allegations of bitcoin being used for untraceable money laundering [LWN.net]

allegations of bitcoin being used for untraceable money laundering

Posted Jan 12, 2018 23:01 UTC (Fri) by Cyberax (✭ supporter ✭, #52523)
In reply to: allegations of bitcoin being used for untraceable money laundering by Garak
Parent article: Welcome to 2018

"You're holding it wrong" (tm)

Look at exchanges. You basically put your money into an exchange's wallet, do some trades between alt-currencies and get back a fresh new Bitcoin wallet. Law enforcement will have to request logs from the exchange to trace the funds (good luck with it, yeah).

Many exchanges also provide helpful trading APIs so you can even automate this process, chaining several of them together.

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allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 0:45 UTC (Sat) by Garak (guest, #99377) [Link] (16 responses)

"Law enforcement will have to request logs from the exchange to trace the funds"

The Horror. The Horror. Next thing you know, we'll be forcing the donut patrol to stand up and walk across the street instead of hacking across the street from the comfort of their chair.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 4:59 UTC (Sat) by Cyberax (✭ supporter ✭, #52523) [Link] (15 responses)

This is not "walking across the street", this is "climbing Everest". Some of the exchanges might not have a legal address at all, some might be registered in China. Good luck getting the logs.

The situation used to be similar in classic banking, but putting pressure on real banks is easy because they have to be a part of the SWIFT network and they have to have correspondent accounts in major banks. Eventually the most egregious "washing machine" banks were forced to fix their behavior.

With Bitcoin one doesn't need any government registration to open a money laundry. And this is not a theory, there are tons of them operating right now.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 7:52 UTC (Sat) by Garak (guest, #99377) [Link] (14 responses)

"The situation used to be similar in classic banking, but putting pressure on real banks is easy because they have to be a part of the SWIFT network"

Except perhaps(?) for banks that are willing to engage in criminal money laundering, and choose not to be part of any government mandated network? I don't quite yet (but perhaps i haven't thought about it enough) see how Bitcoin is the true enabler of the moneylaundering scenarios you describe. Please try to walk me through the details, illustrating a few common examples of historical non-bitcoin based moneylaundering techniques, as well as bitcoin ones.

Yeah, thinking about having a foreign bank criminally cooperating, I can't see that using Bitcoin makes anything easier or more hidden from the FBI/IRS. At some point, the supposedly clean money needs to end up in a U.S. bank. Whether it came from a fly-by-night foreign bitcoin exchange, or a fly-by-night foreign bank or entity posing as a foreign bank, doesn't seem to fundamentally change the equation AFAICT??

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 8:08 UTC (Sat) by Garak (guest, #99377) [Link]

Or perhaps another angle to try to suss out the heart of the issue would be to compare any scenario you might think of, to an alternate using physical gold, instead of bitcoins. Sure, there may be increased shipping fees, but lets presume that is not a burdensome enough overhead to worry about, as the real optimization targeted is ability to not to have a greater chance of being arrested for the moneylaundering and/or other crimes.

I.e. what is it about the gold version of the scenario, compared to bitcoin, that makes it easier for the authorities to catch the bad guys?

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 8:54 UTC (Sat) by Cyberax (✭ supporter ✭, #52523) [Link] (12 responses)

> Except perhaps(?) for banks that are willing to engage in criminal money laundering, and choose not to be part of any government mandated network?
A bank that is not connected to the SWIFT network will be rather useless, since it won't be able to accept wire transfers. It'll be limited to cash operations only.

> I don't quite yet (but perhaps i haven't thought about it enough) see how Bitcoin is the true enabler of the moneylaundering scenarios you describe. Please try to walk me through the details, illustrating a few common examples of historical non-bitcoin based moneylaundering techniques, as well as bitcoin ones.
It's quite easy. Basically, a bank is used as an intermediary for payments between fictitious companies, registered with fake documents. This is usually made possible by (usually intentionally) lax due diligence from the bank's side.

So when the law enforcement comes, they simply are not able to find who made payments and who are the ultimate beneficiaries of the fake companies.

Example: http://eng.lsm.lv/article/economy/economy/latvian-banks-w...

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 9:21 UTC (Sat) by Garak (guest, #99377) [Link] (11 responses)

"It'll be limited to cash operations only."

And how is that a problem(ic significant limitation) in the given context? It seems to me the only fundamental difference between cash, gold, and bitcoin as far as the situation with the criminals and authorities is concerned, is that the criminals have to pay less money to ship fewer kilograms of mass across national boundaries. So it benefits the criminals, but only as a small shipping overhead cost. Not as a cost of being more or less able to evade detection and apprehension by authorities. However I keep seeing implications that this fundamentally is about something different than shipping costs of gold or paper currency.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 23:36 UTC (Sat) by Cyberax (✭ supporter ✭, #52523) [Link]

You can not easily ship large amount of currency between countries. That's also why "laundromat" banks are now mostly extinct.

