IG Report Finds Serious Issues with Postal Inspectors’ Handling of Cryptocurrency

According to an audit report from the Office of the Inspector General at the United States Postal Service (USPS), cryptocurrency, as used postal inspectors, can be better tracked and accounted for in order to prevent abuse, waste, or fraud. While the audit found the current program to be sufficient, , auditors found over 1,000 cases where the use of cryptocurrency may not have been properly recorded.

In order to intercept criminal activity online, postal inspectors often use cryptocurrency. However, the volatile nature of the crypto market and anonymity association with transactions makes it easy to waste or lose track of the crypto. In 2017, the U.S. Postal inspection Service established the Cryptocurrency Fund Program (CFP) through which postal inspectors can request different kinds of crypto.

To make it easier to facilitate and account for cryptocurrency transactions, the Program developed an application to manage inspectors’ cryptocurrency wallets.

According to the report, “Within the application, postal inspectors submit requests for cryptocurrency intended for investigative use, which includes information about the inspector’s cryptocurrency exchange account and wallet that will be used for the case. The application tracks all cryptocurrency activity associated with an inspector’s exchange account by cross-referencing the public blockchain daily.”

Tracked activity includes disbursement of wallet funds and online purchases made by postal inspectors. However, the CFP only contains certain kinds of crypto and inspectors must go through CFP managers to receive different kinds of crypto for certain operations.

The report explains, “When an inspector does not use one of the … cryptocurrency[ies] managed under the program, the funds are requested through the traditional investigative funds process. In these instances, it is the discretion of the team leader to inform the Cryptocurrency Fund Program manager that some other type of cryptocurrency is being used for investigative purposes.”

While team leaders are required to report to CFP managers what kinds of currencies are being used outside of the CFP, many cases slip through the cracks creating an inaccurate picture of cryptocurrency usage.

Furthermore, the Postal Inspector’s Case Management System has several issues. For example, the Transaction Review Report is highly unreliable and, according to the IG report, “[contains] duplicate transactions and transactions unrelated to the case being queried. As a result of these data integrity issues, the Transaction Review Report cannot be used to accurately track and manage cryptocurrency transactions or to assist in validating the final balance of funds for each case.”

The IG report furthers that many postal inspectors are undertrained, augmenting many of the issues that already exist. The IG report states, “Internal guidance states that postal inspectors must be approved to conduct undercover operations and training must be completed prior to requesting cryptocurrency funds. However, the guidance does not specify what training courses should be taken or how frequently refresher training is required.”

The IG issued four main recommendations to tackle these issues. First, ensure that the Cryptocurrency Fund Program has the information needed to provide oversight of the investigative use of cryptocurrency. Next, modify the Postal Inspector’s Case Management System to ensure duplicates and unrelated transactions are not included in the Transaction Review Report and that the report provides sufficient information to differentiate between transactions. Third, develop a comprehensive cryptocurrency training program. Finally, develop written procedures for the management and oversight of the national wallet and its associated exchange account.