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>Money laundering is the process of transforming the profits of crime and corruption into ostensibly "legitimate" assets. >A cryptocurrency tumbler is a servic

by FRex 9y ago

>Money laundering is the process of transforming the profits of crime and corruption into ostensibly "legitimate" assets. >A cryptocurrency tumbler is a service offered to mix potentially identifiable or 'tainted' cryptocurrency funds with others, with the intention of confusing the trail back to the fund's original source. English might not be my native language but I can see lots of parallels. I never actually considered this before but a mixer is the physical world would be getting mailed (by anonymous parties) 10 bags of money, 9 legitimate ones and one known to be from mafia and with sequential bill numbers known to feds and then repacking and mixing up the banknotes and receiving 10 visitors, each of whom gets one bag from you. You just laundered the money, sort of... it gets screwy (that's a very technical term ;) although does it really? From 9 legitimate bags you made 10 (functionally) legitimate ones. You can't trace the mafia guy after your mixing, you can't pick a guy with a bag at random and say he is the mafia perp, you can't say each of these guys now has 10% of illegitimate money in his bag because they can't be responsible (and don't even know) about actions of other people who mailed you money. An entire money bag just got laundered (by the definition above, it was crime proceeds and is now ostensibly legitimate because it can't be distinguished).

SAI_Peregrinus 9y ago
One minor difference with Bitcoin is that there are no serial numbers. Every bitcoin is identical to every other bitcoin. The blockchain tracks transaction source, destination, and amount, but there's no way to identify a specific bitcoin. Such a concept is actually meaningless, there are no bitcoins, just transactions. This means that when a mixer or exchange wallet gets the bitcoins they can't be individually tracked anymore. This doesn't really matter in practice since all transactions are public.
- FRex 9y ago
  The bag analogy still works if you remove serial numbers and just say that one of the bags was known to have came from mafia. You still can't identify which of the end receivers was the mafia and the effect is still a 'cleaning' process: dirty and clean go in, only clean (as in clean or dirty but not provably distinguishable from clean) comes out.
StavrosK 9y ago
Laundering isn't about traceability. It's about taking money that's been gotten illegally (and thus you can't spend without the IRS asking questions) and paying tax on it so it appears as if you earned it by legitimate means. Making traceable money untraceable doesn't mean it's now clean.
- FRex 9y ago
  It seems to be about both taxes and making yourself not traceable to a crime (or the latter is a side effect of the former, since making money appear legitimately earned will of course unlink it from any crimes as a side effect/prerequisite). Look at the definition here and tell me it doesn't sounds like a mixer: https://www.fincen.gov/history-anti-money-laundering-laws https://www.fincen.gov/history-anti-money-laundering-laws Similarly there can be unusually high tax (like the 75% in Poland) on undocumented income but if that money could also be traced to a bank heist or drug deal as well you would be in much more trouble than just that tax. As for USA's (un)usually far legal reach, strong extradition agreements, etc. - that can be up for debate. But money laundering itself (especially when starting with stolen funds) is hardly legal anywhere and mixers seem to fit the definition of laundering at a glance if you consider Bitcoin a currency, it's typical case of law not catching up with the technology and legacy laws being reused instead.
  - StavrosK 9y ago
    Yeah, you're right, the two are pretty well intermingled. To me, laundering is more about the "paying taxes" part, but there's definitely an element of obfuscation.
MichaelGG 9y ago
If all serials on cash were pervasively tracked, then we'd have and need such services. From criminals hiding their money, to a husband not wanting his wife to know he bought a gift at a jewelry store, everyone deserved privacy if they desire. Money laundering is simply a term used by lazy prosecutors that can't find real crimes. Fundamentally it's criminalising the act of daring not to tell the government everything you do. Not that mixing even accomplishes what criminals need - it leaves them needing a cover story for why they have so much Bitcoin.
- FRex 9y ago
  Sequential bills is movie slang for marked/traced bills cops use to pay off ransoms and such. And 'the government' isn't going after anyone who 'dared to not tell the government everything they did' or even after all the clients of this mixer or all bitcoin users but after a guy who ran a specific large mixer that was used in mixing bitcoin from a large theft and several small thefts and sketchy in general (whatever that means in context of a tool like Bitcoin that on its own is quite notorious). And it's actually few governments together that are on this wider Mt. Gox case, including Japanese one (Mt. Gox location), Greek one (where Vinnik was arrested), etc. They also said he possible played a role in the theft itself - we will see what comes of it.
  - MichaelGG 9y ago
    The US government goes after all sorts of people that do things even remotely looking like money laundering. They make banks report $10K+ transactions, then invent a new crime if you avoid making such transactions. Small business owners get bit by this and end up fighting for their own money.

