Similar stories played out with companies affiliated with Bitfinex IIRC, where people got arrested and connections to cartels and human trafficking were revealed.
Jan Marsalek, of the Wirecard fraud fame, who fled Germany to Russia to escape prosecution, is now suspected to have been an asset of Russian intelligence working alongside a ring of at least 5 other spies.
> One of the biggest credit card fraud empires on the planet was run by the son of a deputy in the Russian Duma.
$169 million in credit card fraud.
I raise you with the biggest crypto exchange ponzi (so far) being run by the son of two Stanford lawyers and law teachers (dad teaching tax laws and mom teaching ethics, while having none). Well connected people to the US political elite, donating tens of millions to US political candidates.
All the while having one of the most respected publication in the US (maybe not so much respected anymore now) actively participating in the scheme.
Crypto is one of the best methods available to Russia to circumvent sanctions and turn their capabilities to hard currencies. This is true whether we're talking about acquiring money by running frauds internationally, or finding ways to be paid for cybercrimes like ransomware.
Rather bigger amounts of defrauding are possible for Americans who figure out how to directly access the American financial system. That doesn't change the way that it is being used by Russia. And the Russian use case is far more relevant to this story - they are undoubtably involved in a shockingly large fraction of the crypto money launderers that were registered in Estonia.
Aren't the best sanction-busting tools the Russians have things named "Rupee" and "Yuan"? Possibly even "gold".
The situation isn't clear yet, but it looks like the biggest problems with sanctions is that China is an advanced manufacturer that isn't part of NATO. Everyone outside of NATO seems to be calm enough about the war.
Those are great sanction-busting tools for getting payments from organizations who actively wish to cooperate with Russia to get paid. They aren't good tools for getting paid by victims of cyberattacks.
That isn't really sanction-busting. Committing crimes was already illegal before Russia was sanctioned. In point of fact, it is probably still illegal in Russia.
> Aren't the best sanction-busting tools the Russians have things named "Rupee" and "Yuan"? Possibly even "gold".
They are.
Converting crypto to hard currency outside of Russia without tripping flags is certainly possible, but has all the same problems of using hard currency while under sanctions in the first place.
A lot of the fraud and laundering happening after the Russian invasion of Ukraine is definitely something Russia is doing to earn some extra cash and hurt the West.
However before 2022 it was just as much wealthy Russians doing it to put their money beyond the reach of the Russian state.
> A lot of the fraud and laundering happening after the Russian invasion of Ukraine is definitely something Russia is doing to earn some extra cash and hurt the West.
That's like saying that US-made guns fueling cartel violence is 'America doing something to earn some extra cash, and to hurt Mexico'. It's ridiculous, and not accurate.
It's just economically-rational actors trying to make money, and taking advantage of legislative and enforcement arbitrage. This kind of arbitrage exists any time two different systems interact with eachother. Foreigners, and foreign criminals are not some weird hive mind in cahoots with their state.
The phrase "one of the best methods" means not the only one. Yes, gold is another method that is used.
But ransomware gangs are overwhelmingly Russian, and overwhelmingly use crypto as their payment channel. It is far from the first kind of cybercrime to be overwhelmingly Russian, and disrupting payment channels is a good way to shut it down.
"But ransomware gangs are overwhelmingly Russian, and overwhelmingly use crypto as their payment channel"
Would it not be a little bit strange for Russian ransomware to provide an IBAN or a Money Wire to a bank? And Russian ransomware actors are, in contrast to North Korean and as far as I know, not state actors. (Russian Troll factories are not ransom ware)
Russian ransomware actors are not state actors, but couldn't operate in the way that they do without the sanction of the state. This is why the phrase "Russian ransomware actors" makes sense.
But they also wind up with the same kinds of relationships with the state that the Wagner group did. And so we get things like https://www.cisa.gov/news-events/cybersecurity-advisories/aa.... Russian military activity comes backed up with Russian cyberattacks that use all the same techniques, and presumably some of the same people, that Russian cybercriminals do.
And these attacks were not necessarily trivial. For example https://www.reuters.com/world/europe/russia-behind-cyberatta... verifies that KA-SAT was taken offline. Starlink was also under constant cyberattack. I strongly suspect that Musk's unwillingness to allow Starlink in areas under Russian control, and unwillingness to allow Starlink to be used in offensive military attacks, are exactly to reduce how much he is a direct target of Russian activity.
