Florida Arrests High-Dollar Bitcoin Exchangers For Money Laundering

tsu doh nimh writes "State authorities in Florida on Thursday announced criminal charges targeting three men who allegedly ran illegal businesses moving large amounts of cash in and out of the Bitcoin virtual currency. Experts say this is likely the first case in which Bitcoin vendors have been prosecuted under state anti-money laundering laws, and that prosecutions like these could shut down one of the last remaining avenues for purchasing Bitcoins anonymously."

Comments

Matter of time

[nurb432]

The entire 'barter system' scares governments as they cant track and tax it. Things like bitcoin will be crushed, one way or another.

They also are not keen on regular currency, for similar reasons.

Can a bitcoin advocate explain....

[mark-t]

... why, if news stories are any indication, there seems to be such a high percentage of money laundering activity or the like compared to what happens with other forms of currency?

This is a sincere question... not a challenge to the usefulness or benefits of bitcoin, but just a question that, if bitcoin is to really have any kind of future, I think that people who *are* law abiding and might want to use it someday really need to understand.

Re:Can a bitcoin advocate explain....

[QuasiSteve]

I'm not a Bitcoin advocate.. At least, not of the currency - the technology is marvelous, however. Nevertheless, here's a shot at answering your question...

I think one of the issues here is that it concerns a very specific type of money laundering - if it can even be called that.

Basically the seller is acting as a money services business, without being licensed to do. As such, they do not formally have AML (anti-money laundering) and KYC (know-your-customer) compliance anywhere on their radar. That, in turn, can lead to the actual money laundering allegation.

I say allegation, because there's no 'money laundering' going on when you decide to sell your PS3 for $100 to buy some BTC with that somebody just mined on their rig. Nowhere in that entire exchange chain would there be an illicit aspect.

That explains one aspect of why 'money laundering' seems to pop up relatively often.

Another aspect is that you, me, and everybody can fairly easily buy, and sell, Bitcoin to whoever we want. If you want to buy Euros, you'll have to go to an exchange bureau. If you want to sell them again, you'll have to go to an exchange bureau. Those are, of course, licensed money services, but there's also far fewer of them - generally only at major international ports (be that airport or seaport and maybe the odd exchange bureau at border towns).
Loosely tied into this is the fact that in the U.S. you really don't have much use for alternative currencies. Sure, you can buy some Canadian dollars or some Pesetas. But why would you, unless you were to go to those countries? You can't exactly spend it at a website. With Bitcoin, you can. So there's far fewer such exchanges occurring 'in the wild' to begin with.

And, lastly (well there's a few more, but I see these as the major ones) - well, let's face it.. Bitcoin em used for quite a few illicit purposes. Be that the well-known Silk Road aspect, or people in other criminal circuits trying to look clean, or even just people who want to hide some of their money from the IRS.

Oh, and also, it's actually a fair bit easier to identify the parties in these cases. If you're a major Bitcoin exchange, you undoubtedly have a business address or have some other way to be found. If you're a user of localbitcoins.com then you can simply be invited for an exchange and could be arrested on the spot. Finding out money laundering operations, locations, etc. in the traditional movie-/TV-show-popularized sense is, quite frankly, a lot harder.

Re:Can a bitcoin advocate explain....

[Anonymous Coward]

I'm not a bitcoin advocate, but I think I have an explanation.

Regular currency has controls that generally prevent large amounts of it from being spent conveniently without entering the banking system and thereby being trackable (for plenty of good reasons for government -- the money's harder to hide from taxes, illegal ventures become less profitable for criminals, etc.) Bitcoin doesn't have these controls.

Relative to using regular currency, Bitcoin carries more risk (in my humble opinion, others may vary.) So the people who seek it out at present are a mix of people who are politically interested in seeing it succeed, think it's a cool technology and would like to see it succeed, trying to get rich quick with mining/investing, or who think they can fly under the radar with it for illegal activity. There aren't enough places you can casually spend Bitcoin yet, and I think that has to change before you see it open up to more "legit" traffic because otherwise what use does the average person have for it? But then I could see it disrupting credit/debit cards for online payments at the very least.

Illicit purchase intention aspect isn't one?

[QuasiSteve]

I see a lot of the comments so far are about how stupid it was to go through with the transaction after it was mentioned that the buyer was going purchase illicit material with it.

However, as I understand it from Krebs' post - and the Florida law in question - that doesn't necessarily factor into it. The law seems to state that as soon as you act as a money transmitter, and the exchange is between $300 and $20k within a 12 month period, without being licensed to do so makes you liable for a third degree felony.

Some questions I would have for a lawyer that actually knows the ins&outs of Florida state law in this field:
1. Is the above, in fact, the case? I.e. are the charges on those accounts completely unrelated to the disclosure of what the purchased material (in this case, Bitcoin) would be used for?
2a. Does that mean that the state of Florida sees Bitcoin as a currency?
2b. If it does not, then how would this same law be applied to e.g. physical goods if used as a material for exchange (e.g. gold nuggets, diamonds, etc.)
3. Would similar apply to a travelers going in opposite directions exchanging their currencies when the value exceeds $300 (something easily possible if you forget to empty out your wallet), rather than going through the official exchange bureaus at the airport (and incurring the rather hefty exchange fees)?

Re:Why do they always make grand inaccurate claims

[tftp]

If anyone comes to you and says something along the lines of, "I've got some drug money to launder, I need $30,000 in bitcoins..." don't say yes. I mean, Jesus Christ, how fantastically stupid do you have to be to go for that?!

On the other hand, one has to be fantastically naive to expect a similar magnitude of business from people who only want to buy a cup of coffee at Starbucks. BTC attracts criminal proceeds like honey attracts flies. In essence, there is hardly any legal use of BTC (outside of pure speculation and experiments.)

One would be better off buying that TV or that subscription with an inflating currency than with a deflating one. Credit cards also give you insurance, and protection, and a small kickback, and a grace month during which you own the item but haven't paid for it yet.

Its not the beta that annoys me.

[Anonymous Coward]

It is the people who ruin every single discussion and make it about the beta. Sites change and evolve get over it.