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Using bitcoin as a way to launder dollars requires the ability to turn USD into bitcoin and back again, which, incidentally, is exactly what Mt Gox does. dir

• eurleif 13y ago
  Wouldn't you still have to explain who was paying you BitCoin, and why?
  • jlgreco 13y ago
    "I do freelance [whatever] over the internet in exchange for bitcoins." Where "[whatever]" is something relatively unverifiable. Programming, essay writing, whatever. Declare it properly as income and you probably won't have issues unless somebody actually decides to look closer. Not all that different from "selling" heavily marked up drinks at your bar in exchange for cash, then pouring said drinks down the drain. It will work for a while so long as you avoid suspicion.
    • kanzure 13y ago
      > Where "[whatever]" is something relatively unverifiable. Programming Yep. And that may sound inefficient, but it's actually really great at decreasing information about the source of money. For example, you might have a legitimate software business where you're selling custom software to a customer, but meanwhile you're financing the creation of those bits through dirty e-goldcashcoin. Later, you transfer the bits through Tor to yourself, with very little record of the origin of those bits. The only problem is that the worker that was paid in dirtcoin might be able to recognize their work in the future (in the wild), breaking the anonymity of that value-creating transaction. So you can focus on content creation work that is less unique, but you can't always charge customers that much for that sort of work anyway.. I think it's an interesting problem to think about. I am sure there's a solution where you don't end up with a stray existential threat like the worker stumbling upon his beautiful artwork in the future. Assassination market? That's really extreme, surely there's a better way.
      • jlgreco 13y ago
        Jurisdiction allowing^, a bitcoin gambling website would be a fantastic way of laundering your bitcoins. Just start using your undeclared money to play at your own casino. The house always wins, so slowly but surely that dark money will become your legitimate income. Do it right and you might actually even turn your casino into a legitimate source of income itself. ^ I'm not sure where this would be legal. Not the US clearly.
        • kanzure 13y ago
          > The house always wins, so slowly but surely that dark money will become your legitimate income. That's not helpful, because the transaction is really obvious. If your casino is unpopular, it's even more obvious that it might just be you. This is a much worse idea than the one in your original comment. Edit: also, you can't verify that obfuscators operate without logs, so using "mixers" isn't a legitimate answer either.
          • jlgreco 13y ago
            The way I see it, there two stages to money laundering: The first is simply disassociating your money from the crime. If you robbed a bank this means swapping your bills for other bills. If you robbed MtGox or sold a bunch of coke on the silk road this means using a fuckton of mixers... but that is not a good solution as you have noted. Bitcoin does not lend itself to this at all. Honestly if I somehow found myself in the possession of a ton of prominently stolen bitcoins I would just write them off; the risk involved in recovery would be far to great. If it was just bitcoins I got from selling some coke on silk road then I would be more relaxed; a few (presumably) independent mixers over a few months would put me at relative ease. None of the money from this step is useful though.. not unless you are content with paying your rent in cash for a few years or blowing all your bitcoins on VPSs... For the money to become actually usable you need part two. The second part is the traditional money laundering. Taking money that is assumed to be unconnectable with the crime and associating it with your identity in a way that appears legitimate. If you robbed a bank this means taking the bills that you got out of step one and finding a way to put them back into the bank. If you are selling coke in real life then this is actually the only step you need to worry about; take the cash you got for the coke, "spend" it at your bar, and deposit it at the end of the week in your bank account. If you mined a shitton of coins a few years ago and don't really care to explain that you are a miner, then this is the only step you need to worry about. The idea of both the "freelancing" and "casino" ideas is to do only step 2; that is to say they are both just to associate money with your identity in an "official" way. Neither will work worth a damn for step 1... at least I wouldn't trust either of them for that. The nice thing about bitcoin casinos is that they are easy to spin up. Just load one up, spam it all over the place over the period of a week. During that week you "gamble" with yourself, then you taper that down to simulate waning interest in your service. Rinse and repeat as often as you need more money, just rip off whatever the current preferred gambling/toy is in the community at the moment. Never keep them around long enough for them to be popular or unpopular, only new. With the freelancing idea you may eventually have to explain where you are getting your contracts, but with technically legal fly-by-night gambling schemes nobody would expect even you to know or care. Gambling sites involve far less fabricated story and background, which is to your advantage. Which I would choose would depend on how much money I wanted to attach to my identity and how fast. For modest amounts quickly I'd make a gambling site. For large amounts infrequently but at steady interval, I would become a freelancer. That would be the better one to attempt to live off of. (Also I'm in the US, so a gambling site is a non-starter anyway.)
