Silk Road forums
Discussion => Security => Topic started by: alpine on April 12, 2012, 08:56 pm
-
might be a dumb question but just wondering. and if the person buying does something illegal would you be liable?
-
might be a dumb question but just wondering. and if the person buying does something illegal would you be liable?
Buying and selling Bitcoins in itself is not illegal and does not amount to money laundering. If however you earn an income as I do from trading in BTC, in theory you should declare this on your tax return and failure to do so would be a felony in the USA and a crime in the UK where I'm from.
It's worth saying in the first instance that Bitcoins are designed to be an anomymous system of currency so the point is fairly moot but the answer to your question is no, it wouldn't be illegal. If you buy a drug addict's motorcyle for cash and he then uses that cash to buy a gun to hold up a liquor store, the responsibility would legally fall squarely upon his shoulders, even though you'd done business before.
The law is less clear about the kind of business I am in whereby you assist in transforming the proceeds of Bitcoin sales from illegal activities into legitimate money. It's not in itself illegal to make the conversion however knowingly accepting a consideration from the proceeds of crime does place you in a questionable position legally.
In practice however this is not an issue as if I choose to mail you 100 dollars in exchange for 25 Bitcoins, it would be near impossible to detect the transaction had taken place. Moreover it would be extremely difficult to prove that those particular Bitcoins a) belonged to you and b) had been earned illegally, as there are many lawful uses for them.
In a nutshell, it is illegal to launder money, whether you use Bitcoins or regular cash to do it. However trading in Bitcoin does not in itself mount to money laundering, that's simply one type of crime that can be committed through the Bitcoin network.
V.
-
Using bitcoin mixes is money laundering. Using bitcoin to pay for drugs may be money laundering in itself. Bitcoin is somewhat of a legal gray area right now afaik, but they could probably try and say it is money laundering depending on how you go about using it.
Actually being a bitcoin exchanger is almost certainly illegal in the USA unless you have licenses and follow some sort of know your customer regulations.
-
If trading in Bitcoin amounted to money laundering exchanging Linden Dollars on Second Life would be too - No, I think this is a rather narrow interpretation of the law.
A bitcoin mixer simply swaps your Bitcoins for someone else's. It is true that it makes it close to impossible to detect the passage of Bitcoins through a network from one person to another. It's also true to say that Bitcoin mixing services can be used (and are!) for money laundering services. This said, running an exchange of this nature is no more illegal than exchanging any other kind of virtual currency for another, for which a licence is not required.
As I said before however the point is moot in any case as Bitcoins are designed to be used anonymously. KYC procedures would rather defeat the point of the exercise.
In theory if you did earn an income from exchanging or trading in Bitcoins, this should be declared and taxed but in practice it would be extremely difficult to detect unless you were stupid enough to transfer large unexplained sums of money to your bank account.
Hope this helps,
V.
Using bitcoin mixes is money laundering. Using bitcoin to pay for drugs may be money laundering in itself. Bitcoin is somewhat of a legal gray area right now afaik, but they could probably try and say it is money laundering depending on how you go about using it.
Actually being a bitcoin exchanger is almost certainly illegal in the USA unless you have licenses and follow some sort of know your customer regulations.
-
I think Wikipedia sums it up quite nicely,
"Money laundering refers to the process of concealing the source of legally and illegally and grey area obtained monies. "
So by this definition, nearly everything is money laundering. If I legally sell a pen, and then hide the income from that pen, I am engaging in money laundering according to the above statement.
It's another one of those stupid blanket laws that can be arbitrarily applied to ANYONE who doesn't keep good books basicly.
-
A bitcoin mixer simply swaps your Bitcoins for someone else's. It is true that it makes it close to impossible to detect the passage of Bitcoins through a network from one person to another. It's also true to say that Bitcoin mixing services can be used (and are!) for money laundering services. This said, running an exchange of this nature is no more illegal than exchanging any other kind of virtual currency for another, for which a licence is not required.
Bitcoin mixing is clearly money laundering, particularly since you need to split the coins over multiple accounts to hide input/output correlations. Splitting finances over multiple accounts to avoid being investigated for money laundering is pretty much the textbook definition of account structuring, which is in itself chargeable under money laundering statutes. Not to mention bitcoin mixes exist for the sole purpose of obfuscating the source and or destination of money, which is essentially the textbook definition of money laundering.
No person shall, for the purpose of evading the reporting requirements of section 5313 (a) or 5325 or any regulation prescribed under any such section, the reporting or record keeping requirements imposed by any order issued under section 5326, or the record keeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508— [...] (3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.
