Step 1: Initiating Financial Investigations

A financial investigation involves collecting, collating, and analyzing all available information to assist in prosecuting crime and the deprivation of the proceeds and instrumentalities of crime. The major goal of a financial investigation is to identify and document the movement of money during the course of criminal activity. When the money is received and stored or deposited, the link between the origins of the money and beneficiaries can provide information about and proof of criminal activity. In this respect, the financial investigation is a process that is mostly parallel to the main criminal proceedings – be it cybercrime, fraud, or money laundering – and allows investigators to focus solely on the proceeds and instrumentalities of crime.

Financial investigations thus require specialized knowledge that may not always be available at regular law enforcement agencies. To address this, national jurisdictions can revert to multiple solutions:

• Creation of joint investigative groups by the prosecutor, with the coordination and division of tasks ensured by the supervisory prosecution authority;
• Involving financial transaction experts into ongoing investigations, retaining full control of the criminal investigation by the requesting law enforcement agency;
• Separating the crime proceeds investigation from the core criminal investigation and ensuring feedback between the investigative authorities.

Whichever of these options is used, distinctive features of financial investigations should be kept in mind. One such feature and consideration of financial investigations is the comparably relaxed standard of proof compared to criminal cases (i.e., money-laundering cases). Proof of criminal origin of the property and its proceeds does not require proof beyond a reasonable doubt, making the conduct of such proceedings different from mainstream criminal investigations.

Financial investigations focusing on virtual currencies as proceeds and instrumentalities of the crime are still a relative novelty. Therefore, there are no tried and tested approaches in dealing with virtual currencies; the following sections are thus an attempt to guide the most relevant investigative techniques that can be used in tracing, taking control of, and managing virtual currencies.