The United States Postal Inspection Service (USPIS), the law enforcement arm of the U.S. Postal Service, has conducted an internal audit of the way in which it carries out crypto-related investigations and found there\u2019s significant room for improvement.<\/p>\n
Notably, the USPIS handled only a small number of crypto-related cases during the two fiscal years under review \u2014 2019 and 2020 \u2014 with a total of four closed cases for which postal inspectors seized crypto as evidence during an investigation and nine other cases that were managed under the USPIS\u2019 \u201cCryptocurrency Fund Program,\u201d established back in 2017.<\/p>\n
This program was intended to specify standards and policies that can help account for cryptocurrency transactions during investigations and reduce any associated operational risks. As the report has emphasized, this is particularly important given that \u201cThe anonymity of cryptocurrency transactions and the significant fluctuations in the value of cryptocurrency create opportunities for abuse or theft when used during law enforcement activities.\u201d<\/p>\n
Despite the small volume of crypto-related activities, the USPS Office of Inspector General (OIG) had determined earlier this year that a self-initiated audit was necessary in light of the fact that cryptocurrencies can often be the \u201cpreferred medium of exchange\u201d for illicit activities like ransomware campaigns, online scams and money laundering.\u00a0<\/p>\n
Assessing operations during the two fiscal years under review, the audit report identified a \u201clack of standardized training\u201d for USPIS employees regarding cryptocurrencies. This meant that postal inspectors who carried out undercover investigations and purchased crypto as part of their activities failed to comply with the guidance that had been established as part of the Cryptocurrency Fund Program.<\/p>\n
While in some cases inspectors did use the program to account for crypto transactions they make for investigative purposes, the audit found that there are many legitimate instances when using the program may not be possible, as when certain crypto vendors only accept payment in the form of specific private cryptocurrencies.\u00a0<\/p>\n
In these cases, inspectors needed to request standard investigative funds in the form of U.S. dollars and were personally responsible for all crypto-fiat conversions and the management of unused investigative funds.\u00a0<\/p>\n
It is in these scenarios that the audit identified a breakdown in communication between management and inspectors, meaning that the program\u2019s managers at present \u201ccannot account for the total amount of cryptocurrency used for investigative purposes across the Postal Inspection Service.\u201d\u00a0<\/p>\n
The auditors were therefore required to conduct a manual keyword search for various crypto-related terms to try to ascertain whether or not crypto had been used in certain investigative cases, finding 1,064 unique case numbers that will now need to be manually reviewed. On this point, the audit report concluded:<\/p>\n
\u201cThe Program is unable to carry out one of its primary purposes\u2014to help postal inspectors manage the challenges associated with cryptocurrency\u2019s inherent volatility\u2014which ultimately leaves the Postal Inspection Service susceptible to theft, abuse, and mismanagement of federal funds.\u201d<\/p><\/blockquote>\n
The audit report has recommended that going forward, the USPIS should ensure that the Cryptocurrency Fund Program has the information it needs to provide oversight and that the agency also develop a comprehensive cryptocurrency training program for all inspectors. Additionally, it has recommended a rehaul of current data management for investigative transactions, which have been inaccurate and include duplicates, again impacting the agency\u2019s ability to accurately track and manage its crypto-related law enforcement activities.\u00a0<\/p>\n