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Fake books sold on Amazon could be used for money laundering (theguardian.com)
162 points by DanBC 8 months ago | hide | past | web | favorite | 123 comments



This story touches a nerve for me because I recently tried to make a small market service but couldn't get it off the ground specifically because of money laundering concerns from my payments processor (Stripe). They shut me down even though I was a small player and would have been very low risk for large money laundering transactions (which I could have detected anyways). I guess they had a point - it would have been very hard for me to detect and eliminate money laundering from my service, if it was done very cleverly. However, in doing research for my anti-money-laundering strategy (that they had requested) I came to the conclusion that not only could I not solve that problem - no one could! After all, all one has to do to launder money through Venmo is label all the transactions as alcohol purchases. All one has to do to launder money through Stripe is tell them you're selling pizza (hypocrites)! And now apparently all one has to do to launder money through Amazon is sell a crappy book for $25,000. For that reason I'm sort of annoyed to have been shut down. Oh well, I've got other plans now...

Edit: To be fair to Stripe, they did tell me that it was not them, but their underwriters that were responsible for the decision.


Your story really resonates with me, as I also was trying to start a side hustle of my own.

The original plan was to sell certain retro items on Amazon's Marketplace and possibly Ebay. I figured that the fees and taxation requirements were a logical expense in exchange for increased traffic and ease of payment.

While I wasn't concerned about getting hit with accusations of money laundering, I was extremely concerned about chargebacks and Amazon siding with the buyer instead of the seller for pretty much any reason.

Which got me thinking-- how and when did it get this bad? A wad of cash or a check in envelopes isn't the most scalable or amazingly convenient payment solution on Earth, but it is more equitable and irreversible than the current system.

In fact, I was surprised to learn that Venmo doesn't do chargebacks. Aside from Venmo's strict and arbitrary laws about money laundering ("ISIS beer funds" is a fun googleable term here), it is an infinitely more ideal way to pay than Paypal or etc.

"Want to buy something? Venmo me the money and I will send you the item. If you don't trust me as a seller, then find someone you trust who is also selling this item, because by default I do not trust any buyer."


>A wad of cash or a check in envelopes isn't the most scalable or amazingly convenient payment solution on Earth, but it is more equitable and irreversible than the current system.

Cash gets counterfeited. Checks bounce. Invoices go unpaid. Debtors go bankrupt. Packages get pilfered. The world is full of shoplifters, skimmers, change raisers, rip dealers, embezzlers, commercial burglars and opportunists.

It didn't "get this bad" - it used to be much worse. Shrinkage is a cost of doing business and it's priced in to margins. If your business venture can't withstand a normal level of shrinkage that all your competitors deal with, then you didn't have a business to begin with.


Shrinkage isn’t the problem; being locked out of using a payment processor because of your shrinkage (which you’re eating) is the problem. Ever asked a small retailer how they feel about chargebacks? I’ll give you a hint: it’s not that they care one whit about losing money on the individual transactions.

It used to be that your storefront getting robbed—because that’s essentially what this is—was a temporary setback. As long as you had also made enough profit to afford to restock, and had taken appropriate precautions to deposit your revenue in the bank regularly, such losses cold be considered just a cost of “doing business in a bad neighbourhood.”

Nowadays, though, a business that might regularly get robbed—digitally—is untenable, because even if you want to restock and continue on, and even if your business is profitable enough to always be able to afford to eat such losses, your payment processors will still “fire” you as a customer. (Or see the “neighbourhood” you’re in and never take you on as a customer at all.)


thus, one strong clear use for cryptocurrency. a payment system that people cant get locked out of by the whims of the fiat middlemen


You place an order for an item from me. If you send me counterfeit cash or a bounced check, I'm not sending you the item.

I don't do invoices. I don't do credit.

And if the package is stolen from the mailing service I choose, then hopefully I purchased some type of tracking service for it to fulfill an insurance claim from the post office.