by FRex 9y ago

SAI_Peregrinus 9y ago

One minor difference with Bitcoin is that there are no serial numbers. Every bitcoin is identical to every other bitcoin. The blockchain tracks transaction source, destination, and amount, but there's no way to identify a specific bitcoin. Such a concept is actually meaningless, there are no bitcoins, just transactions. This means that when a mixer or exchange wallet gets the bitcoins they can't be individually tracked anymore. This doesn't really matter in practice since all transactions are public.

FRex 9y ago
The bag analogy still works if you remove serial numbers and just say that one of the bags was known to have came from mafia. You still can't identify which of the end receivers was the mafia and the effect is still a 'cleaning' process: dirty and clean go in, only clean (as in clean or dirty but not provably distinguishable from clean) comes out.

StavrosK 9y ago

Laundering isn't about traceability. It's about taking money that's been gotten illegally (and thus you can't spend without the IRS asking questions) and paying tax on it so it appears as if you earned it by legitimate means. Making traceable money untraceable doesn't mean it's now clean.

FRex 9y ago
It seems to be about both taxes and making yourself not traceable to a crime (or the latter is a side effect of the former, since making money appear legitimately earned will of course unlink it from any crimes as a side effect/prerequisite). Look at the definition here and tell me it doesn't sounds like a mixer: https://www.fincen.gov/history-anti-money-laundering-laws https://www.fincen.gov/history-anti-money-laundering-laws Similarly there can be unusually high tax (like the 75% in Poland) on undocumented income but if that money could also be traced to a bank heist or drug deal as well you would be in much more trouble than just that tax. As for USA's (un)usually far legal reach, strong extradition agreements, etc. - that can be up for debate. But money laundering itself (especially when starting with stolen funds) is hardly legal anywhere and mixers seem to fit the definition of laundering at a glance if you consider Bitcoin a currency, it's typical case of law not catching up with the technology and legacy laws being reused instead.
- StavrosK 9y ago
  Yeah, you're right, the two are pretty well intermingled. To me, laundering is more about the "paying taxes" part, but there's definitely an element of obfuscation.

MichaelGG 9y ago

If all serials on cash were pervasively tracked, then we'd have and need such services. From criminals hiding their money, to a husband not wanting his wife to know he bought a gift at a jewelry store, everyone deserved privacy if they desire. Money laundering is simply a term used by lazy prosecutors that can't find real crimes. Fundamentally it's criminalising the act of daring not to tell the government everything you do. Not that mixing even accomplishes what criminals need - it leaves them needing a cover story for why they have so much Bitcoin.

FRex 9y ago
Sequential bills is movie slang for marked/traced bills cops use to pay off ransoms and such. And 'the government' isn't going after anyone who 'dared to not tell the government everything they did' or even after all the clients of this mixer or all bitcoin users but after a guy who ran a specific large mixer that was used in mixing bitcoin from a large theft and several small thefts and sketchy in general (whatever that means in context of a tool like Bitcoin that on its own is quite notorious). And it's actually few governments together that are on this wider Mt. Gox case, including Japanese one (Mt. Gox location), Greek one (where Vinnik was arrested), etc. They also said he possible played a role in the theft itself - we will see what comes of it.
- MichaelGG 9y ago
  The US government goes after all sorts of people that do things even remotely looking like money laundering. They make banks report $10K+ transactions, then invent a new crime if you avoid making such transactions. Small business owners get bit by this and end up fighting for their own money.