Conflict diamonds, sanctions evasion and the evolution of organized crime in digital assets. In this episode we cover all that and more with Eitan Danon (Content Marketing Manager, Chainalysis) and Brad Brooks-Rubin (Partner, Arktouros PLLC), as they walk the audience through discussions on complex jurisdictions, sanctions and innovative solutions using blockchain technology.
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Public Key Episode 160: From Conflict Diamonds to Conflict Crypto
Conflict diamonds, sanctions evasion and the evolution of organized crime in digital assets. In this episode we cover all that and more with Eitan Danon (Content Marketing Manager, Chainalysis) and Brad Brooks-Rubin (Partner, Arktouros PLLC).
Brad shares his extensive experience working at the intersection of policy, financial crime and international illicit finance to walk the audience through discussions on complex jurisdictions, sanctions and innovative solutions using blockchain technology.
He also brings to light the critical issues surrounding sanctions compliance and how organized crime is exploiting digital assets particularly in emerging markets where crypto adoption is burgeoning.
Eitan and Brad offer a deep understanding of the role U.S. policy plays on the global stage, the challenges of sanctions enforcement and the potential of blockchain in disrupting illegal financial ecosystems.
Quote of the episode
” What better way for the diamond sector to be able to respond to those kinds of concerns and those kinds of policy interventions. So whether it’s Russia or terrorism or China in the future, being able to have traceability all the way through the supply chain, you know, with blockchain enabled technology is the best response to all of it. Like information and sunshine and transparency is going to be what that sector needs. ” – Brad Brooks-Rubin (Partner, Arktouros PLLC)
Minute-by-minute episode breakdown
2 | Brad’s career journey from conflict diamonds to crypto
5 | Crypto’s role in corruption and illicit financial activities
10 | Blockchain and how it fosters transparency in the diamond trade and sanctions
18 | Africa’s economic potential and western engagement challenges with crypto
23 | Evolution of organized crime in the digital age
28 | The value of digital assets during times of geopolitical uncertainty
30 | Crypto Sanctions: Iran, Russia and China’s impact on digital assets
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Transcripts
Eitan
Welcome to another episode of public key. I’m your host. Eitan Danon, I’m here today with Brad Brooks-Rubin, partner at Arktouros. Welcome to the pod, Brad.
Brad
Thank you so much for having me. Etan, really appreciate
Eitan
Before we jump in. Why don’t you tell us a little bit what is Arktouros and what are you working on there?
Brad
Sure, Arktouros is a small sanctions anti money laundering boutique law firm started a few years ago by two partners, Michael Moser and clay Porter. We’re now up to 11 people, total, seven partners, two of Council, two paralegals and I am working, you know, kind of carrying forward what I’ve been doing throughout my whole career, which is really trying to work at the intersection of policy, financial crime, responsible business, business and human rights. So that’s everything from, you know, straight ahead, sanctions compliance for a range of clients, clients in the across a variety of sectors, including in the in the crypto space, trying to understand, you know, how they can navigate in complex, complex jurisdictions when they need to report to OFAC based on their their potential exposure to sanctioned jurisdictions working on licensing enforcement matters. I’m doing a lot of work with companies in the gold and kind of natural resources sector, again, a mix of kind of compliance and strategy. And then last, doing a lot with civil society. I had a background in civil society before going back into government, working with civil society on everything from the recent international criminal court sanctions that were imposed to helping NGOs work in, again, complex jurisdictions like Iran like Syria, and how they can navigate sanctions compliance. We at Arktouros, for example, have done a range of work with with NGOs connected to Iran, to help them figure out how to be compliant. But also, again, think about new ways to be able to work, including working through crypto.