There is no justification for the new "chargeback culture" that exists in our society. Only the most centralized sellers can eat these costs. This is a temporary win for consumers-- just wait until friendly indie sellers are pinched out of existence.


>There is no justification for the new "chargeback culture" that exists in our society.

Customer protection. A lot of those "friendly indie sellers" are selling substandard goods, failing to ship products or engaged in outright fraud. Chargebacks exist as a dispute resolution mechanism of last resort.

If you can't eat those costs, you don't have a business. If your chargeback rate is over 1%, you're doing something seriously wrong and your merchant will eventually close your account. If you can't comfortably absorb the shrinkage from a chargeback rate of below 1%, your margins are far too small.

There's nothing stopping you from running a mail-order business that only accepts cash, but customers will quite reasonably baulk at the risk and inconvenience. If you don't trust your customers enough to accept credit cards, why should they trust you enough to send you an envelope full of greenbacks?


>If you can't eat those costs, you don't have a business.

Everyone agrees on this point.

>If your chargeback rate is over 1%, you're doing something seriously wrong

Not everyone agrees on this point.

The point the gp is making is that the chargeback rates are too high due to circumstances beyond his control.

He can't stop people from taking advantage of the system as it currently operates and basically committing fraud against him at a higher rate. There's no policy he can implement to prevent this. Because he's not in control.


The original flavor of “chargebacks” is the “defective” or “return” allowance charged to vendors of retail chains.

It still boggles my mind that in most major US retail chains, if you return a high value item, e.g. a TV or appliance, you can get a refund without the store clerk checking the merchandise.

It’s an unfortunate reality that in the US, consumers have been conditioned to expect lengthy return periods, and then still game the return system with various tricks. Need a tent for a camping trip? Great, use it for camping season, and return it within the 60 day return window for a full refund, no questions asked!

In my personal experience, when my company receives shipping containers with returned “defective” products, anywhere from 25-50% of the returns are working just fine.

In contrast, in Canada, Mexico, or many European countries, return periods rarely extend beyond 30 days.

With online sales, the same issues seem to have cropped up in a different form. Amazon can’t be bothered to actually verify whether returned merchandise is actually defective, or if the returned box actually has an item in it. If you ask to see the merchandise that triggered a chargeback, be prepared to shell out for freight, and wait weeks for your shipment to arrive. When it does arrive, and you find out that the merchandise is perfectly functional, or the customer kept the merchandise and sent back an empty box, good luck trying to find an Amazon rep who can adjust your account balance in a timely manner.

The return system on Amazon for consumers seems designed to encourage bad behavior. If you’re returning an item, and select your reason for return as “I didn’t like it”, you’ll be charged the cost of return shipping. If you claim that the listing was “inaccurate” or that there was a vague “quality problem”, Amazon will immediately let you download a prepaid shipping label. Better yet, you can test the different options for yourself, since Amazon doesn’t prevent users who selected one reason and have seen the return shipping cost from selecting another that has no return shipping cost.

All this is to say, I deeply empathize with the original comment and the child comment. If you’re selling low-volume, high-value goods, a bad string of chargebacks can easily threaten your business. If I’m selling 100 $50 dollar items a month on Amazon, and I suddenly get 3 chargebacks, that money is immediately deducted from my balance. To contest the chargebacks, you’ll have to go through the whole rigmarole I described before. Stripe’s underwriters are doing what makes financial sense for them, but that’s small consolation to the entrepreneur.

It’s awfully easy to say that any business with more than 1% chargebacks is doing something wrong, but if you’re a low volume seller trying to grow your business organically, a bad month or two (“variance”) can seriously crimp your cash flow and the threaten the survival of your business.


Agreed. It was much worse before. Items were sold on craiglist or gumtree. They are completely filled with scams, send cash by mail and never receive the item. Noone sane would buy an item online.


> Noone sane would buy an item online.

