Blockchain Intelligence and Border Security

The rise of cryptocurrency has created new challenges — and new opportunities — for border security agencies tasked with combating transnational crime. 

In the United States, US Customs and Border Protection (CBP) and Homeland Security Investigations (HSI) play a crucial role in identifying, disrupting, and dismantling criminal networks that exploit financial technologies for illicit activities. And in Mexico and Canada, law enforcement agencies are working to secure their borders from drug cartels, human traffickers, and cybercriminals. 

As these threat actors increasingly integrate cryptocurrency into their operations, blockchain intelligence tools like TRM Labs offer a powerful solution for tracking and mitigating these threats.

The integration of blockchain intelligence into border enforcement operations can provide CBP, HSI, and other law enforcement agencies with real-time intelligence — allowing for the detection of illicit funds moving across borders and enabling the seizure of cryptocurrency linked to smuggling, narcotics trafficking, human exploitation, and money laundering schemes. Recent cases highlight the growing role of cryptocurrency in transnational crime and underscore the urgent need for robust investigative tools to counter these threats.

The growing role of cryptocurrency in cross-border crime

For decades, CBP and HSI have targeted bulk cash smuggling, trade-based money laundering, and illicit financial flows at US borders. Today, criminal organizations have, in part, adopted cryptocurrency as a borderless financial tool, allowing them to transfer funds instantly, bypassing traditional banking oversight and circumventing anti-money laundering (AML) regulations.

According to TRM Labs’ recent report on cartel activity, Mexican drug cartels and human trafficking networks have increasingly turned to bitcoin, USDT, and Monero to move illicit proceeds. Cartels use a network of crypto ATMs, peer-to-peer (P2P) traders, and exchanges to convert cash into crypto — enabling faster, more anonymous transactions across borders.

However, cryptocurrency remains undefined in US customs and financial statutes, creating challenges for enforcement. This ambiguity complicates how CBP and HSI apply existing laws to digital assets, making greater regulatory clarity essential for the future of effective border security.

Border search authority: Legal framework and application

Border search authority is a unique power granted to CBP, HSI, and other federal agencies that allows for the search and seizure of persons, goods, and financial assets at US ports of entry without a warrant or probable cause. This legal framework is based on the government's interest in regulating what enters and leaves the country, and is considered an exception to the Fourth Amendment’s warrant requirement.

Key aspects of border search authority

• No warrant required: Unlike searches conducted inside the US, border searches do not require probable cause or a warrant.
• Searches of digital devices: CBP officers have the authority to inspect laptops, mobile phones, and cryptocurrency wallets if they suspect illicit activity.
• Currency and asset seizures: Travelers must declare cash or monetary instruments over USD 10,000, and failure to do so may result in confiscation under civil forfeiture laws.

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Title 19 vs. Title 31: Does cryptocurrency fall under either?

While border authorities rely on Title 19 (Customs Duties) and Title 31 (Money and Finance) to regulate cross-border financial transactions, the legal status of cryptocurrency remains ambiguous.

Title 19 (Customs Duties)

• Scope: Governs the import and export of goods, including contraband, undeclared assets, and commercial shipments.
• What this means for crypto: Cryptocurrency is not explicitly listed as a regulated item under Title 19, but it has been seized under customs authority when linked to suspected money laundering, smuggling, or criminal enterprises.

Title 31 (Money and Finance)

• Scope: Focuses on currency reporting requirements, anti-money laundering (AML) enforcement, and financial transparency laws.
• What this means for crypto: Title 31 applies to cash and monetary instruments over USD 10,000, but cryptocurrency is not explicitly classified as a monetary instrument under current statutes.

Regulatory ambiguity and enforcement challenges

Since cryptocurrency does not fit neatly under Title 19 or Title 31, its legal treatment at the border remains inconsistent. 

Customs officials have used Title 19 to seize crypto assets tied to criminal activity, but lack explicit statutory authority to regulate digital assets. Meanwhile, anti-money laundering authorities under Title 31 enforce suspicious activity reporting — but crypto is not defined as a monetary instrument, making seizure laws more difficult to apply. Future legislation is needed to clarify how digital assets should be regulated at US borders, ensuring law enforcement officers in these locations have the necessary tools to combat illicit finance.