Eitan
Awesome. Thank you for that. So you’ve kind of touched on this a little. It’d be great to learn a little about kind of your professional origins and how you first encountered digital assets. How you know, where were you in your career when you first came across cryptocurrency? Sure,
Brad
so, I mean, my just professional origins. I’m a lawyer. You know, was able to end up at Treasury, in the Office of the Chief Counsel for OFAC in late 2005 showed up with a background in the Middle East, and in typical government fashion, was told, great, you’re going to work on Africa. And probably the best thing that happened to me in my career, I had a chance to work on a range of sub Saharan African sanctions programs. Also bid on conflict diamonds, which OFAC has a piece of implementing my interest in that led me to take a job at the State Department working on conflict diamonds, which evolved into conflict minerals. I used to joke that my title was special. Should have been Special Advisor for people fighting over rocks, and was sort of the guy involved in a range of different again, whether it was certification or due diligence or just sort of the evolution of business and human rights. Left there in 2013 and found my way to an NGO called the century, which was really an evolution out of a different NGO called the Enough Project. And we were really looking at the intersection of conflict and corruption in East and Central Africa and trying to advocate for ways that tools of financial pressure, like sanctions, like AML tools could be used to be more disruptive to kleptocracies that we were dealing with there, and that’s really when my connection to digital assets began. We were looking in the late 2010s into how corrupt regimes, illicit actors dealing with natural resources and others might be thinking about moving into digital assets and crypto. And frankly, my first call was to chain analysis to say, Hey, can you guys come over and talk to our team about how this works and where this where these trends might go. So we did a number of discussions and kept up some engagement when I went back to the State Department before coming to Arktouros. You know, lot of discussion there about where we could be engaging with regulating, understanding digital assets and how they might be used by actors that we were targeting. I was in something called the Office of the sanctions coordinator, and we. Were our job was to think about where can sanctions policy and strategy be more effective, and to do things like think about where are potentially sanctioned and illicit actors using crypto, and how can we use sanctions effectively for that
Eitan
awesome that’s quite a lot of different angles to look at this problem set from. You mentioned corruption and anti corruption. I mean, it seems like a lot of the problem sets you’ve looked at from state to Treasury. You know, certainly this working at the century have dealt with corrupt institutions, co optation, elite power politics, state, state capture and the like. How do you see crypto fitting into the puzzle? I mean, I’ve read the Panama Papers. You read the Obermeier, they’re not brothers, they’re both obermeyers. But you read some of this work, and kind of body of investigative journalistic reporting, crypto is around, are we what are we missing? And kind of, how do you see it fitting into some of these larger money laundering and financial crime technologies?
Brad
Yeah. I mean, it’s an important question. And you know, in the in the world that I’ve been in, mainly Sub Saharan Africa, Myanmar, kind of jurisdictions that, frankly, get let us less attention, are also in many ways less connected to the traditional financial system, but as a result, also more easily overlooked. My experience with it is still it’s at fairly basic levels that we haven’t seen the super complex schemes involving digital assets in those jurisdictions. Yet, it’s more, you know, using using crypto to make payments for illicitly obtained goods, and you know, using crypto as a means of integration for proceeds that were obtained illicitly. So it’s still, you know, you’re the chain analysis report. You know, notes for things like wildlife trafficking, that it’s still crypto is sort of used in a fairly straightforward means, probably because those actors are thinking, well, no one’s really looking here, and it’s easier. And there has been pressure within the traditional financial system around wildlife trafficking. So let’s go there, and it’ll be easier. That is my experience so far anyway, with how digital assets are working in with corrupt actors in in Sub Saharan Africa, for example. I mean, when I was at the century, we were, you know, often astounded at how just basic the corruption, the means of moving proceeds were. We did a report in 2016 about South Sudan, where, you know, a general was literally going into a bank in Kenya and writing checks to self for $100,000 when he had, you know, a salary of 30. And just, you know that was and if you don’t have to make it more complicated, why do why would you? And I think we’re, as we’ve seen, some pushback and again, and mainly, frankly, de risking out of jurisdictions like that in the traditional finance sector, my sense is actors are moving more into crypto, but still doing it in a pretty straightforward way, because they just don’t think anyone’s looking. And that’s to me, what we’re missing is really understanding the typologies, and again, the sectors through which money is being stolen, and then doing the looking in crypto for it, but not over complicating it yet. Certainly.
