 to strengthen cybersecurity and provide actionable assistance to law enforcement globally. Blockchain technology can greatly enhance existing investigation techniques if law enforcement agencies know how to leverage and operationalize the data and work closely with the relevant players in the industry. Over the years, Web3 organizations and law enforcement agencies have been working closely on thousands of investigations, where the following flows of funds provided actionable leads to the investigators.
According to Binance’s 2023 End of Year report, they have supported and processed over 58,000 law enforcement requests, serving about 13,000 registered officials worldwide through its Government Law Enforcement Request System. Binance’s security and investigations teams have also successfully thwarted international criminal rings, acted against major hacking incidents, helped solve crimes against persons, and tackled online scams, leading to significant recoveries and arrests over the year.
In one of the major cases of 2023, Binance teamed up with the Cyber Crime Investigation Bureau (CCIB) of the Royal Thai Police and the U.S. Homeland Security (HSI) to take down a criminal group that has affected thousands of victims in Thailand. During the operation, Binance and HSI provided CCIB with intelligence that eventually allowed them to apprehend key members of the criminal group and seize around THB 10 billion ($277M) worth of assets, including luxury vehicles, houses, land titles, and other high-end goods. This is an excellent example of how the private and public sectors can work together to provide a safer digital environment for the industry.
The key to a robust cybersecurity
Web3 companies and exchanges play a vital role in bridging the knowledge gap and enhancing the collective ability to address cyber crimes. They possess the knowledge, expertise, and infrastructure that is key to understanding and leveraging the technology. By actively engaging with law enforcement authorities, the private sector in Web3 can enhance information exchange and law enforcement expertise to apprehend criminals promptly.
The world’s leading exchange, Binance, proactively shares knowledge with crime fighters. In 2022, they formally launched the industry’s first Global Law Enforcement Training Program to help law enforcement detect and combat financial and cybercrimes. In 2023, their Law Enforcement Training Team, with support from the Investigations Team, delivered 120 onsite or online training and workshops for law enforcement agencies around the world, including in Ukraine, Taiwan, South Korea, Hong Kong, Australia, and Kazakhstan.
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