Key threats: How criminal networks use cryptocurrency to exploit borders

1. Drug cartels and cryptocurrency-based money laundering

Cartels such as Sinaloa and CJNG have integrated cryptocurrency into their financial operations in several ways:

• Converting US drug proceeds into crypto to move money across the border undetected
• Utilizing crypto ATMs and money service businesses (MSBs) in border towns to cash out illicit funds
• Hiring US-based brokers to receive drug payments in crypto, converting funds into stablecoins like USDT on TRON before transferring them to cartel-controlled wallets

On September 26, 2023, OFAC sanctioned nine individuals linked to the Los Chapitos faction of the Sinaloa Cartel, a significant trafficker of fentanyl into the US. Among them, Mario Alberto Jimenez Castro was charged with running a money laundering network that used cryptocurrency and wire transfers to send proceeds from US fentanyl sales to cartel leaders in Mexico. 

OFAC also designated a cryptocurrency address on the Ethereum blockchain tied to Jimenez Castro, which received over USD 740,000 between March 2022 and February 2023. This action marked the first time OFAC publicly identified the cartel’s use of cryptocurrency for laundering drug proceeds. While cryptocurrency was not used to purchase drugs, it played a critical role in laundering the proceeds, highlighting the cartel's evolving financial strategies to evade detection and sustain operations.

Similarly, in 2023, a DEA-led operation in Southern California targeted the Sinaloa Cartel’s cryptocurrency-based money laundering network, resulting in the seizure of over USD 2 million in illicit digital assets. Investigators traced transactions using blockchain intelligence to a cryptocurrency exchange account controlled by a cartel-linked money launderer, uncovering a broader laundering scheme that funneled drug proceeds across borders. This intelligence led to the identification and disruption of a Mexico-based laundering cell that facilitated the movement of millions in cartel profits.

2. Human trafficking and migrant smuggling networks

Human smuggling organizations are just beginning to experiment with cryptocurrency to collect payments from migrants, pay off corrupt officials, and fund criminal activities. While these activities are not yet occurring at scale, law enforcement should be on the lookout for:

• Smugglers demanding crypto payments from migrants before allowing them to cross the US border
• Ransom demands for kidnapped migrants paid in cryptocurrency
• Crypto used to pay human traffickers and transporters operating along smuggling routes

Labor trafficking networks are also experimenting with cryptocurrencies to facilitate and conceal their illicit activities.

A notable example involves scam compounds in Southeast Asia, where victims are trafficked under false pretenses of employment and coerced into participating in fraudulent online schemes, often involving cryptocurrency investment scams. The FBI has issued warnings about such operations, highlighting that traffickers use false job advertisements to lure individuals, then forcing them to engage in these scams.

Additionally, the US Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) has reported a significant increase in Bank Secrecy Act filings related to the use of convertible virtual currencies in human trafficking activities. This trend underscores the growing concern over the role of cryptocurrencies in facilitating such crimes.

These developments illustrate the evolving tactics of labor trafficking networks and the challenges they pose to law enforcement agencies. Disrupting these illicit activities requires enhanced monitoring of cryptocurrency transactions and strong international cooperation.

3. Sanctions evasion and trade-based crypto laundering

Sanctioned entities and state-affiliated actors exploit border financial channels to conduct illicit trade. For example:

• Iranian-linked networks have used crypto payments to purchase US technology to build blockchain infrastructure
• North Korean officials and over-the-counter traders launder stolen cryptocurrency through Hong Kong-based front companies to purchase goods for North Korea
• Russian oligarchs and sanctioned individuals use cryptocurrency to move assets across borders, bypassing traditional financial controls

In 2022, a Homeland Security Investigations (HSI)-led task force uncovered a crypto laundering scheme involving Russian entities smuggling luxury goods into the United States. This operation resulted in the seizure of USD 1.2 million in cryptocurrency tied to a sanctioned Russian oligarch. The investigation revealed that the individuals involved conspired to violate the Export Control Reform Act, commit smuggling, and engage in money laundering to circumvent US sanctions and illegally import luxury items.