Eitan
I mean, that’s an area of great interest for us. And in our 2025 crypto crime report, you know, in the organized crime section, we have this example that you mentioned about IWT, about illicit wildlife trafficking. And you know, our take is that there is more there than meets the eye. And figuring out kind of what’s going on at the lower level, whether it’s for individual payments or, you know, one transaction, can often lead the way investigatively to more complex or more deliberately obfuscated parts of the network that have kind of more of a strategic so what, either in A disruptive kind of conversation or policy wise, but we’re certainly reading from the same sheet of music. I think,
Brad
yeah, I mean, I’m on the board. I think we are. I’m on the in addition to Arktouros I’m lucky enough to be on the board of something called the wildlife Justice Commission, which is an organization that really does innovative work to try to disrupt, you know, the high level traffickers, the sort of kingpins of international wildlife trafficking, using a lot of former Intel folks, law enforcement folks, high level analysis
Eitan
and way beyond the world of Tiger King, way beyond the
Brad
world of Tiger King and. Um, although, at the end of the day, it all leads back to Tiger King, yeah, or another, but we, but yeah. And the findings that the WJC have made, I think, really, you know, correspond to what you said in terms of, just, you know, you have to be able to follow the trail and sort of figure out where things are leading, but at the end of the day, as they, I mean, they’ve done some analysis, for example, in Rhino horn trading and finding, again, it’s fairly straightforward mechanisms of payments. It’s just got to be, is anyone actually looking and again, you’re talking about jurisdictions in Sub Saharan Africa and in Southeast Asia, where the regulatory environment, the banking environment, may be not as developed, not as sophisticated. And the way WJC, for example, has worked, has very much been a matter of like, look, we’ve done the investigation, we’ve done the analysis. If you kick in that door over there, you’re going to find product in it. And I think taking that same approach to payments and digital assets is very much of interest to them, and I think could be something that’s extrapolated into the sector as a whole.
Eitan
Excellent. Well, I want to hop back. You’ve mentioned so many interesting things. You talked about conflict diamonds, and you’ve definitely done more work than your average bear on the topic. Could you talk to our listeners a little bit about some of the main money laundering typologies and financing in the ecosystem, kind of ranging from the low tech to the high tech. I think what’s really interesting for a crime type like that is the overlay with jurisdictions where crypto adoption is very high, and so looking at, even if we don’t have a light shining on a particular area, looking at our geography of cryptocurrency report, which comes out on an annual basis, and trying to square that with interesting activity where we know use cases are kind of expanding at a rapid clip. That’s kind of one question. The other question, perhaps a little outside the scope of chain analysis, but of interest, I think, to a lot of our listeners, what are some of the blockchain based use cases you’ve seen for provenance? You know, taking a look at precious stones, diamonds, fighting over rocks, as you called it very eloquently. Yeah, you know, how, how are we seeing decentralized ledger technology play out? You know, we’ve, we’ve seen with the war in Ukraine, you know, the idea of maybe document, documenting war crimes as nfts kind of having something non fungible and permanent as a historical record of something we’ve seen it in the art world, certainly we had a few years ago. Sotheby’s on the pod to talk about, you know, to talk about what the use cases or implications are in the art world and art theft and crime. So, so it’d be great to get your take on both. Sure. Yeah, sure.
Brad
So, I mean on the first side, because when I was in the sanctions coordinators office at the State Department, I had a chance to really help lead along with colleagues across the US government and the g7 an effort to try to implement import restrictions that root themselves in distributed ledger and kind of blockchain enabled technology as a way to prevent Russian mined diamonds from entering the supply chain. And that’s actually now, you know, the the implementation has been slowed, but I’ll come back to that, because really, the idea for doing that was to build on a lot of the lessons learned from the way that diamonds have been used historically as money laundering vehicles, right? So you have everything from simple theft of diamonds and then the proceeds of cash, the proceeds of the stolen goods get laundered through, get get laundered through the financial system. In 2013 fat F actually did a typology study around diamonds. And even in 2013 they were, you know, there’s a slide in there from Silk Road of, you know, use Bitcoin to buy stolen diamonds. So kind of early days in that world. You know, diamonds, historically, there have been used as a means of currency that’s trickier than gold. Diamonds are an interesting vehicle for money laundering, because each stone is sort of unto itself, right? The value ranges, and it takes a real level of expertise to know what run rock is
Eitan
worth. No one troy ounce of a diamond, correct, right?
