Is "money laundering" really that big of a deal?

[BitcoinAshley]

If a system were ever implemented that allowed exchanges/businesses to refuse to accept coins because at some point in the past they were tainted I would never again accept btc for payment. I would sell all that I have that are not tainted and never use Bitcoin again. I seriously doubt I'm alone in that regard. Could you imagine the Dollar surviving if you could have your money confiscated because some kid bought a bag of pot five years ago with the money in your pocket!

I agree. A widely implemented taint system would be the end of Bitcoin for me.

Most people don't understand 'taint'.  Or 'tarnish' which was probably invented to help understand, but made things worse.  It is perfectly possible to compute the percentage of a transaction which had a 'bad' history.  So, your idea to ruin everything would only have the effect of ruining everything by a tiny fraction.  And you your $1 might be worth $.95 due to the 5 year old pot purchase.  Better than $0 though, right? And we solve a lot of crime after all.

The first sign that you are retarded - you assume that we are OK with someone else deciding for us what is "Crime" and what is not crime. In some countries, a pot purchase is a crime, and in some countries, it is not. So now we are going to let the Bitcoin Taint Council/Algorithm determine what is and what is not a "crime?" We've just lost a good majority of Bitcoin's function which is to remove political corruption and control from the money supply. Money is money, not a political tool.

And also it would be difficult to make an algorithm which was able to characterize 'bad'.  For this we need a trusted body consisting at least partially of humans (until great strides are made in AI) to decide how bad is bad.  These people will need compensation as will the infrastructure they operate to perform the calculations and communicate with the rest of the network.

The second sign you are retarded - you assume that there is a universal system of "bad" and "good" and that it is OK to [essentially] render someone's money worthless because an algorithm or "trusted body" (LOL) decides that selling pot is a crime, or transferring money across international borders without declaring it is a crime, or prostitution is a crime, or not reporting income to a government who will use 11% of it to kill people in the middle east... you get the point. This is a law-making body for Bitcoin and nothing more. Good luck convincing people to accept this.

Don't feel bad.  Someone in the audience insisted on making an ass out of himself by not getting it (twice!) in the QA session.

Seems the only person who doesn't get it is you 

It is said to be a 'bad idea'.  It actually works fine.  I've done it.  It seems like a bad idea for the recipient unless he knows what he's doing.  I don't see any real dis-advantages for the person giving up the funds.  I mean, they are assumed to be a total loss by the nature of the transaction.

Again, a "trusted body" is deciding upon the nature of that transaction. When a "trusted body" gets to decide whether or not my coins can be spent because they were received in a pot sale, an assault rifle sale, well, there are other coins; I suppose that's the nature of the free market, right? 

It's so GREAT that y'all have figured out a method to make the Bitcoin WORSE THAN the U.S. dollar! Over 3/4 of US Dollars have cocaine residue but I can still spend them just fine. Just make coins that were used for transactions YOU DON'T AGREE WITH worthless! I'm talking about gray area stuff, by the way... the vast majority of people will agree that assassination markets and child prostitution are "bad" but what about selling guns in places where the gov't bans guns... what about selling drugs in places where it's legal, or places where it's illegal... what if someone operating a prostitution service in a jurisdiction where it is legal, gets his coins mistakenly "TAINTED" because what he is doing is BAD? Will he have to go appeal to the central governing body of bitcoin tainting and fill out forms and hire an attorney and wait 10 months to get his coins removed from the centralized taint list? What if I perform some web design work for Sea Shepherd and the Centralized Bitcoin Taint Organization considers them an "eco-terrorist" organization (after heavy lobbying by the Norwegian government) and freezes the coins they paid me? Now I have to hire a lawyer and appeal to a board or an algorithm to get my coins back, good luck because they are from a "Terorrist organization." Bitcoin Taint Organization gets to decide what groups are terrorist groups and what aren't. Is the Syrian government a terrorist organization worthy of coin taints, or the Syrian Rebel groups, or both, or neither? You seriously think this is a "good idea" and it "works?"

There is absolutely no way to guarantee (1) that the Taint Council's subjective morality won't end up screwing over lots of people, (2) the Taint Council won't taint coins unknowingly received that were used for "illegal" purposes 5 transactions ago (maybe 5 of my coins were from PirateEat40)  (3) the Taint Council won't be corrupt and subject to outside influence from companies, governments, wealthy individuals, etc.