I buy almost everything online (normally eBay, because I like the convenient price comparison between different vendors, and the consistent search and checkout interfaces). I almost never have any issue.


I believe he was saying that it used to be much worse, not that it is like that now.


I, along with many thousands, regularly buy stuff on OLX (local equivalent of those sites) and pay by bank transfer (which is not reversible) or even cash-equivalents.


Guess you'll be even more surprised to learn that Venmo absolutely does chargebacks! Go read their user agreement:

https://venmo.com/legal/us-user-agreement/


Ahhh, interesting! I literally only googled the problem earlier today. It seems venmo's site lied to me then. It quite literally said

"It is not possible to cancel a payment without the consent of the payee".

Aka, if i give you money and you say you don't want it, you can cancel the payment.

But on Amazon or Ebay, you pay me for an Xbox, I ship it, and 3 days later "IT'S BROKEN" and I lose all my profit + shipping fees


When I was selling hundreds of items per month, I would hold any Spanish name for 48 hours. The majority of Spanish named buyers were committing fraud.


Funny story is the first time my credit card number was stolen following the Target hack, it was used in a grocery store and a convenience store near Madrid.


The "trust the buyer" thing seems to work reasonably well in practice, especially if on say eBay you limit buyers to ones with positive feedback and not living in iffy countries. Trust the seller is vulnerable to people offering say bargain laptops, selling 100s then running off.


I don't see why it would be fairer to put the burden of potential fraud on the buyer.


My identity as a seller is a business asset. If you don't trust my reputation, you are free to search for an item/service elsewhere from a seller you trust more.

However, I am not able to trust you as a buyer on Ebay or Amazon. No matter what I do to cover my bases, there is a risk that Amazon and Ebay will reverse the transaction, and I will lose my money, time, and even my item.

Conversely, when you send me cash or a cash equivalent by mail, I am now 100% fulfilled, and any failure to deliver on my end should become public knowledge quite quickly. However, caveat emptor.


I don't buy into the libertarian idea that your reputation is a sufficient substitute for proper regulation of commercial activities.


I'm sure you have used reputation a thousand times in your life to decide whether or not to dine in a restaurant, take a class from a professor, or stay in a hotel.


In my college experience, many courses that came highly recommended by the student population were garbage. Students don't have the experience to judge the worth of all courses, and the same information and knowledge asymmetry extends to many other fields of human activity.


Mostly highly rated classes tend to be blow-off classes, rather than informative and engaging ones.


All of those things are subject to substantial regulation, meaning that it's not that much of a risk to eat at a restaurant I've never heard of before. And even with those lower stakes, plenty of highly-rated restaurants I've been to turned out not to be so good.


You say all you have to do is lie, but that’s not true at all. I mean, laundering money $20 a day isn’t going to really matter, and a $25,000 pizza order is going to set off alerts.

It’s not about preventing 100%, it’s about making it difficult to the point that it’s not a way to efficiently move that much money.

I mean, technically Apple could be used to launder money.

And frankly, any service that looks to offer some marketplace should be aware of money laundering potential, and how you are going to limit it. And don’t get me started on other issues like fraud.


Money laundering regulations are one of those things that started out with good intentions (prevent people who obtain money via theft or fraud from being able to spend it in the legitimate economy) but has now morphed into a kafkaesque burden that isn't obviously a net positive for society.

This is one of the reasons I'm a big fan of cryptocurrency. Your service would not have been shut down by the payment processor if you were able to handle the money yourself without relying on a third party.

The world probably hasn't reached the point where going cryptocurrency-only would be viable for your service, but onerous anti-money laundering regulation is just pushing more people towards cryptocurrency, at the margin.


>This is one of the reasons I'm a big fan of cryptocurrency. Your service would not have been shut down by the payment processor if you were able to handle the money yourself without relying on a third party.