Brad
I mean, there is. It was only even in the 1970s where you had somebody produce even a price list for what, you know, a one carat with these characteristics on the four C’s should be valued at that that didn’t come around. And that’s, you know, 50 years old. And, you know, the trade is hundreds of years old. So even that idea, let alone, yeah, one, exactly one, one stone to another, it takes a lot of training and a lot of evaluation to know. In the last 10 years we’ve. Also had the rise of lab grown diamonds and so and there’s ways to detect that. But that fact that you know this very valuable thing could also be completely worthless, and unless you’re trained, you may not know the difference, has been certainly the vehicle for a range of trade based money laundering and other kinds of schemes. You know, both to hide, to hide value, by over invoicing, by under invoicing, depending on the way you want to the way you want to roll. And then, you know, simply for currency purposes. Again, because the value of diamonds has been so volatile, certainly in the last few years, we see it less a means of currency than, say, it was 20 years ago when the conflict diamonds problem originally came out, and you had people in Angola and Sierra Leone, Liberia and the DRC using diamonds to buy weapons. That happened less because, frankly, the value of diamonds is just somewhat, is diminished. It’s complicated, but is diminishing in some degrees. So there have been lots of efforts in the last 25 years to develop provenance and other kinds of approaches. The Kimberley Process is one. I was the US representative to that for four and a half years, which was meant to be a certification system where every country that’s part of the global trade would issue a certificate saying our diamond is conflict free, and you would sort of allow it to kind of work within the supply chain that has proved challenging in implementation for a lot of reasons that I won’t that’s a whole nother podcast, probably maybe for our next conversation. But all that to say that really, it became clear that paper based certification isn’t enough, and because diamonds actually enable, you know, on one hand, each one is individual. It makes coming up with a value hard. On the other hand, traceability is possible. Because even if you’re going to cut off bits of the stone when it goes from rough to polished, you know, it’s not going into a vat to make a big you know, like gold is going to get refined, and you’re going to end up with a bar. And who knows where it all came from, a diamond is a diamond. Is a diamond, right? So we within the g7 as we looked at initial sanctions put in place on Al Rosa, and which is the Russian diamond mining company and Russian diamonds more generally, we started learning that there were a lot of technologies in the diamond sector where they were tracking. You could take a it happens in two ways. One is, you can take an image of a diamond, essentially an MRI of a diamond when it’s rough, and you can track it all the way through the supply chain and kind of map it at each stage, you have to use algorithms to decide how, you know, did this one that came out of the factory? Is that really the same one that was originally rough, but you can map that. And then there are more common, you know, Blockchain enabled, you know, documentation systems where you’re just kind of document the paper trail. So the g7 you know, basically has been working for the last few years on an effort to require diamonds that are imported into any g7 country that a half carat and above once they’re polished, to be, to have a certificate that comes that has been issued by what we’re calling nodes, and that the and the certificates are essentially captured in a decentralized ledger and ideally matched with this blockchain enabled scan that goes along so the process is underway. And so that was maybe a bit of a deep dive on that. But it’s important to note that it is a supply chain that provides a test case for can you actually require imports to have blockchain enabled documentation and even scans of the product all the way through as a way of countering sanctions evasion. So that’s been again, that work is going on in the diamond sector as we speak. There are lots of different views on it, as you can imagine, within the industry, but all of it is to sort of build on this 25 year effort to say, I’ve got this stone in my hand. It’s worth a lot of money. Did anything bad happen along the way? Right? And, you know, clean, and here’s the right, it’s cleared, and here’s the record of it, and here’s the people who benefited. And, you know, the analog, the interesting analog, also between diamonds and crypto, is, you know, as I mentioned, there’s this sort of world of lab grown diamonds, right? And lab grown diamonds are trying to basically come upon the scene and say, one, we’re less expensive, but more importantly, we’re cleaner, we’re, you know, we’re more sustainable, and you don’t have to worry that anybody got hurt, because the traditional system. Has failed you. That’s the idea. There’s lots of choose and froze about it. But similarly, I think in the digital asset world, looking at the traditional finance system and saying, like, there’s got to be a better way to do this, and there’s got to be a better way for this value to be to to move between people, between businesses. It’s a disrupter, and the diamond industry is trying to deal with a disrupter, and blockchain enabled technology is one way the traditional system can actually go back and say, Hey, wait a minute. We can actually, we can do this too,
Eitan
right? No, I think, you know, certainly on the surface, outside the scope of digital assets, but the implications for AML writ large, or for provenance, I think there’s a lot to chew on there. And we’re no strangers to resistance to disruption, so I think a lot of people are, Hey, why do we need this? And then when you explain it to them in plain English, I think it becomes a bit more compelling. That’s really interesting. Well,
Brad
