Tue May 28, 2013
'Virtual Currency' Used To Hide Large Money Laundering Scheme
Originally published on Tue September 10, 2013 9:16 am
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Today in New York, federal authorities unsealed indictments against seven men connected with what may be one of the largest money laundering operations ever uncovered.
From member station WNYC, Ilya Marritz reports the bank at the center of the case allegedly used virtual currency to help its customers break the law.
ILYA MARRITZ, BYLINE: The name Liberty Reserve sounds trustworthy and maybe a little bit dull. But the U.S. Attorney in New York City, Preet Bharara, says the name is deceptive.
PREET BHARARA: The only liberty that Liberty Reserve gave many of its users was the freedom to commit crimes.
MARRITZ: Founded in 2006 in Costa Rica, Liberty Reserve allegedly catered to a clientele that included identity thieves, narcotics traffickers and unregulated gambling enterprises. In all, prosecutors say, the bank laundered $6 billion for more than one million users. It grew fast by offering clients something rare: absolute anonymity. You could set up an account without showing a credit card or government ID.
BHARARA: In fact, during the investigation, an undercover agent, working as part of this group, was able to register an account at Liberty Reserve using the name Joe Bogus. The account name: To Steal Everything. And the address: 123 Fake Main Street in Completely Made Up City, USA. Perhaps some of you live there.
MARRITZ: The bank offered additional privacy by avoiding traditional currencies and instead used its own virtual currency. John Kicklighter is chief strategist for DailyFX.com, a research group for foreign currency traders.
JOHN KICKLIGHTER: A virtual currency is one that is not necessarily cleared through the traditional banks, banks that have to abide by anti-money laundering requirements.
MARRITZ: Recently, regulators around the globe have strengthened controls on traditional currencies, making these virtual currencies more attractive to criminals. Kicklighter notes that earlier this year, when Cyprus was planning to impose a new tax, some bank clients emptied their accounts by converting euros to a different virtual currency, bitcoin.
And that was legal, probably, maybe, not really legal?
KICKLIGHTER: This is the interesting thing about the digital currencies. It's very difficult to get in there and to put regulation on it.
MARRITZ: There have been earlier lawsuits involving digital or virtual currencies, but Kicklighter says this is by far the biggest. Attorneys for the accused declined to comment or could not immediately be reached. Two of the defendants are still at large. For NPR News, I'm Ilya Marritz in New York. Transcript provided by NPR, Copyright NPR.