'Virtual Currency' Used To Hide Large Money Laundering Scheme

fromWNYC

Federal prosecutors in New York say they have arrested five men associated with a digital currency company called Liberty Reserve. The men are accused of running a $6 billion money laundering scheme that prosecutors say was a "bank of choice for the criminal underworld."

Copyright © 2013 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

MELISSA BLOCK, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, HOST:

And I'm Robert Siegel.

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?

(LAUGHTER)

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.

Copyright © 2013 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.