FinCEN today imposed the most restrictive Special Measure under Section 311 of the USA PATRIOT Act on Liberty Reserve, a virtual currency system that is alleged to have been used to launder $6 billion. The Section 311 designation will effectively prevent Liberty Reserve from being able to accept or disburse US dollars to its clients.
Unlike Bitcoin, which is a decentralized system predicated on anonymity to prevent intrusion by governments or marketers, Liberty Reserve is a centralized for-profit virtual payments system. Like the forced closure of Mt. Gox's account on Dwolla by the Department of Homeland Security, Liberty Reserve's sanctioning is partly driven by its being an unlicensed money services business.
FinCEN was very clear on the dangers of Liberty Reserve's business model:
Liberty Reserve’s virtual currency appeals to illicit users because it provides the capability to conduct anonymous transactions around the world. Liberty Reserve does not conduct verification of account registration for individuals using the system, asking only for a working e-mail address, and allow an individual to open unlimited number of accounts. By paying an additional “privacy fee,” users can hide their internal unique account number when sending funds within the Liberty Reserve system. Once an account is established, Liberty Reserve virtual currency can then be sent, instantly and anonymously, to any other account holder within the global system. For example, a cyber-criminal online marketplace would accept payment in Liberty Reserve transfers for illicit activity that included spam services and key-logging programs used to steal personal information, such as account numbers and passwords, from innocent victims. Also for anonymous sale were destructive malware programs designed to assault financial institutions, as well as lists of information from thousands of compromised personal accounts.
Concurrent with this action, the US Attorney for the Southern District of NY unsealed indictments against Liberty Reserve and its 7 principals.
Gee… how often do you see a story like this on TV? Well, you did Tuesday – Rachel Maddow covered it on MSNBC.
Link:
FinCEN Finding of Liberty Reserve as a Financial Institution of Primary Money Laundering Concern
FinCEN Notice of Proposed Rulemaking
Posted with BlogsyFiled under: Anti-Money Laundering, FinCEN Updates
