

How to Launder Billions of Digital Dollars - kitcar
http://www.theatlantic.com/technology/archive/2013/11/how-to-launder-billions-and-billions-of-digital-dollars/281091/

======
strick
Many of the largest banks in the world launder much greater sums and get away
with the lightest slap on the wrist. Wherever money changes hands you will
find ethically challenged people making a profit.

Gangster Bankers: Too Big to Jail
[http://www.rollingstone.com/politics/news/gangster-
bankers-t...](http://www.rollingstone.com/politics/news/gangster-bankers-too-
big-to-jail-20130214)

~~~
cynicalkane
I think
[https://en.wikipedia.org/wiki/HSBC#Money_laundering](https://en.wikipedia.org/wiki/HSBC#Money_laundering)
might be more interesting to a hacker.

As I've discussed previously[1], Taibbi is not noted for being a reliable
systems expert on the international banking system. The simple facts are
damning enough without layers of editorializing cruft from an unreliable
source.

For example, consider the assertion that people need to go to jail for fraud
in the HSBC case. Most of these bad things are instances of the bank
systemically not monitoring transactions closely enough. You can't pick
individuals and throw them in jail for responding to bad institutional
incentives--you have to pick out a specific criminal act that's punishable by
jail time and pin it on someone, beyond reasonable doubt. Truth be told, if
you start doing this in an _equitable_ fashion with the goal of "punishing"
bad banking behavior, you'll target a lot of lower-middle-class mortgage
brokers from the 2008 mortgage crisis who knowingly committed fraud, which
seems like an undesirable result. Or maybe you could pick a few politically
convenient scapegoats, but that would be unjust in a different way. That's why
we fine banks billions of dollars instead.

[1]
[https://news.ycombinator.com/item?id=5616805](https://news.ycombinator.com/item?id=5616805)

~~~
criley2
For the life of me, I don't understand why the biggest investors and
executives, who are rich because "with great risk of captial comes great
opportunity for success". So they get the 99% of the profit, they get the big
paychecks, because they took the big risk in the beginning.

But on the flip side, they don't accept the risk for the behavior of their
company.

I don't understand how the system operates whereby they accept all the profit
from their risk, but successfully mitigate almost all of the negatives of
their risk, reducing jail time and criminal penalties to fines and loss of
investment.

If a man earns profit from an investment in his control, to me, he also is
responsible for the legality and behavior of that investment.

This seems obvious: Take down the executives. And keep on doing it, keep
throwing them in jail until banks hire executives who don't let this bullshit
happens. How many millionaires in jail would it take to change the culture?
I'm betting not many.

~~~
nostromo
That sounds nice, but it's impossible for an executive of a multinational bank
to know what every employee is doing at all times.

It's not like their quarterly business review slides include, "committed fraud
to increase revenue 20%."

~~~
criley2
Quite frankly, _I don 't care_. They as executives are trusted to handle every
dollar, every share. They are the stewards leading their company, making the
decisions, creating the profit or loss. When they succeed, they take the
praise and the reward. When they fail... it's too hard for them to manage
everyone? What?

The buck stops there. It must stop there. It is THEIR PROBLEM to control the
misbehavior of those who they entrust with their capital, not OUR problem.

Those that Executives entrust with their assets are the Executive's
responsibility.

As a citizen, I don't get to say "Your accountant is immoral, fire him". I
don't get to have a say in the ethics of private sector employees. I don't get
to speak to who an executive entrusts with capital. I'm not responsible for
their actions by design.

So with that isolation of the private sector comes the responsibility of the
private sector to handle it's own shit.

Buck stops with the executive. I imagine the richest people alive, if they can
"solve" the problem of <1ms trades cross-Atlantic, they can "solve" the
problem of unethical behavior.

What I think: _they don 't want to solve it_. Why would they, unless we forced
them?

If they don't have control over their assets and those that manage it, why do
they get the profit from what they do not control and do not risk? Either they
accept responsibility for their assets and those that manage it... or the
public should get the credit and profit from an asset the public is forced to
manage and protect.

~~~
cynicalkane
This sounds like an easy way to make sure nobody wants to be an executive of a
major bank. Why would anyone want to take charge of an organization where the
actions of any one of hundreds, thousands, hundreds of thousands of employees
can get them thrown in jail? Do you have the ability to monitor that? Or
anyone you know? Would you bet your freedom on it? Do you want bank executives
to be the sort of people who play the odds on going to jail vs. getting money?
The smartest people in the world have trouble getting your friend feed to
display ads you want to see. The smartest people in the world cannot get their
1ms trades--to use your example--to succeed more than 50+epsilon percent of
the time. They don't have this genius power to monitor all fraud that you
think they should have. And before you argue that banks don't even try to set
up monitoring systems, _they actually do_. Every major bank now is into big
data and machine learning precisely to stop employees and customers from
breaking the law. (They are hiring, by the way.) This is in response to
Congressional and popular pressure.

In summary, I cannot think of a single significant way in which you understand
what you're talking about.

------
driverdan
> LR's most basic criminal offense is simple: It didn't know or want to know
> the identities of its clients. They allowed people to transfer big sums of
> money without checking their identification.

That this is a crime disgusts me. I should be able to do whatever I want with
my money without anyone knowing who I am. That's how it worked up to the past
century.

