A blockchain-based Forensic Model for Financial Crime Investigation: The Embezzlement Scenario

TL;DR

This paper proposes a blockchain-based forensic model specifically designed for investigating embezzlement in financial crimes, utilizing smart contracts and chain of custody mechanisms to enhance digital forensic processes.

Contribution

It introduces a forensic-by-design methodology leveraging blockchain technology for financial crime investigation, with a functional smart contract implementation and adaptable forensic workflows.

Findings

Effective chain of custody preservation using blockchain

Feasibility of smart contracts in forensic investigations

Enhanced transparency and verifiability in financial crime forensics

Abstract

The financial crime landscape is evolving along with the digitization in financial services. In this context, laws and regulations cannot efficiently cope with a fast-moving industry such as finance, which translates in late adoption of measures and legal voids, providing a fruitful landscape for malicious actors. In parallel, blockchain technology and its promising features such as immutability, verifiability, and authentication, enhance the opportunities of financial forensics. In this paper, we focus on an embezzlement scheme and we provide a forensic-by-design methodology for its investigation. In addition, the feasibility and adaptability of our approach can be extended and embrace digital investigations on other types of schemes. We provide a functional implementation based on smart contracts and we integrate standardised forensic flows and chain of custody preservation mechanisms. Finally, we discuss the benefits and challenges of the symbiotic relationship between blockchain and financial investigations, along with future research directions.