    • caf 13y ago
      ..or selling haircuts or tattoos to non-existent customers.
• joezydeco 13y ago
  I would think DHS is more worried about (any) money -> mt gox -> bitcoin -> groups not aligned to DHS interests
  • mpyne 13y ago
    This "threat" already exists with cash though (and with cash you can throw it into an ocean or burn it, but the blockchain will forever record your Bitcoin ID and you have to hope DHS never figures out which ID is yours).
    • karlh3o 13y ago
      Yes, but DHS can't eliminate cash. However they can restrict the amount you carry across borders without declaring to around $10K. Bitcoin does make it very easy to transfer a million USD worth of coin to anywhere in the world in minutes. It's impossible to do that with cash, unless you go through a heavily regulated and monitored bank. And there is always the Tor network for anonymity.
      • knowaveragejoe 13y ago
        You can transfer absurd sums in bitcoin across borders all day, but good luck when it comes time to convert it into a useful currency. Turning btc into a useful currency in the US and Europe is about as easy as its going to get.
        • EvilLook 13y ago
          >Turning btc into a useful currency in the US and Europe is about as easy as its going to get. But good luck trying to get the value out that you put in. Dollars and Euros are relatively stable compared to bitcoin. There is a much higher guarantee that you're going to get the same value out that you put in with Dollars or Euros compared to bitcoin. Bitcoin looks like a great investment until you actually try to turn it back into dollars or euros.
          • 13y ago
• chez17 13y ago
  It's not about logic, it's about power. Banks routinely (once every couple years it seems) get caught rigging rates, laundering money, financing dictatorships or terrorism, etc... In the US, when it comes to banking it's really not about logic but about power.
  • phyalow 13y ago
    Money Laundering is a serious risk banks face, you only need to look at HSBC's recent debacles to see why. AML/Compliance at contra Dwolla Banks would have flagged this and quite rightly so. I disagree with your last statement. Could you please elaborate?
    • mike_herrera 13y ago
      IIRC, HSBC signed a deferred prosecution agreement and paid a sizable fine. That's not justice.
      • rayiner 13y ago
        HSBC paid a $2 billion fine for a "crime" that was rooted in negligence rather than malicious intent.
        • warfangle 13y ago
          Wait, folks showing up and depositing millions in a go in cash not raising red flags was negligence? That 2BN fine was leveraged for a combined failure to monitor more than $670bn in wire transfers and $9.4bn in dollar purchases in Mexico. You can bet yer britches they made more than 2bn off of all the shadiness -- and when a fine is less than the profit of the act being fined, the act will not cease.
          • patrickdavey 13y ago
            Exactly... they made more cash by laundering and then paying a fine. Presumably banks will keep on doing this until there is a real deterrent (like having the entire operation shutdown by DHS)
• outside1234 13y ago
  How is this different tho from USD -> Swiss Franc -> USD? I don't see how that cleans the money...
  • minimax 13y ago
    Bitcoin crosses borders more easily than CHF. Try this: Money in Saudi Arabia -> mt gox -> bitcoin -> mt gox -> terrorists inside the USA
    • kiba 13y ago
      Terrorists don't need much money to kill. All you have to do is recruit a dude in the US, give him information on how to purchase an AR-15, and the dude can start killing people at the malls or any other soft targets. Or actually just kill people with pistols. Seung-Hui Cho, the Virginia Tech mass killer, kills 35 people with his Glock 19 and Walther P22. The attacker is basically undetectable until he start his assault, and the probability of success is quite high. He can even use his car to ram into the mall door and run down individuals before he start his shooting spree. The only hope for civilians at that point is that a policeman or a civilian with a pistol to start shooting back. The operation can be done with the attacker saving money for those purchase of weapons by working at his usual job. You don't need to send funds. (Of course, if it was that easy, why don't terrorists do it more often?)