~~~
gizmo
The trade-of here is individual liberty vs what we know the consequences will
be from allowing truly anonymous exchange.

For all things in life: cui bono. Illegal operations (the vast majority of
which are doing tremendous damage to society) stand to gain the most from
anonymous money exchanges. So that's who end up using the service.

So even die hard libertarians who value personal freedom such as anonymity a
great deal have to acknowledge that the real life consequences of exchanges
like Liberty Reserve are a net negative to society. Leading to less bottom
line Freedom compared to the current situation where society tries to make
life difficult for gangsters and enterprises that harm us all.

~~~
nostromo
Isn't cash more popular than Liberty Reserve and just as anonymous? (Albeit
more cumbersome to transmit around the world.)

So isn't your argument also that cash encourages crime? And if so shouldn't it
be abolished so that we can prevent activities that damage society?

~~~
leot
Things aren't so clear cut. Laws have to draw boundaries around things all the
time, even if the particular location of any particular boundary cannot be
easily justified, the necessity of the boundary's existence most certainly
can. In this case, we can regulate electronic transactions, but we can't
regulate cash. Furthermore, it happens to be the case that when you allow
electronic transactions willy-nilly bad things happen, and it's harder for
those bad things to happen when cash is involved (Breaking Bad would have been
completely different if Walter White had hid is money in Bitcoin). So, we
regulate electronic transactions more than we do cash. It doesn't solve all
the problems, but it does mitigate them.

------
TomGullen
Seems like Liberty Reserve just wasn't big enough to protect itself. If they
had been bank sized they could just pay a few fines every now and then and
continue to operate:

[http://www.bbc.co.uk/news/business-18880269](http://www.bbc.co.uk/news/business-18880269)

~~~
at-fates-hands
Banks are also heavily regulated. Liberty Reserve was attempting to act like a
bank without all the government regulations - which is highly illegal for
several reasons, one of which just happened to be money laundering.

------
fsckin
>[...]put things like "your share of the cashout," "for atm skimming," and
"for the cocaine," into the memo field (where you'd put "Rent" on a check)

The memo field is not terribly relevant. I've jokingly written things very
similar to these examples on real bank checks and never had a problem with
someone else cashing or depositing them.

~~~
gghootch
I went to the DPRK (North Korea) past summer. Beforehand we met with a guy who
went there a year before. In the payment memo field for his trip he wrote
something akin to 'Payment for North Korea'. The bank cancelled his wire
transfer and nearly cancelled his account. In the end they only barred him
from making other payments to that bank account number.

My guess is everything is monitored but red flags only go off when suspicious
activity is frequent or serious enough.

------
mindslight
" _Money Laundering_ " is an oxymoron. The whole concept of _money_ requires
that one unit is an equal store of value no matter who possesses it or how it
was obtained. Adding conditions on exchanging destroys independent/classless
power by making the value of one's liquid assets dependent on their political
connections.

FWIW this is something Bitcoin didn't bother to get right, and will be its
downfall, starting as soon as brick and mortar businesses are required to
register their wallet identities.

Liberty Reserve isn't the first competitor to USD that USG has shut down, and
it won't be the last. It's unfortunate that when economics finally prevails
against these goons, the market correction will probably cause the collapse of
the USA.

------
ck2
Ah they now have an angle to go after bitcoin.

~~~
keyme
Difference is, there is no one behind bitcoin. No one to arrest. The only
"real people" "behind" it are the Exchanges. However, they(usually) hold
proper documentation for transactions and comply with the law fully.

~~~
dragonwriter
> Difference is, there is no one behind bitcoin. No one to arrest. The only
> "real people" "behind" it are the Exchanges.

No, the real people behind it are the miners. You know, the people that create
bitcoins and validate every bitcoin transaction?

~~~
ferdo
Let them bust a few miners. More will take their place.

~~~
dwaltrip
If miners are ever prosecuted, then that is a pretty big signal that the U.S.
has completely lost its shit. Submitting the outputs of hash functions to a
distribitued p2p network sounds like extremely basic free speech to me.

As a young person with no wife/kids and plenty of tech job prospects, I would
probably start researching moving abroad.

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smurfy
Dang, LR has been big in the underground communities forever. Bouncing money
between international Paypal accounts and then through LR has always been the
way I've heard of it being done. It will be interesting to see what follows
it. Also curious if they will try to prosecute any of the LR users they are
able to track down.

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coldcode
All you need is a bank, no detergent necessary.

~~~
finnw
Detergent is optional, but it sometimes helps.

[https://www.schneier.com/blog/archives/2013/02/tide_becomes_...](https://www.schneier.com/blog/archives/2013/02/tide_becomes_dr.html)

------
anan0s
go buy bitcoins ;-)

