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Money Laundering and Funding Terror Using BitcoinConvertible Virtual Currency and Other Digital CurrencyProducts
Disclosures
The information presented in this paper examines potential money laundering situations and possible terror funding scenarios which utilize Bitcoin convertible virtual currency and other digital currency products. The research attempts to identify US laws and regulations that are ineffective in supervising or regulating the movement of funds through new Internet digital currency products and emerging mobile payment devices. Despite the fact that many of Bitcoins US regulatory burdens still lay ahead! most Bitcoin companies in the United States are committed to operating as legal! regulated financial businesses. "owever! some individuals and companies! in the US and around the world! do not share that commitment. #any parties engaged in business with US customers are located in faraway $urisdictions and have no reason or desire to become properly licensed in the United States. These bad actors are focused on circumventing important US financial regulations and ignoring both federal and state law. %inally! there are many existing US regulations that &miss themar'( and miserably fail in supervising and securing the movement of digital currency in and out of the US.The intent of presenting this information is to focus attention on specific Bitcoin digital currency mar'ets! products! businesses and individuals that are engaged in the unsupervised and unlicensed money transmitting business. Discussion is also directed at unveiling ineffective rules and &blind spots( in US laws that permit the free and unobstructed cross)border movement of cash e*uivalents +Bitcoin,.These situations and examples accurately depict how easy it is to move money anonymously using non)ban' digital currency products. This information details methods which individuals are using today which allow them to circumvent US financial regulations and engage in criminal activity +including possible terror funding,. This paper does not promote or condone illegal activity. The material is presented with a desire to change and strengthen existing regulations and prevent illegal activity.The situations presented were modeled using real people! businesses! ban's and popular digital currency products. In order to accurately represent real world situations! the legal names of companies! persons! ban's! websites! and businesses were included in this paper. -nyone doubting the possibility of these transactions occurring today can gain proof by following the detailed research. The reference material includes screenshots! diagrams and documents attached as exhibits.The conclusions drawn from this information! may suggest that current US financial regulations are not yet compatible with modern digital currency products or US Bitcoin activity.This paper does not promote or condone illegal activity. The material is presented with the desire to change and strengthen existing US regulations and prevent illegal activity.
Introduction
This paper eamines every!ay metho!s o" movin# "un!s an! laun!erin# money throu#h $itcoin convertible virtual currency% $itcoin echan#e a#ents an! common !i#ital currency tra!in# techni&ues. 'ttention is "ocuse! on the lac o" eistin# en"orcement in
the * an! the ina!e&uate * "inancial re#ulations #overnin# both $itcoin pro!ucts an! those en#a#e! in the trans"er an! echan#e o" $itcoin.$itcoin "unctions as a type o" electronic cash. $itcoin !oes not have the common "eatureso" electronic online payment systems or mobile payment systems. $ecause o" !ecentrali+e! "eatures% $itcoin transactions "unction very much lie cash payments.The nite! *tates has strict la,s an! re#ulations #overnin# the movement o" cash. -n the *% it is a crime to trans"er or !eposit a lar#e amount o" cash throu#h any "inancial institution ,ithout properly reportin# the movement o" this money. -t is also a crime in 'merica to cross the bor!er% either enterin# or eitin# the *% ,ith a lar#e amount o" cash or cash e&uivalents inclu!in# value hel! on prepai! car!s or store! value !evices. ar#e cash transactions an! the movement o" cash across * bor!ers are strictly monitore! an! subect to "e!eral reportin# re&uirements.espite the "act that $itcoin acts as an electronic version o" cash% proper state an! "e!eral re#ulations "or supervisin# the echan#e o" $itcoin an! the cross bor!er reportin# o" lar#e $itcoin transactions are noneistent.The spee! at ,hich an in!ivi!ual in the * can echan#e cash into $itcoin an! circumvent eistin# cash reportin# re&uirements is eye openin#.