As I said before however the point is moot in any case as Bitcoins are designed to be used anonymously. KYC procedures would rather defeat the point of the exercise.
First I would like to say that bitcoin was not designed with anonymity in mind. If they wanted to they could have built anonymity right into the protocol, but they didn't for whatever reason (possibly in an attempt to make it less blatantly money laundering) and anonymity needs to be layered on with third party mixing services. Bitcoin is actually very much not anonymous, the entire transaction history is viewable by anyone and it is entirely non-obfuscated. Using Tor with Bitcoin can give you network layer anonymity, but that is because Tor was designed for anonymity and has next to nothing to do with Bitcoin. Bitcoins primary design goal appears to be censorship resistance, it will be infinitely harder to end Bitcoin versus centralized E-currency companies like E-gold. Bitcoin also aimed to be seizure/forfeiture resistant, since you control your own keys which control your bitcoins, third parties can't steal them from you. Bitcoin also of course aims to do all the things that any other E-currency aims to, let you send and receive value over the internet. Alas, anonymity is not a property of bitcoin.
Second, I would like to point out that the government doesn't give a flying fuck what bitcoin was designed to do, if you don't follow know your customer rules and run a financial exchange it isn't going to do a bit of good to argue that the software you use was designed for anonymity and that following the governments know your customer rules would be counter productive to this end goal. Running any sort of financial exchange without following the applicable know your customer and licensing rules is illegal.
-
I think Wikipedia sums it up quite nicely,
"Money laundering refers to the process of concealing the source of legally and illegally and grey area obtained monies. "
So by this definition, nearly everything is money laundering. If I legally sell a pen, and then hide the income from that pen, I am engaging in money laundering according to the above statement.
It's another one of those stupid blanket laws that can be arbitrarily applied to ANYONE who doesn't keep good books basicly.
Yes. In practice money laundering is essentially anything that involves money that the government has not explicitly approved. Several E-currency exchangers and services have been busted in USA and charged with money laundering, even ones that were apparently taking some efforts to follow the law. You would really need to have solid brass balls to operate a bitcoin exchange in USA unless you get written permission from the government saying that you are allowed to do so (probably in the form of some license) + keep detailed records on each of your customers + fully comply with suspicious activity reporting laws etc etc etc.
-
I think Wikipedia sums it up quite nicely,
"Money laundering refers to the process of concealing the source of legally and illegally and grey area obtained monies. "
So by this definition, nearly everything is money laundering. If I legally sell a pen, and then hide the income from that pen, I am engaging in money laundering according to the above statement.
It's another one of those stupid blanket laws that can be arbitrarily applied to ANYONE who doesn't keep good books basicly.
Yes. In practice money laundering is essentially anything that involves money that the government has not explicitly approved. Several E-currency exchangers and services have been busted in USA and charged with money laundering, even ones that were apparently taking some efforts to follow the law. You would really need to have solid brass balls to operate a bitcoin exchange in USA unless you get written permission from the government saying that you are allowed to do so (probably in the form of some license) + keep detailed records on each of your customers + fully comply with suspicious activity reporting laws etc etc etc.
One of the many legal uses for Bitcoin is to send money abroad. I do this for someone close to me who lives in New Zealand (I am English). I use my bank account to buy Bitcoins via Intersango, then move the coins to BitNZ, sell them and withdraw them to my friend's NZ bank account. It is true that there is a layer of deniability to this transaction but it is not illegal in itself.
The question of whether the exchange themselves are laundering money comes down to whether their trade constitutes offering a financial service. The IRS in the USA was able to pin this on E-Gold despite the fact the organisation didn't own a bank account. As I said the point is moot in any case as it's possible to set up and run an exchange anonymously, although such exchanges have not enjoyed much success in practice.
V.
-
Under current law, no more so than buying chickens to barter for hogs.
Government has no right to tell individuals and communities what they can and cannot place value in. The value of the bitcoin is derived from the community that uses it.
-
Under current law, no more so than buying chickens to barter for hogs.
Government has no right to tell individuals and communities what they can and cannot place value in. The value of the bitcoin is derived from the community that uses it.
I think you're right, exchanging money for a consideration or swapping one form of good or service for another does not amount to money laundering. As I said previously, under UK law at least bartering Bitcoins for cash would count as an income and in theory should be declared on your tax return.
Bitcoins are a common method of purchasing illegal goods and it'd be very naive to say that they are not commonly used to facilitate illegal transactions e.g purchases of drugs and weapons but trading in them is no more illegal than using a twenty dollar bill to fill up your car.
V.
