And it shall come to pass

(I can’t help noticing that my post titles recently have had something of a Biblical bent to them but then, rather like Shakespeare, God gets all the best lines.)

Many moons ago, people started asking me about the money laundering implications/opportunities/vulnerabilities of virtual currencies.  I did a bit of reading, I put together a few slides – but the ultimate message was “wait and see”.  So now we have waited, and we have seen.

Like many things in the e-world, things moved pretty swiftly with Liberty Reserve.  On 27 May 2013 the BBC announced that the digital currency service had been “forced offline” after its founder Arthur Budovsky was arrested in Spain on suspicion of money laundering.  The next day, the US authorities declared that Liberty Reserve was at the centre of “the largest international money laundering prosecution in history” and that it was suspected of laundering US$6 billion of criminal cash.  And on the morning of 29 May, Radio 4’s Today programme carried an item to warm the heart of any MLRO: is there anything more lovely than hearing the divine James Naughtie discuss due diligence and “ill-gotten gains”?

Jim also raised the concern about jurisdictional responsibility; after all, this is a Costa Rican company run by a Costa Rican and a Russian, with customers all over the world.  (Eagle-eyed readers will spot that the BBC filed the first two stories under their “Technology” heading and the third under “World news / US & Canada”, so we know that their view is!)  However, US officials were able to use provisions under section 311 of the USA PATRIOT Act, which grants the Treasury Secretary authority to take “special measures” against foreign entities suspected of money laundering, to halt the activities of Liberty Reserve and other financial institutions with whom they conducted business.  This is the first time that section 311 has been used to prosecute a virtual currency provider – but it will almost certainly not be the last.  As Preet Bharara, the US attorney in Manhattan, said at his press conference: “The global enforcement action we announce today is an important step toward reining in the ‘Wild West’ of illicit Internet banking.  As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the earth.”

This entry was posted in AML, Money laundering and tagged , , , , , , , . Bookmark the permalink.

2 Responses to And it shall come to pass

  1. Keith Hood says:

    No doubt the falllout from this will be interesting. Wonder what percentage of the overall clients will be legitimate customers who step forward to register a claim?

  2. Keith, If I were legitimate (if you see what I mean!), I’m not sure that I would choose to move my money through a Costa Rican firm, run by a Russian, that took my business on the basis on a username and email address – but maybe I’m just too AML-ish for my own good.
    It seems that Mr Budovsky fell madly in love with a Costa Rican lady he saw selling food from a cart – and just had to marry her: http://www.guardian.co.uk/world/2013/may/30/liberty-reserve-budovsky-marriage
    Ain’t love grand?
    Best wishes from Susan

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