If your cryptocurrency-based store wouldn't comply by the same regulations that third party was required to comply with, though, then you, as a merchant, would be breaking the law. Which takes you back to square one, cryptocurrency or not.

It's just that with cryptocurrency you get to decide to break the law and continue accepting payments, instead of being based to Stripe.


The difference is that you don't get blocked by the third party before you even try to start.

You are correct that the law is still there, but it's the difference between innocent until proven guilty and guilty until proven innocent.


Why on earth would a cryptocurrency-based store have to comply with the same regulations as a card payment processor?

One is just accepting payments, the other is processing them for vast amounts of third parties.


>Why on earth would a cryptocurrency-based store have to comply with the same regulations as a card payment processor?

Because money laundering can happen at any level, and specific regulations apply, you don't need to be a card payment processor processing "payments for vast amounts of third parties".

As long as you accept payments, even for a lemonade stand in the corner, you need to comply with these.

In fact you probably misunderstood what Stripe demanded on the parent's situation: they didn't demanded the parent's store comply with the same regulations Stripe does as a card payment processor. They demanded they comply with the regulations a store should comply with.


On a first look money laundering by itself doesn't seem to hurt anyone very much except for the state. But of course it is used as a vehicle. Those putting in the effort needed to go through a money laundering process, you may ask yourself: why are they doing all this? My guess is that human trafficking and other terrible stuff is realized with this, so I think there is a point making it difficult - up to the point of "blocking innovation" - when it comes to opening a market place.

> This is one of the reasons I'm a big fan of cryptocurrency.

> Your service would not have been shut down by the payment

> processor if you were able to handle the money yourself

> without relying on a third party.

Yeah but this is also the ethical problem of cryptocurrency. Most people agree that money by itself has something bad attached to it, at some level it encourages people to do evil stuff. If you now look at cryptocurrencies, this is even worse! We complain that most major banks partake in speculation with food. But we completely ignore that with these currencies far worse stuff is possible without going through the process of money laundering, the state is completely not involved.

This is a crazy double-standard if you consider that many hackers consider themselves having a much higher ethics than any other business person.


> Most people agree that money by itself has something bad attached to it, at some level it encourages people to do evil stuff.

What?! This is not true. Money is not inherently evil. Money is a tool, just like a hammer. I can build things with it or do harm with it.


It's not a double-standard. Complaining about a wrong action (like speculating on food¹) is not the same as complaining about a system that makes a wrong action possible (like cryptocurrencies). Much like one can defend the protection of speech one despises.

The equivalent would be to complain about specific uses of cryptocurrencies, or in the other direction, about the very existence of banks and commodity markets.

¹ (just taking your example, not necessarily my opinion)


Why is speculating in food bad? Futures markets feature in explanations of why economies without centralized planning are the ones that never have famines.


Like I noted at the bottom, I just used parent's example, I don't necessarily agree with it.


Ok this might have been a bad example. I'm aware that Futures historically play a role of an insurance for food producers. Are those then by volume the major part of so called food speculation?

smokeyj 8 months ago [flagged]

This HN. Capitalism baaad, UBI goood.


>Your service would not have been shut down by the payment processor if you were able to handle the money yourself without relying on a third party.

But without payment processor you need to handle a lot of that yourself (security, refunds, fraud, recurring payments, taxes, EU VATs, etc.). All the complicated stuff that caused us to outsource payment services in the first place.


I was under the impression that everyone outsources payment processing because PCI compliance is hard.


It's a complete pita, but even without any security rules you still need to figure out how to clear payments using something like ACH, weird and usually 99% undocumented bank APIs, building a lot of automation, reporting & monitoring tools yourself, etc. It's a lot of work.


I actually like that you can go after people financing terrorism or making huge amounts of cash from illegal drugs, gambling, smuggling and the like. Without money laundering regulations, and within cryptocurrencies, that would be a lot harder.

People dealing in significant amounts of cryptocurrency will eventually have to be regulated in some way, also.


