How can money laundering involving as much as $6 billion occur?
Payments
Asked by Question Bot05/May/20151 answer
1 Answer
F
Faisal Khan
Answered 05/May/2015
There is much more to the Liberty Reserve story than just the money laundering component. There is no doubt that LR in the strictest of sense was operating without a license (in Costa Rica and other territories as well), that is not being debated. What is debatable are two issues:
Money laundering is difficult to define, as definitions change across the border of each country. In a recent meeting of the Financial Action Task Force (in Paris, France), it was almost impossible to have all the major financial services regulatory bodies agree on the definition (just an FYI, at the end of the summit, they still could not agree to it). So a transaction set that could be perfectly legal in one country, could very well be violating antimoney laundering laws of another. FATF Home Page: Financial Action Task Force (FATF)
Liberty Reserve is not a new phenomenon. They did not just spring up and started doing massive transactions totalling US$ 6+ Billion. They started with low amounts, went through a lot of teething problems and eventually became big. If you were to read the forums at Warrior Forums or Digital Point (Forums), you will see literally 10,000s of posts related to Liberty Reserve and/or mention of the LR system for payments.
Where were all the financial regulators when it was happening at their watch? Inherently, almost every central bank in the world has made it impossible to set and designate an alternative currency method. There are many other examples of currency systems and/or payment systems that are perhaps in their infancy stages (Bitcoin?) and once they slowly mushroom and grow, the regulators come clamping down. I'm not being sympathetic to LR being shut down (because what they did was without a license), since that is the law of the land, LR should have followed it to the dot. But if you strictly talk about the law, 1000s of financial companies overlook it, break it, bend it, twist it on a daily basis. Some do it voluntarily, others not so. Its all about setting an example. Have no doubt, LR is an example and a warning to other companies (again think Bitcoin operators), to come under the regulatory magnifying glass or cease and desist.
When LR came under the regulator's radar, why wasn't hue and cry made? Its because the AG office and DFI's office get paid to do this, bring the alleged bad guys, parade them up and down and then book them.
How come the British regulator (FSA) did not stop LR, or the financial regulator of Canada or Russia? Why was it the moral obligation of the US financial regulator to start building up a case and then essentially play the lead policeman in bringing LR down. Why not slap them with a fine (based on the volume of business they have transacted). Why not slowly bring them to implement enhanced AML/KYC into their product offering.
One of the world's largest MTO (Western Union) is known to launder Billions of Dollars, yet, the US regulator never seems to spend ample of time building up a case with them, is WU too big to fail? Is it because WU is a trusted American brand?
The HSBC case pointed in the other answer was all about the Saudi Bank Al-Rajhi, shelled and dressed up in an HSBC report. Why didn't the US regulators go after Bank Al-Rajhi? Was it because doing so will serious offend the Saudis, the eminent Arms deal that was in play 3 years ago, the consequences it could have on Saudi American Bank (SAMBA), etc.
Ask the Swiss, who now have to alter essentially their entire banking system when it comes to doing banking with American citizens. Why? Because the IRS and the US Financial Regulator can strong arm Switzerland. The British banks, specifically SCB (Standard Chartered Bank) wanted to challenge the money laundering allegations levied byt he NY State financial regulator, but doing so, SCB knew their US Banking licensed could easily have been cancelled, and thus they threw in the towel and paid the fine. Easy money for the NY State's DFI.
There will always be slippage through the nets. Always. However, tight the controls you levy, no matter how much Big Brother tactics you enforce, the grey and black markets will always coexist. They have been doing so for 100s of years, and they will continue to do so.
- What constitutes as money laundering?
- The global policeman role that the US financial regulators have started playing.
Money laundering is difficult to define, as definitions change across the border of each country. In a recent meeting of the Financial Action Task Force (in Paris, France), it was almost impossible to have all the major financial services regulatory bodies agree on the definition (just an FYI, at the end of the summit, they still could not agree to it). So a transaction set that could be perfectly legal in one country, could very well be violating antimoney laundering laws of another. FATF Home Page: Financial Action Task Force (FATF)
Liberty Reserve is not a new phenomenon. They did not just spring up and started doing massive transactions totalling US$ 6+ Billion. They started with low amounts, went through a lot of teething problems and eventually became big. If you were to read the forums at Warrior Forums or Digital Point (Forums), you will see literally 10,000s of posts related to Liberty Reserve and/or mention of the LR system for payments.
Where were all the financial regulators when it was happening at their watch? Inherently, almost every central bank in the world has made it impossible to set and designate an alternative currency method. There are many other examples of currency systems and/or payment systems that are perhaps in their infancy stages (Bitcoin?) and once they slowly mushroom and grow, the regulators come clamping down. I'm not being sympathetic to LR being shut down (because what they did was without a license), since that is the law of the land, LR should have followed it to the dot. But if you strictly talk about the law, 1000s of financial companies overlook it, break it, bend it, twist it on a daily basis. Some do it voluntarily, others not so. Its all about setting an example. Have no doubt, LR is an example and a warning to other companies (again think Bitcoin operators), to come under the regulatory magnifying glass or cease and desist.
When LR came under the regulator's radar, why wasn't hue and cry made? Its because the AG office and DFI's office get paid to do this, bring the alleged bad guys, parade them up and down and then book them.
How come the British regulator (FSA) did not stop LR, or the financial regulator of Canada or Russia? Why was it the moral obligation of the US financial regulator to start building up a case and then essentially play the lead policeman in bringing LR down. Why not slap them with a fine (based on the volume of business they have transacted). Why not slowly bring them to implement enhanced AML/KYC into their product offering.
One of the world's largest MTO (Western Union) is known to launder Billions of Dollars, yet, the US regulator never seems to spend ample of time building up a case with them, is WU too big to fail? Is it because WU is a trusted American brand?
The HSBC case pointed in the other answer was all about the Saudi Bank Al-Rajhi, shelled and dressed up in an HSBC report. Why didn't the US regulators go after Bank Al-Rajhi? Was it because doing so will serious offend the Saudis, the eminent Arms deal that was in play 3 years ago, the consequences it could have on Saudi American Bank (SAMBA), etc.
Ask the Swiss, who now have to alter essentially their entire banking system when it comes to doing banking with American citizens. Why? Because the IRS and the US Financial Regulator can strong arm Switzerland. The British banks, specifically SCB (Standard Chartered Bank) wanted to challenge the money laundering allegations levied byt he NY State financial regulator, but doing so, SCB knew their US Banking licensed could easily have been cancelled, and thus they threw in the towel and paid the fine. Easy money for the NY State's DFI.
There will always be slippage through the nets. Always. However, tight the controls you levy, no matter how much Big Brother tactics you enforce, the grey and black markets will always coexist. They have been doing so for 100s of years, and they will continue to do so.