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| 3 minutes read

Investigations and the Blockchain

Last month, my colleagues Helena Bowyer, Ezra Cohen, and Ryan Rubin wrote about the exponential growth of cryptocurrency investing and the opportunities, and challenges, this presented from an asset tracing and investigations perspective. Key to crypto-tracing and other cryptocurrency-related investigations is the blockchain, the digital ledger on which all transactions of a particular cryptocurrency are immediately recorded and visible to all. But away from the crypto space, the potential applications of blockchain technology to older, “legacy” public record registries could potentially have wide-ranging consequences for complex investigations and asset tracing practitioners.

A perpetual challenge to any investigation is the access to information, or lack thereof. With regards to property, many land registers are not accessible online (or even accessible at all to the wider public) and contain incomplete information. There is also the matter of “searchability”: while most digitized property registers are searchable by individual property, few allow for searching by owner or purchase price, with this functionality often being provided by expensive commercial database alternatives.

The Blockchain and Legacy Data Sources

Blockchain technology has, until now, been principally employed by cryptocurrencies and crypto-adjacent markets, such as non-fungible tokens (NFTs), most of which employ the blockchain of popular cryptocurrency Ethereum. However, the advantages presented by blockchain are increasingly leading to it being considered for more “mainstream” uses: Alexander Appelmans, an academic at KU Leuven University, has been exploring the potential applications of the blockchain to the real estate market. His research posits that, rather than the often-convoluted system of property and cadastral registers currently used in most countries, a single blockchain ledger could contain most, if not all, relevant information regarding a property transaction, immediately and completely available to real estate professionals as well as the wider public.

Blockchain information would become much more readily available and, perhaps just as importantly, inalterable: because the blockchain does not exist in a single centralized state but is instead spread out over a multitude of nodes communicating with each other, the information it contains exists - at least theoretically – in perpetuity and cannot be tampered with. Investigators could therefore, assuming that the blockchain was made public, have access to the current and previous ownership of all real estate in a given country, including acquisition price and any other transaction and property information available on the blockchain. What’s more, the blockchain could theoretically be applied to any area where information is currently held in a centralized data ledger, such as share registers, corporate registries, litigation databases, and more.

Opportunities and Challenges

There would still be challenges in tracing assets on a blockchain-based registry. For one, the information on the blockchain on an asset’s owners, should this be a corporate entity, would likely not extend as far as disclosing the company’s ultimate beneficiaries, one of the key roadblocks to confirming an asset’s owner. However, other challenges with crypto-tracing would not apply to a real estate or share register blockchain. For one, these assets are non-fungible, which means that obfuscation techniques used by criminals and other bad actors to hide their ownership of cryptocurrency assets such as coin-mixing – broadly speaking, the practice of exchanging a set of coins with coins that have no links to the previous set –, would not apply. With KYC requirements for existing blockchain-based assets also increasing across the board, one would expect that these requirements would also be applied to a real estate or other registry blockchain ledger. This would mean that, theoretically at least, users of the blockchain would not be able to operate anonymously.

All in all, it is not too difficult to imagine a future in which blockchain technology has been widely applied to public record information, making information more accessible and transparent. In this context, investigators will need to possess a strong understanding of the mechanics of the blockchain, acquired either through previous cases in the crypto space or through the expertise of partner cyber and data security practices, in order fully to navigate this new landscape and provide as detailed a survey of publicly available information as possible for their investigations.

© Copyright 2021. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.

Away from the crypto space, the potential applications of blockchain technology to older, “legacy” public record registries could potentially have wide-ranging consequences for complex investigations and asset tracing practitioners.

Tags

asset tracing, memo, f-risk, forensics & investigations, f-conflict

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