interestingly, I mean, just one last note on the diamond side is the nominee of the Trump administration to be ambassador to Belgium, was on an interview a few months ago and made a diamond powerhouse, a diamond I mean, does diamond powerhouse in Europe and Antwerp, you know, probably was spending a lot of time watching rough diamonds on Netflix, but made the comment on An interview that his understanding was that diamonds were still connected to terrorism and money laundering, and that there was this was a real risk. And you know whether that’s true or not in any certain case, what better way for the diamond sector to be able to respond to those kinds of concerns and those kinds of policy intervention. So whether it’s Russia or terrorism or China, in the future, being able to have traceability all the way through the supply chain in again, with, you know, with Blockchain enabled technology is the best response to all of it. Like information and sunshine and transparency is going to be what that sector needs. And I think. And then as you zoom out and look at other sectors, whether it’s gold, whether it’s natural resources, whether it’s the financial system, that level of transparency and traceability becomes essential,
Eitan
awesome. Well, going back to kind of Africa thematically, or maybe not going back, staying on this, you’ve done a ton of work on the continent and about the continent. In our 2024 GEOS report, we called attention to the expanding use cases, practical use cases in Africa, business payments, retail transfers, hedge against inflation, given monetary issues, what from your vantage point, what are some of the geopolitical and economic crime stories that you you feel from your work might not be getting enough attention, or sometimes, you know, too much attention is misplaced on a particular topic in Africa, in particular, and even more broadly, I mean, a chain analysis. We’re no stranger to looking at use cases across emerging markets and, you know, South Africa, Nigeria. These are major economies with tons of momentum and interest and innovation kind of percolating. What’s your take?
Brad
Yeah. I mean, I think you had Nigeria at number two on your that’s right in geography. So, yeah. I mean, look, I think you’re seeing the use cases expand across the continent. You have, you know, mobile ride and taxi apps in Kenya, kind of integrating with with crypto and and being able to and mobile payment systems, obviously, you know, peer to peer trend trading supply chain, again, helping to ensure things like Coco supply chains in West Africa are free of human trafficking by being able to document the supply chain and document payments. You know, I think so the use cases are expanding. And as you mentioned, the innovation, the creativity in places like Nigeria, South Africa is really and Kenya are really remarkable. And I think that’s if I had to point to a couple of you know, what are we missing? I think, on the whole, in the United States and in the West generally, we still see Sub Saharan Africa, as you know, an area for exploitation. I mean, there’s so much in the press day by day about critical minerals. And you know, if it’s not Ukraine, it’s basically, it’s a great race for grant for rare earths. That’s exactly right. And here we are again. And you know, the scramble for Africa underway, and, you know, and it’s also, you know, where we look just for exploitation and extraction too often. Or, you know, e waste, frankly, right? Ghana, Nigeria, the massive dumping grounds for those kinds of things. So we still, we haven’t really integrated our approach to the economies and the creativity of Africa. There’s lots of reports about the growing population and sort of the growing markets. I think 11 of the top 20 growing markets. In the world are in Sub Saharan Africa, and we’re really wrestling with it, right? There’s also this emerging reporting about the administration putting out, you know, higher travel alerts, and I think two thirds of the countries that are in the that would be subjected to these higher travel restrictions coming to the US in Africa, or in Africa, right? So it’s, do we want to be increasing our engagement and economic ties, or are we raising red and yellow flags? That’s what’s missing is really that orientation to how do we engage with these markets? How do we understand the marketplaces? How do we understand that these are, yeah, in some ways, the most innovative and creative, because they’ve had to develop often outside. You know, 50 years ago they were developing outside, you know, the use of phone lines and then outside the financial system, right? So the creativity and the ability to develop and to innovate is, you know, as strong there as it is anywhere on the globe. And I think we’re missing that this, but at the same time, you know, without you don’t want to be too Polly honest, like there are real risks. There’s a level of, you know, there’s a level of, there’s still a level of corruption, a level of exploitation on the ground that has to really be monitored as you do your investment and do your engagement, you have to take that part seriously, and that really takes a level of awareness and understanding of an experience on the ground to know who’s who and what’s what I mean. One interesting thing for me is watching reactions to the administration’s indications that it may ease enforcement of the Foreign Corrupt Practices Act, right? And so you’ve had really decades of Western American companies going into the continent and using the FCPA as a way of saying, like, look, we’re here as a means of investment, and as a contrast with investors from, say, China or other parts of the world where they’re going to be maybe more open to corruption and use of bribes as a way of just getting in. And you’ve had the FCPA as one of these shields to say, look, we have to do business in a certain way, and because we do business in this way, our investment is going to be more sustainable, more manageable, and ultimately more profitable for you. I think we’re in a moment where there’s a lot of discussion about the FCPA, but we do also have to realize that keeping up with those principles is going to what is going to be, what helps continue to be the advantage that American and Allied companies have when they engage on the continent. So it’s, you know, it’s a complicated story. Of, there’s a lot of opportunity, there’s a lot of creativity, there’s a lot to build from due diligence and meaningful under and meaningful understanding of the environments is essential, and holding on to the principles that you know have underlined what American companies in the American economy is about is really going to be key? Yeah,
Eitan
I’m glad that’s not my job, my pay description, right? Unlocking opportunity while protecting responsible innovation. I mean, someone has to do it, but these things are frequently at odds in a lot of different markets.