-
keep in mind that common sense and law are not the same thing. I think there is no doubt at all that mixes would be considered (and are) money laundering in all cases (A. they structure money over multiple accounts, B. They exist for the sole purpose of obfuscating the source and destination of finances). I think in USA exchangers who don't follow strict guidelines will likely find themselves arrested for money laundering. Buying sending and receiving bitcoins is less to worry about though, mixing is certainly money laundering (for all involved) and running an exchange is also very likely to be considered money laundering unless the exchange is licensed and follows all of the regulations.
It would be nice to hear an actual lawyers opinion on these things instead of people merely speculating. I can show a few sources of government officials claiming that bitcoin = money laundering, and there are plenty of cases of centralized e-currencies and exchangers being charged with money laundering, and bitcoin mixing has been called structuring and money laundering by at least one legal analyst (I can't find that link atm but might dig it up later) .... but I can't point to any specific law (other than in regards to structuring)
What he does go after, however, is Bitcoin:
"It's an online form of money laundering used to disguise the source of money, and to disguise who's both selling and buying the drug," said Schumer.
it is also pretty obvious that exchangers lawyers are telling them that the government will consider them as financial exchangers (which they are) and regulate them as such
TradeHill Chief Executive Officer Jered Kenna cited “increasing regulation” and a lack of funds. “TradeHill can not operate in it’s [sic] current capacity without proper money transmission licensing … [W]e have deemed the best course of action is to halt trading and pursue licensing while raising funds,”
-
keep in mind that common sense and law are not the same thing. I think there is no doubt at all that mixes would be considered (and are) money laundering in all cases (A. they structure money over multiple accounts, B. They exist for the sole purpose of obfuscating the source and destination of finances). I think in USA exchangers who don't follow strict guidelines will likely find themselves arrested for money laundering. Buying sending and receiving bitcoins is less to worry about though, mixing is certainly money laundering (for all involved) and running an exchange is also very likely to be considered money laundering unless the exchange is licensed and follows all of the regulations.
It would be nice to hear an actual lawyers opinion on these things instead of people merely speculating. I can show a few sources of government officials claiming that bitcoin = money laundering, and there are plenty of cases of centralized e-currencies and exchangers being charged with money laundering, and bitcoin mixing has been called structuring and money laundering by at least one legal analyst (I can't find that link atm but might dig it up later) .... but I can't point to any specific law (other than in regards to structuring)
What he does go after, however, is Bitcoin:
"It's an online form of money laundering used to disguise the source of money, and to disguise who's both selling and buying the drug," said Schumer.
it is also pretty obvious that exchangers lawyers are telling them that the government will consider them as financial exchangers (which they are) and regulate them as such
TradeHill Chief Executive Officer Jered Kenna cited “increasing regulation” and a lack of funds. “TradeHill can not operate in it’s [sic] current capacity without proper money transmission licensing … [W]e have deemed the best course of action is to halt trading and pursue licensing while raising funds,”
Yes, suggest we wait to get a lawyer on board. I've actually been trying to get in touch with a US Lawyer for some time now who'll help me set up shop in the good old US of A so if any of you are reading, please get in touch.
V.
-
" this should be declared and taxed but in practice it would be extremely difficult to detect unless you were stupid enough to transfer large unexplained sums of money to your bank accoun "
now i would taxes but how much is to much to put into the bank? I heard over 10,000 gets reported to the irs so I am guessing putting in over 10,000 at one time would not be good. and if its gets reported what does that mean? if its not illegal then i guess not much would happen besides paying tax.
-
" this should be declared and taxed but in practice it would be extremely difficult to detect unless you were stupid enough to transfer large unexplained sums of money to your bank accoun "
now i would taxes but how much is to much to put into the bank? I heard over 10,000 gets reported to the irs so I am guessing putting in over 10,000 at one time would not be good. and if its gets reported what does that mean? if its not illegal then i guess not much would happen besides paying tax.
I was reading that Police are empowered to confiscate assets they suspect are the result of drug dealing. There is a red flag for sums over a certain amount (although it's much lower here in the UK) which might warrant further investigation. Since our strongest defence is our anonymity I would suggest using your Bitcoins to buy cash / precious metals rather than withdraw large sums to your account.
I should hold my hands up at this stage and say I'm planning to offer this service in the near future but it doesn't make it any less of a good idea! :-)
V.
-
keep in mind that common sense and law are not the same thing. I think there is no doubt at all that mixes would be considered (and are) money laundering in all cases (A. they structure money over multiple accounts, B. They exist for the sole purpose of obfuscating the source and destination of finances). I think in USA exchangers who don't follow strict guidelines will likely find themselves arrested for money laundering. Buying sending and receiving bitcoins is less to worry about though, mixing is certainly money laundering (for all involved) and running an exchange is also very likely to be considered money laundering unless the exchange is licensed and follows all of the regulations.
