In the last two days of 1999, Los Angeles has become a dangerous war zone. As a group of criminals rob a Chinese restaurant, the event is recorded by a robber wearing a SQUID, an illegal electronic device that records events directly from the wearer's cerebral cortex, and when played back through a MiniDisc-like device, allows a user to experience the recorder's memories and physical sensations. Lenny Nero, a former LAPD officer turned black marketeer of SQUID recordings, agrees to buy the robbery clip from his main supplier, Tick. Elsewhere, a prostitute named Iris, who is a friend of Lenny's ex-girlfriend Faith Justin, is being chased by LAPD officers Burton Steckler and Dwayne Engelman as she flees to the subway. Iris manages to escape on a rapid transit after her wig is pulled off by Engleman, revealing a SQUID recorder headset.
Lenny pines for Faith and relies on his two best friends, bodyguard and limousine driver Lornette "Mace" Mason and private investigator Max Peltier, for emotional support. Mace has unrequited feelings for Lenny from the past, from when he was still a cop and stepped in as a dependable father figure for her son after her boyfriend was arrested on drug charges, but disapproves of his SQUID-dealing business. While Lenny and Max are drinking together at a bar, Iris drops a SQUID disc through the sunroof of Lenny's car, but his car is towed away before he sees it. He is then picked up by Mace, who eventually agrees to take him to a nightclub where Faith is going to sing. In the club, Lenny receives a SQUID disc from a contact and then tries to get Faith away from her new boyfriend, music industry mogul Philo Gant, but to no avail.
While in the car with Mace, Lenny plays the disc the contact gave him and watches Iris being brutally raped and murdered by an attacker at the Sunset Regent hotel. As they approach the hotel, Iris is taken out on a stretcher. The next day, Lenny and Mace take the disc to Tick, who cannot identify the source of the recording, but recalls that Iris was looking for Lenny. Mace deduces that Iris may have left something in Lenny's car, and the two go to the impound and find Iris's disc. Steckler and Engleman appear and demand the disc at gunpoint, but Lenny and Mace escape in her car before being forced to stop at a dock. Steckler pours gasoline on the car and sets it on fire, but Mace drives it into the harbor, extinguishing the flames. When they reach the surface, the cops have left.
Mace takes Lenny to her brother's house and watches Iris' disc. They discover that her death is tied to a cover-up of the murder of rapper Jeriko One by Steckler and Engleman, who disapprove of his politically-charged music. Lenny, Mace, and Max also learn that Tick has been rendered brain-dead from forcefully being exposed to highly amplified SQUID signals. Lenny concludes that the assault on Tick was committed by the same person who killed Iris and fears Faith will be next. Back at the nightclub, Lenny and Mace confront Faith, who tells them that Philo hired Iris to spy on Jeriko. As midnight approaches, Lenny and Mace sneak into a private party at the Westin Bonaventure Hotel that Philo is hosting for the city's wealthy elite. Lenny also gives Iris' disc to Mace so that she can deliver it to deputy police commissioner Palmer Strickland.
Upon entering Philo's penthouse suite, Lenny finds another SQUID disc and Philo's body on the floor, whose brain has been damaged in the same manner as Tick's. After watching the disc, Lenny discovers that Max and Faith have become lovers and that they forced Philo to run an amplified recording of them having sex. Max and Faith then enter the room, explaining that they set Philo up because he wanted to have Faith killed for what she knew about Jeriko's death, and that he now intends to frame Lenny for Philo's murder. After a hand to hand fight, Lenny throws Max off the balcony to his death. Meanwhile on the street, Mace is pursued by Steckler and Engelman, but manages to subdue them with the help of Strickland. Lenny finds Mace and the two share a passionate kiss as the crowd celebrates the turn of the new century around them.

Question: How did Engleman discover Iris' SQUID recorder?
Answer: He pulled off her wig.