> David Molnar writes:
> > If payment mixes come online and the only visible users are "money
> > launderers", then this common carrier argument will be difficult.
> > Unfortunately, it seems to me that the early adopters of payment mixes may
> > well be the "money launderers" -- it may take a while to convince other
> > people that a payment mix is essential for their privacy and that they
> > should use it.
Anonymous chimes in:
> Actually, payment mixes are absolutely useless to money launderers in
> the present financial system. They would be used initially only by
> people interested in protecting financial privacy.
Well, no.
> The goal of a money launderer is to take funds from illicit activities and
> get them into a form where they can be spent without arousing suspicion.
> In practice the funds almost always start as cash. People don't write
> checks to buy drugs. Therefore the problem facing the launderer is how
> to take large quantities of cash, thousands or even millions of dollars,
> and get it into the banking system in some quasi legitimate way.
This is only one goal on the Money Launderer's list.
Laundering money is generally a three stage process.
Placement
Layering
Integration
Placement, where the cash/instruments are actually "placed" into the financial
system. (See Also: Coin Laundromats, Bars, Cash Only Businesses, Smurfing,
Reporting Requirements, CTRs, Currency Exchanges and Small Huts with Bill
Counters at the end of Makeshift Landing Strips on Caribbean Islands.)
Layering, where the origin of (now digital, or at least "electronic") funds is
obfuscated through a series of "layers" and buffers. (See Also: International
Business Corporations, Tax Fraud, Offshore Banks, Wire Transfers, Banking
Secrecy, Bearer Shares and Offshore Trusts).
Integration, where the (now electronic/digital and clean appearing) funds are
"integrated" back into the overt economy, even the U.S. stock market. (See
Also: Offshore Investment Funds, Offshore S&P index funds, Offshore Investments
in Domestic Operating Corporations, Offshore Development Corporations, Offshore
Holding Companies, Creative Transfer Pricing, Import/Export Pricing "Spread"
and Back to Back Loans).
> The point is, payment mixes will not work with cash!
Na, und?
> You can't shovel
> green paper into your phone line.
Na, und?
> In order to use a payment mix,
> the money must have already entered the banking system.
See above.
> That is the
> point where the drug dealer gets caught.
False. Few criminal actions against "drug dealers" are as a result of
investigations into actual money laundering, placement stage or not. Major
drug dealers give their bulk cash to professional launderers and take a bank
check for the amount (minus a fee) on the spot. The launderer then assumes the
entire risk of dealing with the cash. Drug Dealers get caught with drugs or
weapons possession, or are arrested on outstanding and unrelated warrants
or....
> and that is the point where
> the laundering must occur.
False. It is merely the very first step in Laundering. (And, in fact, the
easiest). Open Bar/Restaurant/Coin Operated Laundry. Open bank account.
Speak to manager of bank explaining business plan of bar and need for special
cash and related pickup or deposit services. File for CTR exemption status
with bank. Begin depositing cash at will. Lather, Rinse, Repeat. Total setup
time: 30-45 days.
> The payment mix cannot play a part.
False.
> A payment mix (or an ecash system) which is based on electronic money
> transfers is good only for financial privacy.
False.
> It is a useless tool for
> money laundering
False.
Digitally mixed cash would be very useful to professional launderers in the
layering and integration steps, and particularly the layering step.
A more detailed explanation is left as an exercise to the reader.
> and we should not be frightened away by attempts to
> link the two.
True, to an extent.
> Granted, at some point in the future it may become possible to purchase
> many forms of contraband electronically. Once we get to the point where
> homeless drug addicts carry smart cards with wireless data links so they
> can beam funds for their fix as they stumble into crack houses, then it
> will be appropriate to view payment mixes as a boon to money launderers.
> But let's get real; this is decades away if it ever happens.
Maybe, false, wrong and not really. See above.
> Best to get privacy-protecting financial payments established and
> secure now, long before there is any legitimate objection on the part
> of financial regulators.
Agree.
> Working strictly within the electronic money
> transfer system, these tools can only be used for legitimate protection
> of financial privacy.
This remains to be seen.
> Money laundering is a complete red herring.
Disagree. See above.
