Virtual currencies targeted, money laundering a growing concern


WASHINGTON, June 5 — The US government has made several moves in recent weeks to enforce regulation of virtual currencies in an effort to prevent money laundering, Japan’s Jiji Press reported.

The near anonymous transfer of virtual money across international borders poses a significant challenge to regulating financial transactions.

Legal action was brought against unlicenced money transfer businesses, including what is believed to be “the largest international money laundering prosecution in history,” according to the Department of Justice.

On May 28, the US Attorney’s Office for the Southern District of New York charged a money transfer company called Liberty Reserve and seven related individuals with money laundering and operating an unlicensed money services business (MSB).

Five of those charged have been arrested and the contents of 45 bank accounts were either seized or frozen.

According to the indictment, Liberty Reserve had laundered more than US$6 billion (RM18.5 billion) in criminal funds over seven years, in the process becoming the “financial hub of the cybercrime world.”

US Attorney Preet Bharara noted that the action “is an important step towards reining in the ‘Wild West’ of illicit Internet banking.”

This follows the issuing of two seizure warrants against the U.S. subsidiary of a prominent Tokyo-based currency exchange known as Mt. Gox, which allows users to buy and sell the digital currency Bitcoin.

Both warrants accused the subsidiary, Mutum Sigillum LLC, of failing to register as an MSB, a requirement for such a business.

The contents of its accounts named in the warrants were subsequently seized.Mutum Sigillum had utilised Dwolla, an online payment processor, to transmit US payments for Mt. Gox.

In mid-March, the Financial Crimes Enforcement Network, the Treasury’s financial crimes division, known as FinCEN, published guidance on the use of virtual currencies. According to the guidance, anyone who exchanges virtual currency for real currency is considered to be a money transmitter.

Those who do so must register with FinCEN and provide transactional reports, both for any suspicious purchases and for any transaction over US$10,000.

Put together, all these moves appear to indicate a growing concern that virtual currencies have become a major conduit for money laundering.

In the investigation against Liberty Reserve, the US government obtained seizure warrants for 28 banks and the investigation involved law enforcement in 17 countries as far apart as China and Cyprus.

A related court declaration noted that “the Government’s investigation has required unprecedented international cooperation.”

The scope of this international effort demonstrates just how serious the United States views the dangers of virtual currency. Across the Pacific, Japan’s Financial Services Agency has indicated it also has an interest in Bitcoin and is tracking new information about it.

The reasons that make virtual money a convenient avenue for illicit transactions also make it useful for law-abiding citizens.

Digital currencies facilitate transmitting money to family abroad without the hassle of bank wires. However, this regulatory effort could impact whether Bitcoin and others become an acceptable and mainstream means of payment.

While the possibility remains that authorities could target virtual currencies themselves, they seem likely to more strictly enforce regulatory requirements in an effort to monitor exchanges. – Bernama