International operation dismantles organised criminal enterprise operating encrypted communications

This is a joint media release from the Australian Federal Police, the US Federal Bureau of Investigation, the Royal Canadian Mounted Police, the Australian Criminal Intelligence Commission, New South Wales Crime Commission, New South Wales Police, Queensland Police, Victoria Police, South Australia Police, the Australian Taxation Office and AUSTRAC

Australian law enforcement agencies working with international counterparts in the US and Canada have successfully smashed a sophisticated criminal enterprise servicing the organised crime market with secure, encrypted communications.

It will be alleged Canadian-based company Phantom Secure specifically designed devices for the organised crime market allowing criminals around the globe to use unrestricted, secure communications beyond the capability of law enforcement interception.

Described by Australian authorities as a landmark day, five men have been indicted in the United States in connection with the operations of Phantom Secure, including the company’s CEO, on charges they knowingly participated in a criminal enterprise that facilitated the transnational importation and distribution of narcotics through the sale and service of encrypted communications.    

The impact of this takedown to the global operations of Phantom Secure, its infrastructure and client base in Australia have been significant, and will be sustained.

Law enforcement agencies across multiple continents have worked together to dismantle the network infrastructure of Phantom Secure, located in various offshore jurisdictions, disabling the encrypted platform and the thousands of secure devices used on it.

Australian authorities allege Phantom Secure was the first encrypted communication platform available on a wholesale scale in Australia, and was the largest single supplier to the Australian organised crime market. The number of these devices sold and used in Australia since inception is estimated to be well in excess of 10,000 - the company’s largest customer base.

This is the first time the US government has targeted a company and its principals for aiding and abetting criminal organisations by knowingly providing them with tools to ‘go dark’ and evade law enforcement and obstruct justice while committing crimes such as transnational drug trafficking.

Australia’s role in this complex and unique investigation began in early 2017 following an exchange of intelligence with the Federal Bureau of Investigation (FBI) and Royal Canadian Mounted Police (RCMP).

Australian authorities executed 19 search warrants on premises across four states as part of the international disruption action on 6 March 2018, where more than 1000 encrypted mobile devices were seized. There was one arrest in Victoria for offences relating to drug possession and trafficking.

Australian Federal Police (AFP) Assistant Commissioner Organised Crime, Neil Gaughan said today the US indictment means the weapon of choice in the arsenal of organised criminal groups worldwide - secure encrypted communications – has been disrupted and disabled on an unprecedented scale.

“The action taken in the US directly impacts the upper echelons of organised crime here in Australia and their associates offshore. Using this equipment, criminals have been able to confidently communicate securely and control and direct illicit activity like drug importations, money laundering and associated serious, often violent criminal offending, yet have remained removed from these criminal acts,” Assistant Commissioner Gaughan said.

“Close partnerships have been the key to this operation's landmark success in Australia and recognition and thanks must go to our many partners in this investigation, principally the Australian Criminal Intelligence Commission and the New South Wales Crime Commission. Police in New South Wales, Victoria, Queensland and South Australia were also integral to the success while the Australian Tax Office involvement and information from AUSTRAC was invaluable.

“International partners at the FBI and RCMP had been outstanding working methodically around the clock together with Australia on this unique and complex investigation. Without the cooperation, commitment and shared drive, Australian law enforcement agencies would not be announcing this significant result,” he said.

US Attorney General Jeff Sessions said with one American dying of a drug overdose every nine minutes, our great nation is suffering the deadliest drug epidemic in our history. Incredibly, some have sought to profit off of this crisis, including by specifically taking advantage of encryption technologies to further criminal activity, and to obstruct, impede, and evade law enforcement, as this case illustrates.

“The Department of Justice will aggressively prosecute not just drug traffickers, but those who help them spread addiction and death in our communities. I want to thank the FBI, DEA, Customs and Border Protection, Homeland Security Investigations, Washington State Police, the Bellingham and Blaine Police Departments, and all of our law enforcement partners around the world, including Australia, Canada, Panama, Hong Kong, and Thailand for their hard work on this case. Today's indictment sends a clear message that drug traffickers and criminals cannot hide, because we will hunt them down and find them wherever they are.”

RCMP Criminal Operations Officer, Investigative Services and Organised Crime Assistant Commissioner Jim Gresham said the investigation is a prime example of law enforcement agencies from around the world working together to identify, investigate and charge people involved in transnational criminal activity.

“We remain committed to investigating and disrupting these illegal activities that adversely affect each of our communities.”

Commissioner of the NSW Crime Commission, Peter Bodor QC described the disruption of the Phantom Secure platform as one of the most significant blows to organised crime in Australia in the last twelve months.

“If organised criminals seek to move to other platforms we will remain steadfast and continue to disrupt and dismantle organised criminal activity wherever we can.”

AUSTRAC National Manager, Intelligence, Dr John Moss said: “AUSTRAC’s financial intelligence and information played a critical role in helping investigators follow the money trail and identify payments made by individuals and companies to purchase encrypted communications devices.”

NSW Police Force State Crime Commander, Assistant Commissioner Mal Lanyon, said the operation emphasises our joint efforts, not only in targeting transnational organised crime, but also the ways in which it is being facilitated.

“We will continue to proactively deploy a variety of strategies and tactics, and harness the reach of our partners, to strip criminal enterprises of assets and disrupting any activity that impacts on the community of NSW.”

The AFP will continue to work with the FBI and RCMP offshore and with domestic partners. Further arrests and charges have not been ruled out as the investigation continues.

Authorities are also aware of similar platforms, some with direct connections to Phantom Secure, whose operators are currently under law enforcement scrutiny.

Link to FBI media release:

https://www.fbi.gov/contact-us/field-offices/sandiego/news/press-releases/chief-executive-and-four-associates-indicted-for-conspiring-with-global-drug-traffickers-by-providing-encryption-services-to-evade-law-enforcement-and-obstruct-justice

 

Link to Royal Canadian Mounted Police media release:

http://bc.rcmp-grc.gc.ca/ViewPage.action?languageId=1&siteNodeId=2087&contentId=54664

 

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