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Modern business practices targeted for money laundering

Modern business sometimes use unusual modes of operation such as alternative currency exchanges which can present the risk of money laundering charges.

Federal law enforcement officials know the best way to find suspected criminals is to follow the money. In cases of money laundering, they follow the trail back to where the money came from, which is sometimes a virtual place.

Online currency exchanges of bitcoins, and exchanges such as Liberty Reserve and WebMoney, are being targeted for their involvement with shady and illegal enterprises.

Virtual currencies attacked

Digital or “virtual” currencies such as Bitcoin and online exchanges like Liberty Reserve and WebMoney are popular with individuals and businesses that wish their transactions to remain unregulated. Some exchanges operate like underworld banks that will not look too closely at the money they take on deposit, making them a worldwide haven for drug dealers, identity thieves and other criminals.

In a 2013 indictment, law enforcement officials from 17 countries joined together to charge Liberty Reserve, based in Costa Rica, with hosting over $6 billion in illegal monetary transactions. The website was accused of serving as the bank of choice for the criminal underworld. Not all transactions on the site were illegal, but its lack of identity verification drew nicknames such as the “PayPal for criminals.”

Liberty Reserve foreshadowed trouble for Bitcoin

At first, Bitcoin was seen as decentralized with no set leader to arrest, making it difficult to assign criminal responsibility when used for illegal transactions. But that changed with the arrest of the operator of the black market website Silk Road, which sold myriad drugs and accepted bitcoins as payment. That led to the indictment of the president of the trade group Bitcoin Foundation for money laundering and conspiracy for selling bitcoins to users of Silk Road knowing they would be spent on illicit merchandise.

Bitcoin, which is not backed by any bank or government, has a value which fluctuates with user demand. Government agencies are concerned not only with the use of bitcoins for illegal purposes, but with the viability of the currency, especially after the failure of the Japanese Bitcoin exchange Mt. Gox.

New York experts call for more regulation

With many officials struggling to deal with the crimes that sprung up once Bitcoin and other virtual currencies became popular, New York officials have called for regulations to control transactions more and to require more identification of users.

For enthusiasts who merely enjoy the ease and speed of Bitcoin transactions, a more regulated system would avoid charges of money laundering in using the system for businesses. Also, many businesses have to deal with IRS regulations on handling large sums of cash, and sometimes get in money laundering trouble for not reporting transactions over $10,000 or “suspicious activity.”

Bitcoin trade group tries to control regulatory future of the digital currency

Faced with the prospect of greater government oversight, the Bitcoin Foundation recently hired a lobbying firm in Washington to help guide the type of scrutiny the currency may be subject to. Greater regulatory requirements may increase the cost of using Bitcoin, which tears at a part of its current appeal in comparison to transferring money using traditional currencies. For example, the U.S. Treasury declared last year that businesses that facilitate the exchange of bitcoins must follow anti-money laundering rules. In addition to money laundering concerns, proponents of Bitcoin will have to address concerns of consumer fraud. Businesses and individuals who use digital currencies should be well informed of the rules governing the use of virtual currencies to allay any fears of criminal risk.

Do not go it alone

Fighting federal charges of money laundering is difficult without experienced legal assistance at your side. Criminal charges can hurt your reputation and your ability to do business, so it is essential to consult with a New York criminal defense attorney.

Keywords: bitcoin, money laundering, criminal defense, New York