8 ms·

How to Launder Billions of Digital Dollars

51 points by kitcar 13y ago

ck2 13y ago
Ah they now have an angle to go after bitcoin.
- keyme 13y ago
  Difference is, there is no one behind bitcoin. No one to arrest. The only "real people" "behind" it are the Exchanges. However, they(usually) hold proper documentation for transactions and comply with the law fully.
  - dragonwriter 13y ago
    > Difference is, there is no one behind bitcoin. No one to arrest. The only "real people" "behind" it are the Exchanges. No, the real people behind it are the miners. You know, the people that create bitcoins and validate every bitcoin transaction?
    - ferdo 13y ago
      Let them bust a few miners. More will take their place.
      - dwaltrip 13y ago
        If miners are ever prosecuted, then that is a pretty big signal that the U.S. has completely lost its shit. Submitting the outputs of hash functions to a distribitued p2p network sounds like extremely basic free speech to me. As a young person with no wife/kids and plenty of tech job prospects, I would probably start researching moving abroad.
  - dublinben 13y ago
    That's a pretty new situation, and not nearly as certain as you make it sound.
- gwern 13y ago
  Incidentally, Preet Bharara is also in charge of the Ross Ulbricht trial (the NYC one). So LR is wrapping up just in time to focus on SR.
- peteretep 13y ago
  Bitcoin makes money transfer easier to monitor. Why do they want to go after Bitcoin?
driverdan 13y ago
> LR's most basic criminal offense is simple: It didn't know or want to know the identities of its clients. They allowed people to transfer big sums of money without checking their identification. That this is a crime disgusts me. I should be able to do whatever I want with my money without anyone knowing who I am. That's how it worked up to the past century.
- rayiner 13y ago
  The crime isn't transferring the money. The law applies to the payment processor, who profits from often criminal activity.
  - aric 13y ago
    Operating a medium of trade for profit that others use consensually shouldn't be illegal. The act of people trading value consensually also shouldn't be illegal. The parent post is likely affirming both of these positions.
    - rayiner 13y ago
      You can make that argument, but there are two different positions to argue, and the former position is harder to justify than the latter.
- Smirnoff 13y ago
  Umm, no, you shouldn't be able to do everything you want with your money. A payment processor has a fiduciary duty for its customers. So if you are sending $100,000 to Nigeria to pay for puppies, the Payment processor better stop this transaction to protect you form being scammed. Now maybe you are smart and savvy enough to be not scammed but an average joe isn't. There are many rules in the payment industry but KYC (Know Your Customer) is pretty high up in the Payment Processor's Bible. From the article it seems that Lib.Res. didn't just commit minor sins; it was designed to disregard the bible all together.
  - 13y ago
strick 13y ago
Many of the largest banks in the world launder much greater sums and get away with the lightest slap on the wrist. Wherever money changes hands you will find ethically challenged people making a profit. Gangster Bankers: Too Big to Jail http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214 http://www.rollingstone.com/politics/news/gangster-bankers-t...
- billmalarky 13y ago
  This is what I was thinking. Sounds pretty much like big banking as usual.
- imnoexpertbut 13y ago
  Could this happen in Canada?
- cynicalkane 13y ago
  I think https://en.wikipedia.org/wiki/HSBC#Money_laundering https://en.wikipedia.org/wiki/HSBC#Money_laundering might be more interesting to a hacker. As I've discussed previously[1], Taibbi is not noted for being a reliable systems expert on the international banking system. The simple facts are damning enough without layers of editorializing cruft from an unreliable source. For example, consider the assertion that people need to go to jail for fraud in the HSBC case. Most of these bad things are instances of the bank systemically not monitoring transactions closely enough. You can't pick individuals and throw them in jail for responding to bad institutional incentives--you have to pick out a specific criminal act that's punishable by jail time and pin it on someone, beyond reasonable doubt. Truth be told, if you start doing this in an equitable fashion with the goal of "punishing" bad banking behavior, you'll target a lot of lower-middle-class mortgage brokers from the 2008 mortgage crisis who knowingly committed fraud, which seems like an undesirable result. Or maybe you could pick a few politically convenient scapegoats, but that would be unjust in a different way. That's why we fine banks billions of dollars instead. [1] https://news.ycombinator.com/item?id=5616805 https://news.ycombinator.com/item?id=5616805
  - criley2 13y ago
TomGullen 13y ago
Seems like Liberty Reserve just wasn't big enough to protect itself. If they had been bank sized they could just pay a few fines every now and then and continue to operate: http://www.bbc.co.uk/news/business-18880269 http://www.bbc.co.uk/news/business-18880269
- at-fates-hands 13y ago
  Banks are also heavily regulated. Liberty Reserve was attempting to act like a bank without all the government regulations - which is highly illegal for several reasons, one of which just happened to be money laundering.
coldcode 13y ago
All you need is a bank, no detergent necessary.
- finnw 13y ago
  Detergent is optional, but it sometimes helps. https://www.schneier.com/blog/archives/2013/02/tide_becomes_dr.html https://www.schneier.com/blog/archives/2013/02/tide_becomes_...
smurfy 13y ago
Dang, LR has been big in the underground communities forever. Bouncing money between international Paypal accounts and then through LR has always been the way I've heard of it being done. It will be interesting to see what follows it. Also curious if they will try to prosecute any of the LR users they are able to track down.
fsckin 13y ago
>[...]put things like "your share of the cashout," "for atm skimming," and "for the cocaine," into the memo field (where you'd put "Rent" on a check) The memo field is not terribly relevant. I've jokingly written things very similar to these examples on real bank checks and never had a problem with someone else cashing or depositing them.
- gghootch 13y ago
  I went to the DPRK (North Korea) past summer. Beforehand we met with a guy who went there a year before. In the payment memo field for his trip he wrote something akin to 'Payment for North Korea'. The bank cancelled his wire transfer and nearly cancelled his account. In the end they only barred him from making other payments to that bank account number. My guess is everything is monitored but red flags only go off when suspicious activity is frequent or serious enough.
anan0s 13y ago
go buy bitcoins ;-)
mindslight 13y ago
"Money Laundering" is an oxymoron. The whole concept of money requires that one unit is an equal store of value no matter who possesses it or how it was obtained. Adding conditions on exchanging destroys independent/classless power by making the value of one's liquid assets dependent on their political connections. FWIW this is something Bitcoin didn't bother to get right, and will be its downfall, starting as soon as brick and mortar businesses are required to register their wallet identities. Liberty Reserve isn't the first competitor to USD that USG has shut down, and it won't be the last. It's unfortunate that when economics finally prevails against these goons, the market correction will probably cause the collapse of the USA.