Brad
I mean, that’s what we’re here to do at Arktouros and and, you know, there’s a lot to be done on that. It takes time. And, you know, we’re in a world where due diligence often just means a check box thing. And you know, I think in understanding these these economies, and especially digital assets in these economies, like you can’t do that with, here’s my check box checklist of all right, I’ve done due diligence. Everything’s going to be fine, so yeah.
Eitan
And I think even more broadly, with our own research on some of these fascinating use cases in the global south and kind of other markets, it reminds me of the policies when you buy new phone or new tech, you go, yeah, scroll down to the bottom. I acknowledge, right click. But like, hey, read about this. It’s actually very fascinating. And there, there are a lot of implications. I mean, there’s no interesting integrations. Lots of central by Central Bank pilots and good ideas are being thought and implemented elsewhere. And I think, you know, taking that global approach is something we’re very keen to do at chain analysis. Go ahead, were you going to say something?
Brad
No, just your reporting, I think, is exactly right. Like, really showing the nuance of like, there’s lots of opportunity, and there’s lots of interesting innovations. Here’s where they can go wrong, and you just need to keep your eyes open like any other situation. So yeah, no, that’s all I wanted to
Eitan
say. Sounds like we’re in agreement. So one of the, I mean, a few weeks ago we we published our annual crypto crime report, and one of the key findings in that report was that on chain, crime is rapidly not only professionalizing, but diversifying across every crime type, almost way beyond just pure cyber crime. So certainly hacks and stolen funds. I mean, we’re still in the immediate aftermath of the bybit hack. You know. And somewhere the tried and true categories are not going anywhere, but we’re seeing more across different kinds of activity. You know, we talked about IWT a few minutes ago. Could you walk our listeners through some of the different types of organized crime networks or actors you’ve looked at, either at the Century or Arktouros or back to your time in government, especially if there’s been any kind of crypto or tech Nexus, what has that been? And how do you, how do you approach kind of this broadening how organized crime keeps up with the times, tech wise? Yeah, I
Brad
mean, my, you know, my work and the the typologies I’ve seen really do align a lot with what you reported on in in the crime ninja analysis, crime report, it’s really been a few key areas for me. One is mining. And like mining, mining, not crypto mining, but actual gold and diamonds and mining in their mining in the earth. And you know, organized crime, especially in a world right now. I mean, I talked about the, you know, shaky value of diamonds to some degree, but gold is at all time highs. And so we’re in a world right now where, with uncertain financial trajectory and economic policies, you know, you see this, people are reaching for one of the oldest forms of value in gold, and they’re reaching for one of the newest forms of value in crypto. And you sort of see this kind of parallel move. But organized crime groups have been really organizations like the global initiative on Transnational Organized Crime have been reporting for years on the way in which cartels and organized crime groups are, in some places, even moving out of narcotics and illicit goods and into gold, because it is, it’s, frankly, safer for them. It’s more valuable. The value, the money they’re going to earn, is more consistent. The supply chains are far more identifiable, and because it’s illicit good, once they can sort of integrate, you know, it’s not like trying to move narcotics. So I’ve seen a lot of evolution of the way that organized crime and cartels have tried to move into every element of the supply chain, of mining. So it’s on the ground, organizing miners, organizing the provision of the equipment to minors, organizing the routes, the transportation, providing insurance to some degree, and all of those levels. And because all of that allows them both to have their own kind of value chain from it. But also, again, it’s a perfect way to to to integrate the proceeds of of crime is to just put it into this otherwise