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As someone who has went through way too many KYC/AML dances, this method means nothing. The moment you try to pocket fiat into a regulated bank or exchange, the

As someone who has went through way too many KYC/AML dances, this method means nothing. The moment you try to pocket fiat into a regulated bank or exchange, they will look at the entire chain of transactions. Mixers are a red flag. Unregulated exchanges are a red flag. There is no way in hell those funds are laundered back into the existing banking system.

fumblebee 5y ago
Red flags don't mean much. Building AML models is hard, and often yield an overwhelming number of false positives that arise from an over-reliance on those indicators. Sure, a positive prediction might lead to a SAR, but unfortunately that doesn't mean much either. In the majority of cases it will lead to the customer being off-boarded, in which case they'll simply go to another bank with more lacklustre controls. A SAR won't lead to a prosecution unless it sparks a new case in law enforcement (rare due to resource constraints), or whether it supports part of an ongoing case. Sadly, that money will probably be laundered.
spraynpray 5y ago
To elaborate on this, tornado.cash actually gives you a cryptographic proof of the transaction, which allows you to reveal the origin of the funds to whoever you choose. So an obvious regulatory alternative to the nuclear option would be to require to reveal the origin to the authorities upon request. On a more general note, this is one example of how engineering solves the OPs point of criticism, but it requires some research/education. Ofc someone could fork tornado.cash and not hand out these cryptographic proofs, but I would assume that this clone would not find consensus/acceptance with an informed general public. An informed general public will also not accept prediction markets without a consensus model that prevents paid hits (all of the ones I know [augur, gnosis] include functionality to prevent evil stuff like this), just as an informed general public will not agree to trade on a system that gives carte blanche to criminals.
stevehawk 5y ago
OTOH, it seems like the US perpetually leaves loopholes in its banking regulations that allow for money laundering if you're a big enough bank customer. https://www.cbsnews.com/news/bank-scandal-2020-2-trillion-transaction-suspected-illegal-activity-money-laundering/ https://www.cbsnews.com/news/bank-scandal-2020-2-trillion-tr...
tim333 5y ago
I've made reasonably large crypto profits and returned them to the existing banking system and no questions were asked to the source of the profits although they knew who I was naturally. If you go to say Kraken, change fiat to Bitcoin, send it to say Bitmex, speculate and reverse the process it's quite hard for them to say if you got luck speculating or topped up your account with dirty money. And I imagine the criminals use places much less fussy than Kraken which is US regulated.

fumblebee 5y ago

Red flags don't mean much. Building AML models is hard, and often yield an overwhelming number of false positives that arise from an over-reliance on those indicators. Sure, a positive prediction might lead to a SAR, but unfortunately that doesn't mean much either. In the majority of cases it will lead to the customer being off-boarded, in which case they'll simply go to another bank with more lacklustre controls. A SAR won't lead to a prosecution unless it sparks a new case in law enforcement (rare due to resource constraints), or whether it supports part of an ongoing case. Sadly, that money will probably be laundered.

spraynpray 5y ago

To elaborate on this, tornado.cash actually gives you a cryptographic proof of the transaction, which allows you to reveal the origin of the funds to whoever you choose. So an obvious regulatory alternative to the nuclear option would be to require to reveal the origin to the authorities upon request. On a more general note, this is one example of how engineering solves the OPs point of criticism, but it requires some research/education. Ofc someone could fork tornado.cash and not hand out these cryptographic proofs, but I would assume that this clone would not find consensus/acceptance with an informed general public. An informed general public will also not accept prediction markets without a consensus model that prevents paid hits (all of the ones I know [augur, gnosis] include functionality to prevent evil stuff like this), just as an informed general public will not agree to trade on a system that gives carte blanche to criminals.

stevehawk 5y ago

OTOH, it seems like the US perpetually leaves loopholes in its banking regulations that allow for money laundering if you're a big enough bank customer. https://www.cbsnews.com/news/bank-scandal-2020-2-trillion-transaction-suspected-illegal-activity-money-laundering/ https://www.cbsnews.com/news/bank-scandal-2020-2-trillion-tr...

tim333 5y ago

I've made reasonably large crypto profits and returned them to the existing banking system and no questions were asked to the source of the profits although they knew who I was naturally. If you go to say Kraken, change fiat to Bitcoin, send it to say Bitmex, speculate and reverse the process it's quite hard for them to say if you got luck speculating or topped up your account with dirty money. And I imagine the criminals use places much less fussy than Kraken which is US regulated.