You can go after people laundering money through cryptocurrency, of course.

The part I'm protesting (in this thread, at least) is the part where the regulations on banks and payment processors are so onerous that they refuse to work with legitimate businesses.


Are there any numbers? How much of a dent to terror financing this does? I doubt it's very much.


Just imagine if basically anybody could finance terrorism without much fear of being discovered. I doubt very much there would be less terrorism then.



The weird thing is Stripe have invested in Monzo, a bank.


This is precious world's top banks have being laundering 100s of billions of dollars for drug cartels, ISIS etc. Yet they are worried that some small market place might be used for money laundering.


The laws aren't there to protect us, they exist to secure entrenched interests.


You’re not wrong. Banks have enough money to do what they want and hide it or pay off.

Average joe has to adhere to the letter of law and what ever corporations throw at them.


In general I agree with you, but I doubt banks lobbied for stricter anti money laundering laws as a measure to stifle competition. They do get pretty much a free pass when they do break them unlike smaller entities though.


We all love to be cynical, but I feel this sort of discussion is pointless. It's not based on facts or any domain knowledge.


Look up "Human History" if you need a source.


Bad title, this is Office Space levels of misunderstanding. The claim of money laundering is by some author that has no idea what he's talking about. All it really is: scammers use Amazon to cash out stolen credit cards. That's not money laundering, it's just fraud.

The money isn't even clean if they're using the wrong SSN.


You're absolutely right, the described scam is not money laundering.

I think you could, however, use a very similar method to actually launder money. The SSN/account would need to be accurate; the taxes would need to be paid; and the contents/price would need to be a plausible if low-quality example of the typical self-published book. You'd pay people dirty cash to buy copies of the book, and/or use single-use debit cards bought with dirty cash.


If I we're to use my ill-gotten gains to buy cryptocurrencies, I could, at a small loss, buy Amazing gift cards from independent sites which accept crypto. At that point, aim straight up money launderin


The problem is that there is good money and bad money that looks identical. The only way to tell the difference is to get arrested, have your business shut down, or lose access to all financial services.

And why is there 'bad' money? I think we have to take a detailed examination of what constitutes 'bad money'. I think they are mostly all underserved markets that are being served by the worst of society.

I think most things can be fixed with more sensible approaches. Decriminalizing drugs is a good place to start. Especially considering our own CIA and pharma industry created a lot of addicts that then get fed into the prisons, bureaucrats profiting at every step. They helped create the drug kingpin monsters.

This seems like just another problem created by government where the citizens have to pay the price. No shortage of those these days.


Any two sided marketplace has the potential to be used for money laundering. This really ought to be something everybody that runs a two sided marketplace is aware of.


Amazon has huge fraud and counterfeit issues that you dont have with traditional large brick and mortar sellers. This is going to be a major crack in Amazon’s armor in the same way that privacy was a crack for Facebook. Wait until Amazon sells some kind of counterfeit and tainted baby product that injurers or kills. It will happen and it will be on Bezos because Amazon is clearly turning a blind eye in the name of profits.


Is it worth it for a launderer to give up 30% to Amazon, and then of course pay taxes on the income? Also I assume you can't launder cash this way.


This particular example isn't actually money laundering.

However, in general yes - a 30% haircut on laundered money isn't too bad at all. Consider the classic money laundering scheme: you own a legitimate bar, but supplement the real sales with ghost sales, paid for by the dirty cash. The alcohol supposedly sold in the ghost sales is poured down the drain, so your suppliers invoices match up with your sales (this works because it's typical for customers at bars to pay in cash, and the margin on alcohol sold as individual drinks is pretty high).


You could also sell the booze at a loss out the back door and then launder THAT money :)


You can buy gift cards with the cash. Gift cards as a concept are so funny to me. As a recipient, I would always want cash over a gift card. As a gift giver, I'd think "if I was receiving this gift, I wouldn't want a gift card, so why would I give it to someone else".