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4. Darknet markets and crypto-fueled smuggling

Darknet marketplaces (DNMs) facilitate the sale of illegal goods, firearms, counterfeit passports, and narcotics — often settled in cryptocurrency. For example:

• Weapons traffickers use crypto to purchase untraceable firearms for cartel enforcement units
• Fake US documents, including visas and passports, are sold for crypto to facilitate human trafficking
• Drug transactions conducted via dark web platforms are increasingly linked to crypto-based laundering schemes

In June 2024, Thomas Pavey and Raheim Hamilton were charged in federal court in Chicago for operating Empire Market, a darknet marketplace that processed over USD 430 million in illegal transactions between 2018 and 2020. The platform facilitated the sale of drugs, counterfeit currency, stolen credit card data, and hacking tools, with transactions conducted in cryptocurrency. An investigation led by Homeland Security Investigations – New York, along with FBI Chicago and the US Postal Inspection Service, resulted in the seizure of USD 75 million in cryptocurrency, along with cash and precious metals. Empire Market operated across borders, enabling illicit goods and financial transactions to flow internationally, bypassing traditional financial systems and law enforcement oversight.

According to TRM, Empire rose to prominence after the takedown of AlphaBay in 2017. The platform used an escrow system to handle transactions, attracting a large user base and facilitating payments between buyers and sellers worldwide. Many of the illicit goods sold on the platform — including narcotics and counterfeit documents — were shipped across borders, posing challenges for customs and border security agencies. Empire Market was considered one of the most trusted darknet marketplaces until its sudden disappearance in 2020, leaving many users unable to withdraw their funds and disrupting transnational criminal supply chains.

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How border security agents can leverage blockchain intelligence

Blockchain intelligence is an invaluable tool in every border security agent’s arsenal — and more critical than ever as cryptocurrency adoption grows for both licit and illicit means. Key uses for blockchain intelligence in ensuring border security include: investigating and seizing illicit crypto assets, screening suspicious cross-border transactions, and using border search authority to uncover crypto wallets.

1. Investigating and seizing illicit crypto assets

• Trace cryptocurrency transactions linked to cartel activity and human smuggling
• Identify crypto wallet addresses associated with darknet markets or illicit trade networks
• Track money laundering schemes moving illicit funds across US borders

2. Screening suspicious cross-border crypto transactions

Border enforcement agencies can enhance screening procedures by:

• Using blockchain forensics to analyze digital wallets and transactions
• Monitoring crypto ATMs and exchanges in border regions for suspicious activity
• Tracking illicit flows in stablecoins like USDT, which are increasingly used by TCOs
• More robust screening of electronic evidence at passenger and cargo ports of entry 
  For example, law enforcement leverages blockchain intelligence to monitor crypto transaction patterns at key border crossings, identifying high-risk addresses used by smuggling organizations.

3. Using border search authority to uncover crypto wallets

Border security officers conduct electronic device searches at border crossings under legal authorities, often leading to the discovery of hidden cryptocurrency wallets. When crypto assets are found, they are typically:

• Referred to internal experts or law enforcement partners for further forensic analysis
• Used as evidence in broader financial crime investigations
• Subject to asset forfeiture proceedings under 18 U.S.C. 981 or 21 U.S.C. 881
• Shared with international partners if there is an international nexus

Interestingly, it’s not just cryptocurrency, but also crypto-related infrastructure. As of early 2025, CBP — according to reporting — has intensified efforts to intercept cryptocurrency-related activities at US ports of entry, including the seizure of unauthorized bitcoin mining devices from manufacturers like Bitmain and MicroBT due to regulatory concerns. While CBP primarily focuses on undeclared cash smuggling, the agency is adapting its enforcement strategies to address the evolving role of digital assets in cross-border financial crimes.

The future of border security and blockchain intelligence

Over the last few years, according to CBP, we have seen a significant drop in seizures of currency and other monetary instruments. However, cryptocurrencies take the “bulk” out of bulk cash smuggling, instead allowing traffickers to move funds with only a seed phrase, hardware wallet, or mobile app. 

As cartels, traffickers, and cybercriminals increasingly turn to cryptocurrency, border security agencies like CBP and HSI — in the United States and around the world — must modernize their border enforcement capabilities to detect, disrupt, and dismantle these financial networks.

By leveraging real-time crypto transaction monitoring, forensic blockchain analysis, and public-private collaboration, agencies can:

• Identify illicit actors operating across borders
• Seize and disrupt financial flows linked to transnational criminal organizations
• Ensure that US border security agencies remain ahead of evolving financial threats

With the adoption of blockchain intelligence tools like TRM, these agencies have the opportunity to strengthen national security, combat cross-border financial crime, and enhance investigative capabilities in the digital age.