This won't end well for Bitcoin or for anyone who owns bitcoins.

EDIT: This is exactly what Paypal does.

[tvbcof]

Don't feel bad.  Someone in the audience insisted on making an ass out of himself by not getting it (twice!) in the QA session.

Seems the only person who doesn't get it is you 

Is that so?

I don't think that everyone here came to the conclusion that I was personally was advocating 'taint', but rather simply pointing out some observations from the 2013 security round-table and considerations associated with their posture.  And indeed that am so opposed to the implementation of it that was worth my time to formulate a message on the subject.

I was fully aware that there would be a fair number of jackasses who could not see what is to many more clued in readers was pretty obvious.  This is bitcointalk.org after all.  I'm not surprised that you specifically ended up being one of those jackasses.

[TippingPoint]

Bitcoins have a lower occurrence of taint from illegal activities than U.S. currency does.
http://en.wikipedia.org/wiki/Contaminated_currency
"out of every four banknotes, on average more than three are tainted by cocaine or another illicit drug"

I propose that we compile and post a list of tainted $100 bill serial numbers.

The valid currency serial numbers are provided here.
http://www.uspapermoney.info/serials/
although we may need a programmer to extract them from the provided ranges.

Foreign governments, businesses and the public should be warned not to accept this tainted and laundered currency.

In contrast, the vast majority of Bitcoins are as pure as the driven snow.  If anyone is concerned about tainted Bitcoins, just send them to the address in my signature.

[af_newbie]

So essentially, these are monetary crimes. And since the law enforcement cannot solve the crime or catch the "bad guys" they have to lock down the whole monetary system just in case "bad" money makes it through.

You know that is not the reason to crackdown on bitcoin.

If this was true, USD should have been banned long time ago since it is the currency of choice for illegal arms dealers, drug dealers, human smugglers, prostitution ring operators.  Not only in US jurisdictions, but all over the world. You want to buy a gun (or a tank) in Moscow or get an underage Filipino girl, I'm sure USD will be gladly accepted.

 

[tvbcof]

So essentially, these are monetary crimes. And since the law enforcement cannot solve the crime or catch the "bad guys" they have to lock down the whole monetary system just in case "bad" money makes it through.

You know that is not the reason to crackdown on bitcoin.

If this was true, USD should have been banned long time ago since it is the currency of choice for illegal arms dealers, drug dealers, human smugglers, prostitution ring operators.  Not only in US jurisdictions, but all over the world. You want to buy a gun (or a tank) in Moscow or get an underage Filipino girl, I'm sure USD will be gladly accepted.

Careful what you wish for.  I'm sure that there are many who would like to get rid of the USD in it's cash form, and they will be pointing out exactly the same things you do.  Perhaps counter-intuitively, these people are likely clustered in the higher echelons of the US political and financial groupings.

If Bitcoin could be corralled I've little doubt that it would be a much preferable solution than paper $20 bills to 'the powers that be.'  And when one's only realistic option is the use SPV, I've little doubt that Bitcoin can be corralled.  Mix in a tainting system and I'm certain of it.

[cypherdoc]

If a system were ever implemented that allowed exchanges/businesses to refuse to accept coins because at some point in the past they were tainted I would never again accept btc for payment. I would sell all that I have that are not tainted and never use Bitcoin again. I seriously doubt I'm alone in that regard. Could you imagine the Dollar surviving if you could have your money confiscated because some kid bought a bag of pot five years ago with the money in your pocket!

how about this one?

i intentionally send 1 Satoshi's worth of tainted coin to EVERY single address in existence on the blockchain.

Most people don't understand 'taint'.  Or 'tarnish' which was probably invented to help understand, but made things worse.  It is perfectly possible to compute the percentage of a transaction which had a 'bad' history.  So, your idea to ruin everything would only have the effect of ruining everything by a tiny fraction.  And you your $1 might be worth $.95 due to the 5 year old pot purchase.  Better than $0 though, right?  And we solve a lot of crime after all.

And also it would be difficult to make an algorithm which was able to characterize 'bad'.  For this we need a trusted body consisting at least partially of humans (until great strides are made in AI) to decide how bad is bad.  These people will need compensation as will the infrastructure they operate to perform the calculations and communicate with the rest of the network.

Don't feel bad.  Someone in the audience insisted on making an ass out of himself by not getting it (twice!) in the QA session.