51 points by kitcar 13y ago

ck2 13y ago

Ah they now have an angle to go after bitcoin.

keyme 13y ago
Difference is, there is no one behind bitcoin. No one to arrest. The only "real people" "behind" it are the Exchanges. However, they(usually) hold proper documentation for transactions and comply with the law fully.
- dragonwriter 13y ago
  > Difference is, there is no one behind bitcoin. No one to arrest. The only "real people" "behind" it are the Exchanges. No, the real people behind it are the miners. You know, the people that create bitcoins and validate every bitcoin transaction?
  - ferdo 13y ago
    Let them bust a few miners. More will take their place.
    - dwaltrip 13y ago
      If miners are ever prosecuted, then that is a pretty big signal that the U.S. has completely lost its shit. Submitting the outputs of hash functions to a distribitued p2p network sounds like extremely basic free speech to me. As a young person with no wife/kids and plenty of tech job prospects, I would probably start researching moving abroad.
- dublinben 13y ago
  That's a pretty new situation, and not nearly as certain as you make it sound.
gwern 13y ago
Incidentally, Preet Bharara is also in charge of the Ross Ulbricht trial (the NYC one). So LR is wrapping up just in time to focus on SR.
peteretep 13y ago
Bitcoin makes money transfer easier to monitor. Why do they want to go after Bitcoin?

driverdan 13y ago

> LR's most basic criminal offense is simple: It didn't know or want to know the identities of its clients. They allowed people to transfer big sums of money without checking their identification. That this is a crime disgusts me. I should be able to do whatever I want with my money without anyone knowing who I am. That's how it worked up to the past century.

