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Bitcoins? Silk Road? Understanding Digital Crime

  • November 20, 2013

smile Most recently, law enforcement agencies closed The Silk Road, a popular,  underground, illegal, drug and crime emporium, that used the Bitcoin as a  medium of currency and exchange.

 While the establishment of a crime emporium is not new – there have always  been illegal and nefarious establishments that have come and gone through the  ages – the establishment of a virtual, illegal, enterprise, is a remarkable shift  from old paradigms in crime.

Especially, of interest, is the use of a virtual currency(bitcoin), that is strikingly unregulated. This shift to a virtual currency signals a huge shift in behavior for organized criminals. For decades, criminals have used cash, with the dollar being the preferred medium.

In the 1960’s, narcotic traffickers would deposit their ill-gotten gains, into banks. Once deposited, the cash could be easily money laundered via transfer to foreign bank account. Banks were ok with it – since it gave them an influx of cash, that could then be loaned out. With the Bank Secrecy Act, federal government made it impossible to launder money through the U.S. banking system. Under the terms of this act, banks had to report cash transactions over $10,000 via a currency transaction report.

The shift in using digital currency creates a whole new suite of problems: primarily, because it’s almost impossible to regulate it. The most successful of these was a Costa Rica payment processor – called Liberty Reserve. This company would accept “dirty money,” convert it into Liberty Dollars, and then convert it back into the currency of choice. Eventually, it was shut down – but by this time, $6 billion had already been laundered.

Unlike Liberty Reserve, Bitcoin is not invisible. This cryptocurrecy is based on the “Dark Web,” concept. Due to the softwares architecture, it’s possible to see the exchanges, but it’s not possible to see who is involved in the transcation.

The FBI argues that the Bitcoin has potential, when it comes to money launering, and should not be ignored. Given the speculation surrounding bitcoins, it’s likely that drug enterprises will ditch old-fashioned cash, for this digital currency.


Are Bitcoins the Criminal’s Best Friend? – Bloomberg Mon, 18 Nov 2013 18:30:05 GMT

BloombergAre Bitcoins the Criminal’s Best Friend?BloombergThe shift to a virtual currency signals a huge — and worrisome — shift in behavior for criminals, who for decades have favored cold, hard cash, with the dollar the preferred medium of exchange. Just how alarmed we should be is one of the topics of a …Virtual currencies attract criminalsBusinessTechBitcoin price surges to over $900 after Senate hearingDaily MailUS officials – virtual currencies vulnerable to money launderingReuters UKL …

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