legal venture. You know, we mentioned human trafficking and international wildlife trafficking. You know, those are areas again, that organized crime has tended to to, tended to focus on because, you know, comparatively, they just have, while they’ve been the focus of attention, less law enforcement action over time, that’s been changing over the last decade, I would say, but certainly in my time at at the century, and then back in government, at the State Department, we, you know, We looked at those issues. There were some important sanctions actions taken. There was an important action, you know, in late 2023 for example, on IUU fishing, unregulated fishing, where there were hundreds of sanctions targets, related to human trafficking, related on on fishing boats. And then, you know, to some degree, we talked about it before as well, but the illicit, the way organized crime in a number of countries aligns with kleptocratic actors, and essentially, in some cases, governments are become their own, almost organized crime groups, and the government is essentially run that way. So, you know, the development of shell companies for the purposes of contract, procurement and implementation, when I was at the, you know, century, we did a lot of reporting on that in places like South Sudan, in the Democratic Republic of the Congo, where you essentially see the evolution of, yeah, governments into organized crime actors, and really undertaking every transaction that a government undertakes through the lens of, how can we take money out of this process, and how can we then launder it into real estate, into luxury goods into and then I think that’s where increasingly, we’re going to see the evolution of interest in storing value in digital assets, in the in the expectation of anonymity, without the understanding of where the traceability, traceability,
Eitan
yeah, is possible, absolutely. And I think a lot of the most compelling. Or even the juiciest, if I can say, use cases and kind of problems around which we try to wrap our heads, deal with these cases where we’re like, hey, is this an organized crime syndicate? Is it a security service? Is it the government? Is it a researcher who’s kind of moonlighting in another capacity? What is this transfer activity that we’re seeing? Or, why? Why why now? Why this initiative being launched in a particular country? So a lot of times it raises more questions than it answers, but certainly reading our blog and reading the reports we write, those are the kinds of things we’re very occupied with.
Brad
Yeah, and that’s really where I think the evolution in education is important. For, you know, actors in the digital asset space and in the traditional finance space, because, you know, I mean, the the evolution of this problem, of the way organized crime has worked, in the mining sector, in trafficking and corruption, has all been within, you know, the traditional finance and kind of fiat currency systems. And, you know, with, you know, mixed at best results, I would say, in terms of really figuring out, how do we identify these issues and and work to eliminate them? One thing when we when I was at the century, and we tried, also, we did some of this when I was at state, and certainly it’s a lot of what we do as client service at Arktouros. But one thing at the century, we did was organize banking round tables and sort of take, we would publish our reports, but then we would have a bigger dossier of information, and just take it to banks and say, Look, we know you don’t have the ability to track every single payment, and especially to global correspondent banks to be able to say, look, this is some of what’s passing through your respondent banks. We don’t want you to de risk them entirely. Don’t shut them off, but understand what’s happening in this situation more effectively. And you know their ability to see any particular transaction was next to zero. And again, that’s where on the on the crypto side, being able to have that traceability and be able to ask those questions, what is that? Where is that going? Allows, I think, everybody, to learn how these patterns work. Because, you know, I think we did a good job at the century and identifying a number of different typologies, but I’m sure we barely scratched the surface of what was really going on in any given place. Yeah.