      • stfu 13y ago
        Exactly the point. All the money laundering talk is complete bs when it comes to terrorism. There is only one reason, and that is that government wants their taxes.
        • vanwaril 13y ago
          Which is a very valid reason.
        • objclxt 13y ago
          I don't think that's strictly true. It's generally thought that one of the biggest bank robberies in the UK (the Northern Bank Robbery) was pulled off by the Provisional IRA. Terrorist organisations do need to launder money - it may just not be the same terrorist organisations that you are thinking of.
• nazka 13y ago
  This exactly why I think Bitcoin has no future. Soon or later it will be regulated and we will go back to the same thing.
  • camus 13y ago
    it will not be regulated , it will be shut down , plain and simple , unless everybusiness out there accept bitcoins , one needs to convert it to a sound currency in order to use it.
    • mrb 13y ago
      It cannot be shut down for the same reason that Bittorrent cannot be shut down: it is a peer-to-peer decentralized protocol. You need to learn about the basics... http://blog.zorinaq.com/?e=66 http://blog.zorinaq.com/?e=66
      • junto 13y ago
        I think the basic principal is that it will be unusable within the USA, because you'll have no way to convert US dollars into Bitcoin. A similar attack was made against Wikileaks. If you can't transfer your cash to Bitcoin, or your Bitcoin to cash, then the decentralized nature of Bitcoin itself is immaterial.
        • hisabness 13y ago
          people buy bitcoins for cash in person today. if anything, preventing financial institutions from accepting bitcoins makes the transactions harder to track.
        • discountgenius 13y ago
          > If you can't transfer your cash to Bitcoin, or your Bitcoin to cash, then the decentralized nature of Bitcoin itself is immaterial. Unless you can turn your bitcoins into goods and services.
        • runeks 13y ago
• crisnoble 13y ago
  I have exactly 1 bitcoin and no silk road experience, but IF I sold drugs I might do it like this: drugs->bitcoins->mt. gox->USD->Dwolla->Bank Account A buyer would do the above actions in reverse. As it stands today there are many, many ways to perform that chain of actions. I personally funded my Mt. Gox account with Dwolla because it seemed like the only above the board operation out there.
  • wildgift 13y ago
    I think a more typical chain is: drugs -> USD -> mattress -> grocery store
• fnordfnordfnord 13y ago
  If all it takes is a little bit of money laundering to get your bank shut down, we're going to run out of banks pretty fast in this country.
  • jpdoctor 13y ago
    > If all it takes is a little bit of money laundering to get your bank shut down, Don't be ridiculous. You have to both launder money and not give any of it back with campaign donations. Only then do you get shut down.
• nwzpaperman 13y ago
  Money laundering is about legitimizing the source of money and isn't facilitated by the unit of exchange: dollar, yen, rupee, peso or bitcoin. Post-2001 and the Patriot Act, bank tellers, stock brokers and insurance agents have all become lay intelligence officers under "Know your customer" compliance requirements. Informal value transfer systems, barter/black-market, are only a problem in terms of taxation. Mt. Gox and money exchanges were functionally brought under these KYC compliance regulations and it is only a question of time until bitcoin users will have to speak about the source of the money. Sources are important because that's how taxes are levied. If you can show you have paid taxes on your money, it's rare to have a problem. We have systemic trillion dollar annual deficits, so tax collection efforts are being ramped up. It's why you get 10,000 IRS officers hired instead of 10,000 doctors for a national health care system reorganization.
  • SageRaven 13y ago
    > We have systemic trillion dollar annual deficits, so tax collection efforts are being ramped up. Funny. In renewable energy circles, the first, and most efficient, optimization is "conservation". Converting the 50 incandescent bulbs in your home to their LED or CFL counterparts yield more long-term value than spending the money on the ability to produce the power those original bulbs consumed. Likewise, our government needs to quit pretending it actually needs money and cut spending. The TSA and middle-east war machines are the first places I'd start with.