-t is alarmin# to learn o" the unlicense!% unre#istere! an! unsupervise! $itcoin a#ents% tra!ers% bans an! echan#es in 'merica that are en#a#e! in $itcoin "inancial transactions seemin#ly unboun! by any * "inancial "e!eral or state re#ulations.-n or!er to properly #ro, an! "lourish as a ne, metho! o" payment% $itcoin an! other ne, !ecentrali+e! currency pro!ucts nee! a healthy * consumer re#ulatory environment. or this maret to !evelop% there are many chan#es ,hich nee! to occur in ho, #overnment a#encies attempt to control !ecentrali+e! !i#ital currency.'t this time% the nite! *tates nee!s to !evelop a much stron#er re#ulatory path,ay "or,ar! "or all !i#ital currency pro!ucts. This path must be #eare! to,ar!s convenience an! the epan!in# the 'merican consumer maret. 3e#ulations !o not nee! to restrict le#al consumer marets.$itcoin echan#e a#ents an! consumer services% inclu!in# the $itcoin oun!ation% nee! to tae the initiative an! propose ne, more mo!ern comprehensive #ui!ance an! solutions. Those !i#ital currency pro"essionals% liaisin# ,ith re#ulators% nee! to loo outsi!e the * "or eamples o" success"ul ,orable5 re#ulatory structures ,hich can be importe! an! mo!ele! "rom "orei#n !i#ital currency provi!ers. *everal o" these eistin# "orei#n structures translate ,ell to the * maret. '!!itionally% ne, technical solutions have recently emer#e! that% i" !evelope! in the *% coul! "ast trac ne, comprehensive !i#ital currency re#ulatory solutions.6l! * banin# re#ulations have not proven to be a #oo! match "or ne, technolo#y an!
#lobal !i#ital currency pro!ucts. 6ther countries such as the nite! 7in#!om an! 3ussia o""er ,orin# !i#ital currency solutions ,hich can be a!apte! "or the * maret. These solutions !eliver vast bene"its to the la, en"orcement community% $itcoin merchants an! consumers. This type o" #overnance% ,hen paire! ,ith ne, technolo#y coul! soothe * $itcoin #ro,in# pains.' ,ell re#ulate! an! sa"e $itcoin consumer maretplace shoul! al,ays be pre"erre! over to!ay8s mysterious an! uncertain re#ulatory environment. This paper taes a loo at someissues pla#uin# $itcoin in the nite! *tates. There are solutions to these * $itcoin issues available at this time.
Prepaid ccess
The capacity to transact lar#e anonymous "un! trans"ers online or throu#h a mobile !evice "rom remote locations maes $itcoin !ecentrali+e! convertible virtual currency a !esirable tool "or criminals en#a#in# in money laun!erin# an! the anonymous cross bor!er movement o" "un!s.-n 2009% the * :overnment publishe! the ;ational Money aun!erin# *trate#y ,hich ma!e clear an! use"ul statements re#ar!in# prepai! access (prepai! !ebit car!s).<<...an emer#in# cash alternative "or both le#itimate consumers an! money laun!erers alie. ' .*. -mmi#ration an! Customs =n"orcement o""icial cite! a case eample ,here <<hun!re!s o" >prepai! car!s? ,ere "oun! conceale! in a compartment similar to those use! to conceal cash% !ru#s an! other contraban!. The car!s are also bein# use! by criminal or#ani+ations to cover <epenses incurre! by their couriers as they transport cash% !ru#s an! other contraban! across the country...
The Cre!it Car! 'ccountability 3esponsibility an! isclosure 'ct o" 200A or simply the BC'3 'ctB is a "e!eral statute passe! by the * Con#ress an! si#ne! into la, on May 22% 200A. That le#islation a#ain reco#ni+e! the movement o" ille#al "un!s throu#h prepai! access.BCon#ress enacte! the re&uirements o" the C'3 'ct because o" the potential to substitute prepai! access "or cash an! other monetary instruments as a means to smu##le the procee!s o" ille#al activity into an! out o" the nite! *tates% as various reports an! cases have su##este!. -n a May 1% 200A statement% *enator Collins% intro!ucin# the amen!ment that a!!e! *ection D0 to the C'3 'ct% state!E<<>*?tore! value car!s have been use! an! are bein# use! by Meican !ru# cartels to smu##le their !ru# revenues bac to Meico. The epartment o" Fustice estimates that up to G24 billion in cash is smu##le! into Meico each year "rom
1
.* epartment o" the Treasury% (2009).
//0 1ational #oney 2aundering Strategy
. Hashin#ton% CE .* epartment o" the Treasury% p.A.