Eitan
And I think, you know, great point. I would say not everything is on chain, but to the extent that illicit finance puzzles have an on chain Nexus, you know, I think for those who had jobs and investigations or policy as recently as 10 or 15 years ago, you know, wouldn’t it be great if there were a digital, consolidated, permanent ledger of this kind of activity. And so to the extent that we can shine a light and walk, you know, key players through in industry and in government and elsewhere, through some of these sanctions, AML, you know, financial crime problem sets. It’s deeply powerful. Well, you mentioned sanctions evasion. And certainly, you know, at your time, during your time at OFAC, you know this is a topic to which you’re no stranger. In the sanctions section of our crypto crime report this year, one of our key findings was a spike in crypto use in Iran, in particular at times of geopolitical tension with Israel over the past year. And you know, for those who follow crypto, the popularity of stable coins in a heavily sanctioned, you know, unstable from a monetary and many other perspectives, kind of situation. You know Iran. You know other markets as well that have, that have either faced a lot of sanctions, uncertainty and or monetary instability, that’s no secret. But how do you see, how do you see crypto, and you know, in general, stable coins in particular, evolving against a backdrop of sanctions writ large, and certainly with potential return to max pressure looming over us, Visa V Iran, but in other cases as well, kind of, how are you, how are you gearing up for this conversation at Arktouros? I think,
Brad
you know, it’s two it’s two sides, right? It’s sort of the uncertainty that you mentioned that drives, you know, that obviously drives interest in in stable coins, and in to us, it’s, you know, writ large, the and we’re moving into a period where just policy in general is way more uncertain, right as it’s true in any administration, but certainly, regardless of your view on whether the Trump administration is doing the right thing or the wrong thing vis a vis Russia, vis a vis China, vis a vis Iran. One thing that’s clear is that what’s happening day by day is uncertain, and so therefore that and with tariffs and other economic policy changes obviously. The value of the dollar, and the value of all currencies becomes so much more volatile. And I think the the the interest in other forms of value will continue, and obviously, from a sanctions evasion perspective, because of the ability to avoid, you know, what banks are looking at, but just in general, as a kind of a human response, again, same with gold, as I mentioned before, the flip side. So, you know, we’re trying to get our arms around. Where could sanctions be expanding? What will that look like? And what will the payment structures look like for in markets in whatever maximum, additional maximum pressure could look like. It’s hard to know what more maximum, how much more maximum with respect to Iran, but I’m sure they’ll find something. And then obviously, I think the important thing is not necessarily looking at Iran itself, but Iran’s financial ties like, you know, there was obviously a summit in the last few days between Iran, China and Russia, so understanding where its exposure and where, though, how those markets developed, and again, how crypto plays a role in that will be. You know, your your report talked about the bricks and how the bricks are thinking about currency outside the traditional kind of dollar, euro dynamic. So all of that presents this challenge of, where is the risk going to be? How are these markets going to evolve? Where can these payments go? And the flip side of it is we’re obviously also in a in a policy dynamic where the Trump administration wants to make the US the sort of crypto capital and and expand investment and expand development. And so how do you make those two not be different sides of the coin, but actually work together and complementary, right, complimentary? And how do we understand, how to integrate that and not look at it where, you know, crypto just simply means there’s no regulation and everything’s fine, but rather, how do we integrate the work that that you do and that we can’t, that investigators can do, to be able to identify these patterns and actually demonstrate, look, this is how, if we focus the right resources in the right way, and we integrate sanctions enforcement and sanctions investigations with the expansion of crypto, there’s actually a really interesting opportunity to kind of, you know, have this, you know, rising tide Actually elevate all boats it on this, on these policy objectives. I think at the moment, all of it is still uncertain enough that we’ll have to see but that’s exactly what we’re you know, my colleagues and I at Arturo, so trying to talk to our clients about and examine writ large, to be able to see, okay, well, if we can really devote our our time and our efforts here with our clients, we’ll be able to help them kind of navigate these uncertain times.
Eitan
Yeah, absolutely, I think, certainly lofty topics, but ones that we too spend a lot of time thinking about. Thank you for a very provocative conversation. I think you know, maybe before we go, a question out of left field, could you recommend to our listeners, one of each, or maybe a combo, a book, a podcast, a movie that you feel really is worth the time of someone who’s interested in, you know, it could be more diamond and mining centric, or financial crime that kind of really and or maybe just integrates, like some aspect of it, or this scene or this Movie. You know, read this book. It’s really an insider’s account of, you know, a particular financial crime story. Have there been any books or pods or movies that stand out to you? Sorry to put you on
Brad
the spot. I spend all my time on, whenever I’m not doing this, I’m, you know, like I have a community radio show and a music sub stack, so I mostly just focus on music. Check out my sub stack instead. Yeah, exactly, yeah. Check out three albums, six old guys. When you don’t want to think about that, go to three of them, six old guys, okay? Or listen to my radio station, my radio show on every other Sunday on Tacoma radio.org, excellent.
Eitan
Well, no, this was a great conversation. Thanks. Thanks again for your time. I really appreciate your asking me. Thank you very much for sure.