But they exist, and they're huge. Obviously merchants love them for the float and captive customer spending more than the gift card balance. Businesses might love them to give out to employees since it's not taxed income, and similarly, money launderers would like them.

I guess I could see some niche use, like wanting to give a child funds for a movie ticket, but to avoid them using it for other purposes you restrict it by giving a movie gift card. But I don't see that supporting a large market.


In many cultural circles it’s very rude to gift money (or to even left the gifted know how much something cost).

Giftcards are seen as a way around that (although they’re not really better). They also show that you thought about the gifted (what would this person like), but respect that they might not like the specific gift you’d pick.

e.g. if you know someone is a LEGO collector, you gift them a LEGO gift card, instead of buying a specific collectors model that they might already have.


Also, as a recipient, the pressure isn't there to do something practical with it.


I understand a non gift card gift conveying that someone thought about the gift recipient and/or is not explicit in its cost, but a gift card accomplishes the former poorly, and the latter not at all.


I don't get it either, but people do use them that way. Some are even sillier: a friend of mine, who teaches classes to seniors, got a gift card from them that can be spent on any shop of our huge local mall.


It's a weird cultural quirk of the west that you shouldn't gift cash. In China people are perfectly happy to give money in red envelopes.


Wealthy cultures tend to spend extra to hide the visible evidence of the financial reality of their existence. It's silly but common.


Same in India.


I've always liked getting gift cards over cash because I usually have to spend them on a gift. If I'm getting cash, I end up spending it on groceries or something mundane.


When I get gift cards I end up selling them for cash


I think one might find that if you go buy a million bucks worth of Amazon gift cards and try to load them into a couple of accounts, it'll probably be flagged.

The article is not about money laundering, but using stolen credit cards. It makes little sense to use Amazon for laundering.


Obviously? You can't imagine what % of money you could lose when you launder using other methods. Also this one is totally safe... compared to some other ones ;)


Tax on money from unknown source is 75% in my country. Plus probably police investigation if it is bigger sum.


You can't get access to finance if you don't have a documented income. Making it impossible for you to get a house or even a car.


Read the article. They used someone elses SSN so no tax. Also 70% from of $3999 from a stolen credit card ain't bad.


A stolen credit card isn't money laundering, that's just fraud.


It seems plausible in a logical, if not legal, sense... you've stolen the funds using someone's credit card and then launder that into receipts from Amazon.


I'm assuming the more general case where they are not stupid enough to use someone else's SSN, and thus guaranteeing you'll get found out.


Amazon doesn't appear to be doing much about its problem with fakes.

But this, if it does include money laundering, may attract regulators with teeth.

Also, Amazon wouldn't be able to get away with this nonsense if they were compliant with EU data protection laws:

> Reames says Amazon has told him that it can send him a letter “acknowledging than I’m disputing ever having received the funds, because they said they couldn’t prove I didn’t receive the funds” and won’t share the details of the payee.


> Amazon doesn't appear to be doing much about its problem with fakes.

Sometimes it seems like they are actively helping them. I wrote a review pointing out that an author[1] is a fake person[2] and they didn't respond to me and deleted the review. Meanwhile, the obviously fake reviews on "her" work still stay up.

It used to be that I could go on Amazon and judge by reviews and know I'd get something good, but these days searching Amazon means wading through a lot of crap and fakes and I don't get the impression that the company sees it as a problem.

[1] https://www.amazon.com/Tina-B.Baker/e/B0716Q2Y4Z/ref=sr_tc_2...

[2] https://www.canstockphoto.co.uk/portrait-of-senior-woman-in-...



This is more or less a rewrite of Krebs’ post.


I love how there are hundreds of (genuine!) reviews on those "how to call Amazon support" books. Very much a "googling facebook login" moment.