    • mwfunk 13y ago
      "Likewise, our government needs to quit pretending it actually needs money and cut spending. The TSA and middle-east war machines are the first places I'd start with." Absolutely, but those things are a drop in the bucket relatively speaking and aren't systemic budget problems. By far the biggest culprits are Medicare/Medicaid and the Bush tax cuts, but neither party has the collective will to do anything about them. It's not totally their fault, either- it's the nature of the political system and the level of voter awareness. Anyone who started seriously gunning for any of those things would get voted out at the earliest opportunity, or at least that's their perception. It's a profoundly messed up situation.
• shitgoose 13y ago
  - mt gox and BTC generally volume is miniscule, nowhere near to accommodate money laundering - cartels probably make mt gox's monthly volume in one hour - 'dirty money': is it cash or bank account? i presume cash. how will you sent million of $$ to mt gox? fedex a suitcase? how mt gox will deposit million $$ cash into their back account? good luck with that - BTC transactions are public (see blockchain faq); tracing significant amounts of BTC entering and leaving mx gox is a matter of technicality - etc
  • mehwoot 13y ago
    Mtgox monthly volume from bitcoincharts.com: $454,693,733 USD. I'd be impressed at any cartel making $454 million in an hour!!
    • rdl 13y ago
      What matters for ML/AML is money going from external accounts into MtGox. I do not believe that is $454mm/mo. A lot of the Bitcoin/Dollar stuff is internal to MtGox and is essentially daytrading, which is why you have crazy hundred-trillion dollar numbers on the F/X markets, too.
      • mehwoot 13y ago
        Yeah, I know. But it isn't insignificant and I can't believe that there aren't people with a few million dollars who want to launder it, and would do so if the service kept existing (or maybe already do). Isn't the daily limit for reporting something like $10,000? There is clearly far in excess of that amount of money flowing through mtgox in transactions, so surely the possibility of money laundering is something the authorities would consider.
        • rdl 13y ago
          It is insignificant for anyone not already using Bitcoin and using Silk Road. (or, a nerd pot or RC dealer who just likes the idea of bitcoin) There are many many opportunities for money laundering which are cheaper/easier/more stable than MtGox. I personally haven't had to worry so much about AML regulations since I was last seriously involved in digital payments around 2000, but while a lot of the easier routes to accept USD cash and move it out of the US have been addressed, there are still a lot of lower hanging vectors. The main ML vector would be localbitcoin and other person to person cash exchanges, and they go in the wrong direction (generally people buying bitcoin and GIVING you cash). I'd bet the total volume of bitcoins you could buy for physical cash is less than $5mm/yr/person right now, without a seriously high profile. And probably way less. So, less than would comfortably fit in a bag in your trunk. For domestic stuff (like a pot grow in Humboldt and selling to NYC), shipping bulk currency back and forth is probably fine. SR is a threat to narcotics control regimes, and it's possible there are other issues with anonymous payments through Bitcoin today, but it's not a high volume channel of going from USD physical currency in the USA to any kind of useful placement.
• ry0ohki 13y ago
  Shouldn't it be the FBI or DOJ then, not DHS?
  • declan 13y ago
    DHS typically takes the lead on money laundering investigations. To unpack the acronyms: that would be HSI, part of ICE, which in turn is part of DHS.
• wildgift 13y ago
  That's not how laundering works. MtGox is tracking all the transactions, and will work with the police. There are laundering services that will take your money, then send it to a recipient in dribs and drabs over time. They basically say they won't work with police. Dwolla was probably stopped because there's some regulation regarding converting money between currencies.
• rms 13y ago
  It seems like it should be a reason for DHS to force Mt. Gox to share information about their customers and agree to help DHS prevent money laundering, but shutting things down seems like an overreach that will likely be temporary.
• mattmaroon 13y ago
  That is not how money laundering works. The whole point is to provide an ostensibly clean source of the revenue. If you must first deposit the money into something traceable (a bank presumably, since Mt Gox probably doesn't take cash) your cover is blown. Also converting it to bitcoin and back again does nothing at all.
• runeks 13y ago
  Mt. Gox has anti-money laundering policies. They have a withdrawal limit of $10,000 per month for non-verified accounts, this is utterly useless for laundering money by any serious actor. I feel fairly certain claiming that you can launder $10,000/mo. a lot easier, and more privately, than by going through Mt. Gox.