It would be nice to hear an actual lawyers opinion on these things instead of people merely speculating. I can show a few sources of government officials claiming that bitcoin = money laundering, and there are plenty of cases of centralized e-currencies and exchangers being charged with money laundering, and bitcoin mixing has been called structuring and money laundering by at least one legal analyst (I can't find that link atm but might dig it up later) .... but I can't point to any specific law (other than in regards to structuring)
What he does go after, however, is Bitcoin:
"It's an online form of money laundering used to disguise the source of money, and to disguise who's both selling and buying the drug," said Schumer.
it is also pretty obvious that exchangers lawyers are telling them that the government will consider them as financial exchangers (which they are) and regulate them as such
TradeHill Chief Executive Officer Jered Kenna cited “increasing regulation” and a lack of funds. “TradeHill can not operate in it’s [sic] current capacity without proper money transmission licensing … [W]e have deemed the best course of action is to halt trading and pursue licensing while raising funds,”
Any attempt to hide money to avoid taxation could be considered money laundering... I was more under the impression that OP was simply asking if buying and subsequently reselling btc was, in and of itself, a form of money laundering- but I could have misunderstood the question.
If the income is claimed, and taxed, then no, it's not laundering. How could it be? If an attempt is made to shield money from taxation, then I would say absolutely.
-
ok great so if it is legal and i pay taxes would putting under 10,000 in the bank a day be ok? i guess they could still flag it but what would happen if they flag it? if it is legal i dont think they could do anything right? i mean i am sure theres people that must put a few thousand in at a time. and if i sell via western union is it a good idea to use my real name? thanks so much for all the replies it been very helpful.
-
ok great so if it is legal and i pay taxes would putting under 10,000 in the bank a day be ok? i guess they could still flag it but what would happen if they flag it? if it is legal i dont think they could do anything right? i mean i am sure theres people that must put a few thousand in at a time. and if i sell via western union is it a good idea to use my real name? thanks so much for all the replies it been very helpful.
Bitcoins are not illegal.
Buying and selling bitcoins for profit is not illegal.
Evasion of income tax is illegal.
Buying illegal items with bitcoins is illegal.
There's no harm in using your real name on legitimate, legal transactions. Just keep in off the forums, and off SR. :)
-
ok great so if it is legal and i pay taxes would putting under 10,000 in the bank a day be ok? i guess they could still flag it but what would happen if they flag it? if it is legal i dont think they could do anything right? i mean i am sure theres people that must put a few thousand in at a time. and if i sell via western union is it a good idea to use my real name? thanks so much for all the replies it been very helpful.
Bitcoins are not illegal.
Buying and selling bitcoins for profit is not illegal.
Evasion of income tax is illegal.
Buying illegal items with bitcoins is illegal.
There's no harm in using your real name on legitimate, legal transactions. Just keep in off the forums, and off SR. :)
I didn't think buying/selling for a profit is illegal - what's the evidence for that? You might need to be a proper business and pay taxes, but buying/selling BTCs is not fundamentally different than buying/selling any digital good (such as WoW assets).
Evading tax: definitely illegal
Buying illegal items with OR selling BTC to someone who intends to use them to break the law: 100% illegal. NOTA BENE: LE has to show that in your sales/purchases of BTCs you were INTENDING to break the law.
So - like others have said: stay naive
-
buying and selling bitcoins for profit might be illegal if you don't have the proper licenses, but I am sure that depends to a large extent on the scale you do it. There is a difference between trading your twenty euros to your friend for some dollars, and setting up a business that exchanges euros and dollars.
-
Remember what happened to E-gold
-
so does anyone know what happens if the bank suspects something suspicious with a account? how would i prove where my money comes from and that its legal?
-
" this should be declared and taxed but in practice it would be extremely difficult to detect unless you were stupid enough to transfer large unexplained sums of money to your bank accoun "
now i would taxes but how much is to much to put into the bank? I heard over 10,000 gets reported to the irs so I am guessing putting in over 10,000 at one time would not be good. and if its gets reported what does that mean? if its not illegal then i guess not much would happen besides paying tax.
It's true, I have a friend that works at a bank and he told me that any deposits of $10,000+ get reported so as long as you're below that you have nothing to worry about. If they were to investigate you all you would have to say is you sell currency and then Big Brother takes his cut and leaves you alone until next time.