rayiner 13y ago
The crime isn't transferring the money. The law applies to the payment processor, who profits from often criminal activity.
- aric 13y ago
  Operating a medium of trade for profit that others use consensually shouldn't be illegal. The act of people trading value consensually also shouldn't be illegal. The parent post is likely affirming both of these positions.
  - rayiner 13y ago
    You can make that argument, but there are two different positions to argue, and the former position is harder to justify than the latter.
Smirnoff 13y ago
Umm, no, you shouldn't be able to do everything you want with your money. A payment processor has a fiduciary duty for its customers. So if you are sending $100,000 to Nigeria to pay for puppies, the Payment processor better stop this transaction to protect you form being scammed. Now maybe you are smart and savvy enough to be not scammed but an average joe isn't. There are many rules in the payment industry but KYC (Know Your Customer) is pretty high up in the Payment Processor's Bible. From the article it seems that Lib.Res. didn't just commit minor sins; it was designed to disregard the bible all together.
- 13y ago

strick 13y ago

Many of the largest banks in the world launder much greater sums and get away with the lightest slap on the wrist. Wherever money changes hands you will find ethically challenged people making a profit. Gangster Bankers: Too Big to Jail http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214 http://www.rollingstone.com/politics/news/gangster-bankers-t...

billmalarky 13y ago
This is what I was thinking. Sounds pretty much like big banking as usual.
imnoexpertbut 13y ago
Could this happen in Canada?
cynicalkane 13y ago
I think https://en.wikipedia.org/wiki/HSBC#Money_laundering https://en.wikipedia.org/wiki/HSBC#Money_laundering might be more interesting to a hacker. As I've discussed previously[1], Taibbi is not noted for being a reliable systems expert on the international banking system. The simple facts are damning enough without layers of editorializing cruft from an unreliable source. For example, consider the assertion that people need to go to jail for fraud in the HSBC case. Most of these bad things are instances of the bank systemically not monitoring transactions closely enough. You can't pick individuals and throw them in jail for responding to bad institutional incentives--you have to pick out a specific criminal act that's punishable by jail time and pin it on someone, beyond reasonable doubt. Truth be told, if you start doing this in an equitable fashion with the goal of "punishing" bad banking behavior, you'll target a lot of lower-middle-class mortgage brokers from the 2008 mortgage crisis who knowingly committed fraud, which seems like an undesirable result. Or maybe you could pick a few politically convenient scapegoats, but that would be unjust in a different way. That's why we fine banks billions of dollars instead. [1] https://news.ycombinator.com/item?id=5616805 https://news.ycombinator.com/item?id=5616805
- criley2 13y ago

TomGullen 13y ago

Seems like Liberty Reserve just wasn't big enough to protect itself. If they had been bank sized they could just pay a few fines every now and then and continue to operate: http://www.bbc.co.uk/news/business-18880269 http://www.bbc.co.uk/news/business-18880269

at-fates-hands 13y ago
Banks are also heavily regulated. Liberty Reserve was attempting to act like a bank without all the government regulations - which is highly illegal for several reasons, one of which just happened to be money laundering.

coldcode 13y ago

All you need is a bank, no detergent necessary.

finnw 13y ago
Detergent is optional, but it sometimes helps. https://www.schneier.com/blog/archives/2013/02/tide_becomes_dr.html https://www.schneier.com/blog/archives/2013/02/tide_becomes_...

smurfy 13y ago

Dang, LR has been big in the underground communities forever. Bouncing money between international Paypal accounts and then through LR has always been the way I've heard of it being done. It will be interesting to see what follows it. Also curious if they will try to prosecute any of the LR users they are able to track down.

fsckin 13y ago

>[...]put things like "your share of the cashout," "for atm skimming," and "for the cocaine," into the memo field (where you'd put "Rent" on a check) The memo field is not terribly relevant. I've jokingly written things very similar to these examples on real bank checks and never had a problem with someone else cashing or depositing them.

gghootch 13y ago
I went to the DPRK (North Korea) past summer. Beforehand we met with a guy who went there a year before. In the payment memo field for his trip he wrote something akin to 'Payment for North Korea'. The bank cancelled his wire transfer and nearly cancelled his account. In the end they only barred him from making other payments to that bank account number. My guess is everything is monitored but red flags only go off when suspicious activity is frequent or serious enough.

anan0s 13y ago

go buy bitcoins ;-)

mindslight 13y ago

"Money Laundering" is an oxymoron. The whole concept of money requires that one unit is an equal store of value no matter who possesses it or how it was obtained. Adding conditions on exchanging destroys independent/classless power by making the value of one's liquid assets dependent on their political connections. FWIW this is something Bitcoin didn't bother to get right, and will be its downfall, starting as soon as brick and mortar businesses are required to register their wallet identities. Liberty Reserve isn't the first competitor to USD that USG has shut down, and it won't be the last. It's unfortunate that when economics finally prevails against these goons, the market correction will probably cause the collapse of the USA.