Not entirely sure why the Guardian uses a hypothetical here. This is how amazon is used for money laundring. Fake products, and real products sold at 10,000% prices


Their source is an author that doesn't know what money laundering is. What he described is just a way to cash out a stolen card (fraud).

Can you tell me how you can laundering, say $100K in cash via Amazon? If you already have it on a credit card, you've already laundered it.


While in the US and Canada, "credit card" is the main method of payment, large parts of the world in which Amazon operates offer additional payment methods such as bank transfers, with credit cards offered as secondary option but not owned, let alone used, by large portions of the demographic.

If you already have a credit card, you're indeed almost certainly already good to go.


What I've seen happening is people buying ebooks with stolen credit card numbers. Presumably, the criminal had published ebooks just for this purpose.


Possibly. For small value transactions there's also a lot of people doing tests to see if a card is still live before using it for real purchases. When I was at Yahoo more than a decade ago, we ran into a lot of attempts to purchase extra storage for e-mail (pre-Gmail days...) with stolen cards for that purpose.


I’ve always wondered the point of this. I had a card stolen (skimmed in a taxi) and the first thing they did was donate $1 to a charity, before buying $12k of aquarium equipment from another country. Why not start with the aquarium purchase? (side note, the bank didn’t chargeback the donation because it would have cost the charity, and I wasn’t going to challenge that).


Criminal A skims your card and sells a bundle of cards to criminal B as unvalidated.

Criminal B runs the cards through a donation engine to validate them, and sells to criminal C for more per card.

Criminal C buys one validated card to make an order for aquarium equipment.


Maybe there is risk in putting in a big order (requires contact details? Requires actual contact? There is cost to setting up an account).

This way, you don't risk / burn an account without getting your payoff.


But how is money from a fraudulent Amazon account actually "laundered"? I mean, wouldn't you want to launder such iffy income?


That's very likely the case since money laundering always needs goods with very low intrinsic value but sold at inflated prices. From "modern art" works by unknown artists valued as masterpieces to poor football players priced and sold as champions who will never see the playfield, there are numerous cases which should raise alerts.


This is actually a pretty old story. It's been happening for some time now apparently.


I’m surprised this guy is still waiting for Amazon to play ball instead of lawyering up.


Providing fake or incorrect income to the IRS is a crime and comes with a stiff penalty. If Amazon doesn't "fix" the problem quickly, I'd deal solely with the IRS.


pretty sure this is what cryptokitties are for too


Can't people just use crypto-currency for money laundering now?


How is the currency changing anything? It's like using cash.

Crypto-currency exchanges are not exceptions to money laundering regulations. You have to identify yourself and you may need to explain the source of money if you withdraw too much.


I'm not sure you need to involve exchanges necessarily. Just buy some CPU/GPU resources and mine your own currency. I've never had a hosting provider do KYC on me. Then you can store the cryptocurrency indefinitely and move it to real currency as needed. That step might require KYC, but you can buy physical items using cryptocurrency, so maybe not.

I have no idea whether or not this is cost effective given current mining difficulties and cloud hosting rates... but I'm sure someone somewhere is doing this.


How is “use cash to buy computing resources, mine bitcoins and keep them, convert them to cash as needed” money laundering? In that case, the much easier “keep the cash in a box and take it out as needed” solves the problem in a much simpler way.


Well suppose you have a million bucks of cash or Bitcoin from selling drugs. If you just buy miners and get clean Bitcoin, that might solve the issue by providing a clear and legal source of funds. But if they ask how you bought the miners in the first place...


Who will ask, and why? Perhaps you earnt the money through speculating on bitcoin using a computer that is now sadly destroyed.


I mean, I don't think you use cash, I think you use the stolen credit card numbers you were going to use to buy fake eBooks on Amazon with.


If you had money to launder, you were going to buy fake eBooks on Amazon using that money [0]. If we're talking about credit card fraud, for how long do you think you could keep those prepaid bitcoin-mining computing resources once the fraud is detected?

