Does crypto crime prevention need AI?

On Monday, NYC-based scam and fraud prevention platform CYBERA announced it had entered a partnership with Chainalysis, the blockchain data platform. The thrust of the partnership centered around CYBERA WATCHLIST, a cyber-related financial crime detection- and prevention-focused dataset; it’s now integrated into Chainalysis’ investigation and data solutions. 

Intending to serve government agencies and compliance teams, the partnership aims to combat elaborate scams, such as targeted approval phishing scams, which have seen a twofold increase over the past two years. Chainalysis research suggests that consumers were defrauded of at least $374M using that method in 2023. 

In their official announcement, both CYBERA and Chainalysis framed blockchain-based crimes as a workaday form of financial fraud. That is, official statements made no distinction between crypto-focused and non-crypto-focused crimes, folding them into a singular locus of concern. 

“Our joint efforts, focusing on speed and precision, will provide government agencies and compliance teams with unparalleled insights,” said Nicola Staub, CEO of CYBERA. “Together, we're not just tracing scams; we're actively shaping a safer digital financial world for everyone."

"Scams have been a growing challenge especially in recent years, and it is difficult to overstate the impact on individuals—young and old—in today's digital age,” echoed Jackie Burns Koven, Head of Cyber Threat Intelligence at Chainalysis. “Through our integration with CYBERA, we are looking forward to arming law enforcement agencies and compliance teams with more robust data to crack down on scams, dismantle scamming networks, protect individuals, and build greater trust in blockchains."

That’s a notable discursive pivot for Chainalysis in the wake of two rounds of layoffs last year. In October, Chainalysis laid off more than 15% of its 900-strong workforce. “Evolving market forces”—in other words, growing commercial disinterest in crypto ventures—forced the company to adopt a more “agile” approach to growth. Notably, those cuts disproportionately affected the company’s private sector-focused marketing and business development teams. Chainalysis doubled down on its public sector focus, which already accounted for 70% of its revenues, explaining this recent partnership, which delivers value to government agencies. 

While Chainalysis’s metamorphosis into a relatively monovalent solution serving government enforcement needs offers relatively little business risk—government contracts are more stable than private-sector ones, especially enforcement-related work—the deployment of AI in this work may pose regulatory challenges moving forward. 

As algorithmic and constitutional scholars Dr. Joy Buolamwini and Barry Friedman write in the New York Times, the use of AI in law enforcement is rife with systemic racial discrimination, leading to false arrests, police seizures, families being held at gunpoint, and more. Agencies largely do not face consequences for false arrests, and do not ask for community agreement before using these technologies, offering little incentive for discontinuing these practices. 

The Office of Management and Budget is close to issuing a guidance on the use of AI In law enforcement, which would ban the use of technologies that fall short of basic safeguards by next August. While the guidance includes worrisome loopholes—such as the issuance of exceptions to noncompliant AI technologies if their ban poses “an unacceptable impediment to critical agency operations”—it highlights how the future of partnerships like CYBERA and Chainalysis’ lies in regulators’ hands. Doubling down on public sector use cases makes this regulatory vulnerability all the more significant.