Money Laundering

[Shagnasty]

I keep hearing how btc is being used to launder money, but isn't money laundering where you legitimize illegal money? I mean, you have to buy the coins and then convert it back to cash. If you are making large purchases that are suspicious to the IRS, then how will BTC explain this or make it legal.

[fairgo]

also...sometimes clean money turns dirty when you deal with some people directly...

bitcoin allows your transaction to be hidden so you wont be connected to the person your paying (i.e. your clean money remains clean)

[Shagnasty]

I guess, but I don't think the majority of people are smart enough to really make their money look legit through laundering. Even with BTC. I always thought if you make enough illegal money you could open up a small business like a nail salon or something and then just cook the books or something.

[droledabin]

To do wire transfers away from MtGox, you'll have to get verified by the exchanger first(copy of id,utility bills, stamped bank stuff, etc). So it's not that easy to hide the link between you and the money, if you are using an exchange service.


Btw, i'm a verified user at MtGox,Okpay and others, i usually take a 15% commission if you want to withdrawal something through my account/s. contact in pm.  

*sarcasm.

[fuzzymuffin]

droledabin are you sure? I've never used mtgox but I'm pretty sure I read in their 'Account Statuses' section that for $1000/day $10000/month there was no verification required, unless you use dwolla?

[droledabin]

That's for withdrawals in electronic currencies only. If you want to do wire or dwolla withdrawal, you'll have to get verified.

[fuzzymuffin]

I guess they need to update this then https://support.mtgox.com/entries/20919111-aml-account-statuses !!

[droledabin]

Ok, seems only to apply to europe:

https://support.mtgox.com/entries/20490576-withdrawals-and-deposits

Europe/SEPA Transfers (EUR)
[...]
In order to make Euro deposits you need to have a "verified" or "trusted" account status. Please visit https://mtgox.com/forms/verification to apply.
[...]
 In order to make Euro withdrawals you need to have a "verified" or "trusted" account status. Please visit https://mtgox.com/forms/verification to apply.

[payb.tc]

I keep hearing how btc is being used to launder money, but isn't money laundering where you legitimize illegal money? I mean, you have to buy the coins and then convert it back to cash. If you are making large purchases that are suspicious to the IRS, then how will BTC explain this or make it legal.

except you don't necessarily have to buy the coins, because bitcoin is money.

someone might accept bitcoins directly for illegal goods instead of other types of money.

[Shagnasty]

except you don't necessarily have to buy the coins, because bitcoin is money.

someone might accept bitcoins directly for illegal goods instead of other types of money.

Yeah but is that really laundering?

[Lethos]

Yes, I suppose you could, just like with any currency system or banking system where money gets pushed and pulled into an area where those banks find it hard to track where it went. It might work for a while, but given enough time, make no doubt it is traceable while your still leaving a trail behind.
You can stay quiet anom in bitcoin, but I wouldn't say you can't have you transaction traced, after all that part is very visible.

[Stephen Gornick]

then how will BTC explain this or make it legal.

Are you asking how a technology protocol will explain something?

Bitcoin is not a company, it is not a bank, it is not an organization.  It is a protocol.  There is a Bitcoin.org client what talks on that protocol.  There are others that do this as well.

If there are transactions that an agency wishes to look at, all bitcoin transactions that cross the network are collected in each node.  So the data is there, it just doesn't give much info.   And some transactions occur from hosted (shared) wallets, so there is less information available.  And for even better privacy, there are mixing services which blur the trail even further.

But cash also has the characteristic of not revealing a whole lot of information.  When you receive cash from someone, how does an agency know about that?  They don't.  You have the ability to transact in privacy with cash.  And life continues even with that situation.

[Dabs]

To launder money, you create an offshore company or corporation, you create a corporation in your own country, then your corp borrows or gets an investment from the other corp (which you have no intention to pay) ... Then you make yourself a highly paid executive in your own corporation and you get a salary. Your money is now "clean."

No need to go through bitcoin or any other currency.

For small time people, just shop normally with credit cards and pay those cards with the dirty cash.

You could also regularly (daily) deposit small cash amounts to your bank account at one branch, then withdraw the cash from another branch or ATM. The daily limits of these ATM machines are quite high.

[DannyHamilton]

Are you asking how a technology protocol will explain something? . . .

I don't think you understood what the OP was asking.

[Stephen Gornick]

Are you asking how a technology protocol will explain something? . . .

I don't think you understood what the OP was asking.

I've re-read it and still don't think I do.  Can you point me in the right direction?

[DannyHamilton]

Are you asking how a technology protocol will explain something? . . .

I don't think you understood what the OP was asking.

I've re-read it and still don't think I do.  Can you point me in the right direction?

He's not asking how a protocol will explain something.

He has heard from others that people use bitcoin to "launder" money.  In other words, he has heard that it is possible to hide the original source of a sum of money by using some process involving bitcoin. So the question being asked isn't how a protocol explains something, but rather how a protocol can be used to create an explanation for something.

The question "how will BTC explain this or make it legal", seems to be something along the lines of:

What process involving bitcoin can be used to create a false explanation for the receipt of a large sum of cash? If the original source of the cash was illegal, how can that process involving bitcoin hide the illegal source and create a legal explanation for the funds?

[Stephen Gornick]

What process involving bitcoin can be used to create a false explanation for the receipt of a large sum of cash? If the original source of the cash was illegal, how can that process involving bitcoin hide the illegal source and create a legal explanation for the funds?

Ok, I see now.

Bitcoin wasn't built for the purpose of money laundering.  It has properties that put it at a disadvantage for use in money laundering (e.g., all transactions in the blockchain are traceable by the public).

But if someone were to use the properties of bitcoin to their advantage, that too is likely possible.  Let's say a party's books show artwork that was sold for $10K of cash.  However the value of the artwork was really only $2K and the buyer received bitcoins from the seller, as part of the deal, worth $8K.   It would be hard for any external party to know the actual value of the artwork, and the $10K transaction might then be left unchallenged -- especially as the bitcoins could have been sent anonymously.    

But just like with cash transactions, there are two or more parties involved, and there are clues that will reveal intentions -- especially when larger amounts are involved.  Bitcoin probably doesn't change things much.  The fact that no bitcoins stolen during the hackings or wallet thefts so far is likely due to no concentrated efforts occurring to actually catch the perpetrators.

[moni3z]

There aren't enough bitcoins to satisfy 1% of the daily money laundering that goes on worldwide. If anybody's laundering money with bitcoins they are small time and avoiding a few k of tax, not like HSBC Mexico laundering billions in cartel profits for years before anybody noticed

[Shagnasty]

Thanks for all the responses. I was asking about how BTC can legitimize illegal actions and it doesn't. I was just confused because you always here how it can be used for money laundering, which I thought was making dirty money clean for tax purposes. I guess it could be used to make dirty purchases anonymously, but it won't explain the extra 20 grand you have in the bank.

[moni3z]

Thanks for all the responses. I was asking about how BTC can legitimize illegal actions and it doesn't. I was just confused because you always here how it can be used for money laundering, which I thought was making dirty money clean for tax purposes. I guess it could be used to make dirty purchases anonymously, but it won't explain the extra 20 grand you have in the bank.

You could use bitcoins to launder a small criminal enterprise if you were creative. Create your own p2p cash in mail or in person exchange to avoid banks, buy gold with btc, or start a fake hosting company and claim the dirty bitcoins as customer funds and clean them into your bank account. Not like there's a central authority they can subpoena to find where your so-called customer funds originated from. Especially if you tumbled them and paid yourself out with time delay to further blur the lines