[0] But I wouldn't say the article describes money laundering. The proceeds from the scheme are not (and don't try to look) "clean" at all.


I see the same problem with Amazon's eBooks. They detect the fraud, and they yoink the eBook back and refund the credit card. Whatever time you can mine between use and discover you get to keep as there is no way to revoke the computing resources you've used.

Look, I'm not a criminal mastermind so I have not run the numbers to decide whether or not this is a good use of your resources. I'm just saying that cryptocurrencies might be appealing to people wanting to steal money and that KYC isn't going to save you.


> CPU/GPU resources and mine your own currency.

There is no need to money launder money you have mined yourself.


The laundering is happening when buying the gpu/cpu and electricity. Bad money is laundered in the capacity to generate crypto coins.


The point of money laundering is confusing the origin of money you can’t spend.

If you can already spend it on miners and utilities, why go through the pain of cryptocurrency? Just buy jet skis and restaurants or whatever it is you actually want.


Miners take Bitcoin directly giving you a way to launder a big chunk of money. They don't ask questions and it's not a big visible thing like buying cars in your name. Hosters are fairly cheap and aren't going to be a problem.


Hi, just dropping in cause HNews doesn't have PMs to say I found your comment about how the "other" hemisphere of the brain might be independently conscious but suppressed.

Two things. First: if there was an inactive area of the brain that did not contribute to your behavior, it is very likely evolution would have entirely disabled it. The brain is the single most energy expensive organ in the body. Second, and more importantly: your consciousness does not control your behavior anyways - the only thing that is reasonably known to be in its power is the ability to stop yourself from doing things. Consciousness sees an after-action report of the decisions that the rest of your brain makes, and hence concludes that "it" is responsible for them. (This can be seen by your brain deciding on a course of action seconds before you become consciously aware of it.) As such, the experience of an inert consciousness would probably not be all that different from your active one. Maybe it would have to justify a few more impulsive actions in hindsight.

You may be modelling this as a separate being who is confused and terrified, but that's a category mistake - sensations and feelings happen to your consciousness, not in your consciousness.


If you're good at hiding afterwards then there's probably plenty of people fencing computers who will take the cash (and launder it). You can probably get goods stolen to order.


Not sure how you would launder money through crypto. Let say a drug dealer has $100k worth of dirty cash. He or she could buy $500 amazon gift cards from most stores and launder it through their market place by buying the books.

How would someone do it with crypto? Know your customer(KYC) laws would require legitimate bitcoin sellers to verify you identity. I assume this even true for bitcoin ATMs. Trying to launder $100k this way would a generate suspicious activity(SAR) report to the government.


He could put a small sum of money on an exchange, let's say $10k. Then transfer it into a anonymous cryptocurrency like Monero or ZCash. "Friends" send him the rest of the money (in the form of Monero) which he then brings back to the exchange.

He can justify the amount by "smart" trading. With the current volatility in the market, making 10x profits is not unheard of.


Just start a software company of some kind. Maybe make some games, they don't even have to be good.

Then take payments in cryptocurrencies. Directly without going through BitPay or something. Pay with Monero which cannot be traced on the blockchain and deliver the games to emails.

Now you have a company with seemingly legit profits. All you need to do is convert your dirty money to cryptocurrencies at the start.

Is it really this simple?


Sure, but you can do the same thing with an arcade or coin operated car wash by just converting your dirty money to quarters too.


It's much easier and faster this way though.


Is it really though? How do you convert your dirty money into cryptocurrencies without leaving a damning electronic paper trail? Buying them from strangers in the food court at the mall? Surely this channel is not sustainable at scale.


How could crypto currency launder money? Money laundering by definition means taking dirty money and running it through a legitimate business to make it appear to come from the legit source.


The cards were probably loaded through crypto. Annon cards with $250 limit but they are virtual and cost like $3-5 a piece.


Why would you, if other, less volatile means are still available?




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