---

Speaking of the Q&A, another interesting thing about that session was the suggestion about sending private keys around.  When the round-table figured out what he was saying, they pretty much all turned a few shades more pale.

This tells me that the analysis which is being performed is probably not yet sophisticated enough to overcome that extra degree of freedom.

It is said to be a 'bad idea'.  It actually works fine.  I've done it.  It seems like a bad idea for the recipient unless he knows what he's doing.  I don't see any real dis-advantages for the person giving up the funds.  I mean, they are assumed to be a total loss by the nature of the transaction.

Tx's put all the input Bitcoins into a big pile which they dole out as outputs. There's no concept of particular output corresponding to particular inputs. Bitcoins don't have a serial number that can be traced through the block chain. So yes, while you may know which % of inputs are tainted, you don't know which coins are which when they come out.

[BitcoinAshley]

Is that so?

I don't think that everyone here came to the conclusion that I was personally was advocating 'taint', but rather simply pointing out some observations from the 2013 security round-table and considerations associated with their posture.  And indeed that am so opposed to the implementation of it that was worth my time to formulate a message on the subject.

I was fully aware that there would be a fair number of jackasses who could not see what is to many more clued in readers was pretty obvious.  This is bitcointalk.org after all.  I'm not surprised that you specifically ended up being one of those jackasses.

Oh, I have no problem being one of your 'jackasses.' From your post it seemed that you were advocating taint, for instance, your suggestion that we could "solve a lot of crime" and your implications that morality was objective and it would be preferable to have a governing body decide which uses for bitcoin transactions were just and moral, and which were deserving of paypal account freeze taint.

Even if you were just playing devils advocate, completely in character, and personally you are opposed to taint or any other corruption/centralization of bitcoin, it was still worth the rant, so that others can see my expose of what a terrible idea 'taint' is and how it could never work with bitcoin without rendering the entire protocol useless. We're talking about a massive scale blacklisting of coins used for illegal activities - this isn't even done with the U.S. Dollar!

[Choadmeyer]

Uncle Sam sure seems to think so... but what he doesn't know won't hurt him 

[bbit]

It wouldn't be if the IRS was so up in everyones business.

[porticol]

Uncheck money laundering is a huge deal. It is by and large used for criminal and/or politically motived (IE: terrorism or otherwise) operations. One of the core methods that holds organised crime at bay is the government's ability to constrict their money supply. You can only get so large as an organisation if you do all your transactions in cash.

What is the real evidence that this is true?

As I've noted before, what is the magnitude of terrorist related transactions? And is there any evidence that these AML laws actually inhibit transfers for such people?

I consult to financial institutions in anti-money laundering, so I feel I can speak to this with some knowledge:

Money laundering is a huge deal, but not for terrorism. Terrorist financing is actually different - it's moving legitimate funds for an illegitimate purpose, rather than the other way around - and there is still not an effective scenario to monitor for it. 9/11 they think cost around $20k to execute. The numbers are too small.

The "lazy policing" argument I disagree with: I don't know the numbers, but I'd suspect a large proportion of murder convictions are from people not actually witnessing the murder, but someone found to be disposing of the body, hiding the murder weapon, basically everything that is a result of killing someone. ie the results of the crime, rather than the crime itself.

How money laundering does cause a problem though is it disrupts the economy. For example:

I want to move $20 million to my partner in crime overseas. I can't wire him $1 million without someone seeing that: what I can do, is send him 2000 laptops and charge him a dollar per laptop. He now has an invoice showing he's paid for these laptops, and he can sell the laptops at a reduced price to move them quickly and now has his $1 million. He has also now undercut every other laptop seller in his marketplace. This may put legitimate businesses out of business.
Same goes for any other business propped up by illegitimate funds. They compete with legitimate businesses without valid business models. Depending on the amount of laundering or the size of the community, it can do huge damage.

Legislation in the US however (USA PATRIOT act) was pushed through with an emphasis on terrorism as it was the hot topic (2001). It's generally believed in the industry that this was to cut down on tax evasion (which itself is a crime and you can debate how bad that is for years), but saying that money laundering doesn't cause problems in itself is incorrect.

[anu]

According to the prosecutors, the criminal volume was 6 Billion.