With Bitcoin trans-border transactions are easy. You can have a "washing machine" exchange in Peru that is doing laundry for gangsters in Croatia buying drugs from Afghanistan. With pretty much zero chances for the law enforcement to track monetary flows, as you don't need anything but a server to set up a new exchange.

Heck, there are even "exchange goes out of business" sureties that use Etherum now.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 17, 2018 14:11 UTC (Wed) by mstone_ (subscriber, #66309) [Link] (9 responses)

I guarantee that if you try to board a commercial flight with $100k worth of gold, questions will be asked.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 17, 2018 22:11 UTC (Wed) by edgewood (subscriber, #1123) [Link] (8 responses)

Current price of gold is $43/gram. Let's call that $40 to be conservative and make the math easy. So $100,000 in gold is 2.5 kilograms, a little over 5.5 pounds.

Gold is 19.3 grams per cubic centimeter, so 2.5 kilos of gold occupies a little less than 130 cubic centimeters. Therefore $100k of gold fits into a box a little smaller than 7.2 cm on both sides and 2.54 cm deep (less than 3 inches on a side and an inch deep).

If I were working for Dr Evil and was tasked with commercially transporting gold, I'd want to do some testing on what gold looked like on an Xray machine vs aluminum or steel, but feel fairly confident I could hide that small of an amount of material from anything less than a disassembly inspection.

Or just charter a private jet and take a million or two in a suitcase.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 17, 2018 22:41 UTC (Wed) by farnz (subscriber, #17727) [Link]

Gold appears opaque on an airport x-ray, and opaque blocks get your luggage opened and hand-checked - as would (e.g.) a gold-lined suitcase. Your box is big enough to be worth a manual check, and most countries (USA included) require you to declare high value items if you're crossing an international border, which would cover your gold box.

Fundamentally, the state is well aware of the risks of gold smuggling, and already knows how to catch it for any commercially viable amount - you'd have to carry under $10k at a time to even have a chance of slipping the net.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 17, 2018 22:49 UTC (Wed) by karkhaz (subscriber, #99844) [Link] (6 responses)

Gold is totally opaque to x-rays, which is very unusual, so it appears completely black on airport scanners. Thus, I hope you're not flying to/from the US, lest you end up dealing with TSA agents of the same breed that held up a guy for bringing his Nobel Prize medal through.

http://www.telegraph.co.uk/news/worldnews/northamerica/us...

> ‘What’s it made out of?’ I said, ‘gold.’ And they’re like, ‘Uhhhh. Who gave this to you?’ ‘The King of Sweden.’

allegations of bitcoin being used for untraceable money laundering

Posted Jan 17, 2018 23:19 UTC (Wed) by nybble41 (subscriber, #55106) [Link] (4 responses)

> Gold is totally opaque to x-rays, which is very unusual, so it appears completely black on airport scanners.

Solid gold, sure. But what about a wad of gold thread, or a gold-based aerogel, or thin perforated plates? One of gold's useful properties is the wide range of shapes it can be formed into, and at least some of those shapes should allow some x-rays through—perhaps enough to make it look less suspicious on the scanner.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 18, 2018 0:35 UTC (Thu) by andresfreund (subscriber, #69562) [Link]

I think it'd still show up. But it seems to be easy enough to "hide" it along the structural support of your carry on and such.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 18, 2018 1:07 UTC (Thu) by karkhaz (subscriber, #99844) [Link] (2 responses)

Which brings us very neatly to the other witty anecdote about mischief with Nobel Prizes: György de Hevesy dissolved a pair of Nobel Prize medals into a flask of aqua regia so that they wouldn't be stolen by the Nazis, and then precipitated the gold out of the solution after the War so that the Nobel committee could re-cast the medals.

https://en.wikipedia.org/wiki/George_de_Hevesy#World_War_...

I suppose you could try similar thing if you could find a shampoo bottle or some other inconspicuous container, that would not itself be dissolved by aqua regia---as long as you remember not to bathe in it after you land.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 18, 2018 1:11 UTC (Thu) by sfeam (subscriber, #2841) [Link]

It would still be opaque to X-rays

allegations of bitcoin being used for untraceable money laundering

Posted Jan 18, 2018 2:17 UTC (Thu) by anselm (subscriber, #2796) [Link]

This would probably fall foul of the ban on large amounts of liquids that is in force for hand luggage. That is, if you disregard the fact that aqua regia is bright orange in colour and emits fumes, which would make it very conspicuous anywhere outside of a chemistry lab (you could probably put an Irn-Bru label on the bottle to make the colour believable but you should make sure no Scots get near – they might drink from it).

No airline will let you take dangerous chemicals on board, anyway. And it's not really good for the gold, either.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 18, 2018 4:54 UTC (Thu) by Cyberax (✭ supporter ✭, #52523) [Link]

So alloy it with titanium or aluminum and use it to cast one of the "metallic" luggage bags: https://www.amazon.com/Goplus-Aluminum-Suitcase-Briefcase...

Extra X-Ray thickness will not be noticeable because gold will be spread over a large surface area. Extra weight will also be hard to detect.

It's like you guys never smuggled gold, rare earths and plutonium into the United States.