According to http://nakedsecurity.sophos.com/2013/05/30/digital-currency-liberty-reserve-shut-down-by-us-governement/, 13.83% of criminals now use Bitcoin. Such an inflow of money should be observable in the market. It isn't. Therefore the 6 Billion is a number they just pulled from their bottom. Might be that they consider all TX of LR as illegitimate.

[bluemeanie1]

They will attack you wherever you have no means of self-defense.

So we need an anonymous, P2P trading platform, even just as a last resort. I disagree with the narrative in this community that we shouldn't expect to beat government to it, we can cooperate with them as long as it's reasonable and out of our self-interest, but not outright capitulation.

sorry about the repeat link posts, but I recently wrote this paper and it offers a solution to the p2p Exchange Problem.

https://docs.google.com/file/d/0BwUFHE6KYsM0ZkxLVmFwbXQ3ck0/edit?usp=sharing

just want to make sure everyone knows this option exists.

-bm

[virtualmaster]

Doublethink - is the key word to understand it. (eGold, Liberty Reserve - HSBC)
This is the ultimate concept of the government to fool people and hold the financial power.

'The power of holding two contradictory beliefs in one's mind simultaneously, and accepting both of them... To tell deliberate lies while genuinely believing in them, to forget any fact that has become inconvenient, and then, when it becomes necessary again, to draw it back from oblivion for just as long as it is needed, to deny the existence of objective reality and all the while to take account of the reality which one denies – all this is indispensably necessary. Even in using the word doublethink it is necessary to exercise doublethink. For by using the word one admits that one is tampering with reality; by a fresh act of doublethink one erases this knowledge; and so on indefinitely, with the lie always one leap ahead of the truth.'
George Orwell

[alkuluku]

"money laundering" is an artificial, made-up crime.

All crimes are.

[alkuluku]

When I buy a priceless work of art for $120,000,000 cash, I just "laundered" my money into an item that will hold that value in a "legitimate" medium.

I wonder why the criminals never thought about that.

[porticol]

When I buy a priceless work of art for $120,000,000 cash, I just "laundered" my money into an item that will hold that value in a "legitimate" medium.

I wonder why the criminals never thought about that.

Because art dealers are required to register with regulators and this transaction would (should) be reported to the authorities.

[CasinoBit]

"money laundering" is an artificial, made-up crime.

All crimes are.

Surely you mean non-violent ones?

[Lauda]

"money laundering" is an artificial, made-up crime.

All crimes are.

Surely you mean non-violent ones?

Hopefully he does.

[CompNsci]

I want to move $20 million to my partner in crime overseas. I can't wire him $1 million without someone seeing that: what I can do, is send him 2000 laptops and charge him a dollar per laptop. He now has an invoice showing he's paid for these laptops, and he can sell the laptops at a reduced price to move them quickly and now has his $1 million. He has also now undercut every other laptop seller in his marketplace. This may put legitimate businesses out of business.
Same goes for any other business propped up by illegitimate funds. They compete with legitimate businesses without valid business models. Depending on the amount of laundering or the size of the community, it can do huge damage.

Doesn't sound like there would be any problem or disruption if moving the money in the first place was legal.

[virtualmaster]

Not all crimes are made up crimes.
Some of them are basic crimes, like murdering and stealing or damaging in any way to others.
With 'money laundering'   you don't make basically anything wrong you have just moved money from one account to another or you just helped for others to transfer their money.
This crime was invented as a convenient and easy method by inventive lawyers to stop other invented crimes(like drug consumes or children porno).
Drug consumption sounds very bad but it is also an invented crime to not damage others if you cannot control yourself. It is more difficult to supervise all junkies when they had their shut.
Children porno sounds and is very very evil but it is also an invented crime to stop some basic crimes(like violating and damaging childrens).
They are statistics that those who consumes drugs commit more crimes and who looks children porno will violate more probable childrens.
So far the must people already accepted.
However if this construction is to high, invented crimes based on invented crimes, or invented crimes based on invented crimes which are also based on invented crimes then it is very difficult to understand it(probably 99% of the population doesn't know when it is money laundering), can be manipulated how they want (eGold, Liberty Reserve - HSBC) and it becomes more a tool of suppression and fear than a tool of justice and prevention.
It is also a very good revenue.
It is easier and more profitable to confiscate money then catch violent gang members. If somebody will be hurt then can be a scandal and 100 million people will watch on the TV.
But nobody will protest if somebody gets arrested because probably he have done money laundering.
The society have accepted as something what is evil but they don't exactly know why.