I dunno, one crime was ~200MM the other ~10MMM, so an order of magnitude and a half larger crime. Both are associated with political figures in their respective countries.
Not that it makes it better, but these are different heads of the same hydra:
For Wirecard, Russia had a vested interest in influencing payment policies and happenings in the EU to help them with sanctions (probably at both a national level to keep trade moving, and at a personal level given that Russia's political elite bore the brunt of early sanctions). They were probably proactively engaging with him extensively from high levels.
Seleznev was just a big fish in the general area of "russian fraud and cybercrime abroad." I doubt the state had a personal interest in him like it did with Marsalek. Russia just generally has a policy of allowing Russian nationals to commit cybercrime abroad (as long as it doesn't affect them domestically) probably because it brings in foreign currency, keeps people employed and encourages development of those kinds of skills, and keeps hackers busy so they don't commit domestic cybercrime or do bad things to the government.
That said, Seleznev is directly cited as a factor from Russian media in the arrest of some FSB bigwigs per https://www.buzzfeednews.com/article/kevincollier/report-arr.... To me, if he were personally benefitting from direct help from the FSB like Marsalek this would not be retroactive to begin with, and that it took like 3y to accuse an FSB agent of helping the CIA with him (after the same agent got caught helping catch other hackers) also suggests this was less of a strategic priority and more of a "getting our hackers arrested is bad for business" thing.
I hope Estonia, Latvia and Lithuania don't continue down this path. I've looked at the graphs of their economic success over the past 3 decades with quite a bit of interest.
I'd love to see all of them break through to the level of my adoptive homeland of Finland, and perhaps even beyond (if we don't find a way to make ourselves more business friendly first, of course!). Tremendous potential in all 3 of these places. I'd love to visit Riga or Tallinn one of these days.
We won't, not our goal, not what we want. I think it'll fade into a small blip in our past vaguely remembered as "that crazy time when a lot of crypto companies opened offices and we shut them down".
As someone from the UK currently in Tallinn and about to start a job search here - I hope the (non-crypto) startups stay! Estonia is such a beautiful country, with such a wonderful culture and friendly people.
I hope to do whatever part I can to contribute to Estonia’s success.
I'm frankly not sure why you expect the level of Finland to remain where it was.
20 years ago Russian writer Viktor Pelevin remarked that "we are like a banana republic that has to import its bananas from Finland". But fast forward those 20 years, Finland itself is now a buffer state that buffers a dead end. In many ways, Baltic states and Finland made money trading with Russia, and if Russia stays AFK, their combined economic viability is in doubt.
I'm not sure what is Finland's comparative advantage these days. What are things that are is cheaper to do in Finland (or Latvia) that you cannot do in Hungary, on Cyprus or in Denmark? The logistic leg is surely longer and I'm frankly not sure that you're going to pull it off.
I'm not sure why you're getting downvoted. You're not being actively hostile, just voicing conerns.
But I feel you're not extending your own question far enough to answer it for yourself. Why do in Finland what is cheaper to do in Cyprus? Why do in Cyprus what is cheaper to do in Laos? Etc, etc. The answer is usually not "The economy is wrong and I am right".
Logistics-wise, it is true that we are farther away from places, but it's also true the price of logistics has fallen over the past 100 years by several orders of magnitude -- and that we have a giant sea on our western flank which makes it even cheaper to move huge amounts of freight. I don't think you can look at the sophistication of modern logistical operations and deem that that is going to be the dealkiller for people. Doubly so when you consider the rising tide of self-driving technologies of all kind -- triply so when you consider Finland is one of the few states in Europe still actively investing in nuclear power. A self guided, nuclear powered cargo fleet is the kind of thing I dream about at night.
But again - that wouldn't be specific to Finland, that would be a boon to any state with a coastline. So I just don't really see it as all that relevant from a comparative advantage viewpoint. There has to be more to the story than the raw logistics of it, much like there has to be more to the story of Python being more popular than x86 these days even though x86 is closer to the metal.
Was it Kekkonen who said that the Finnish economy is like a chair, and two of the legs are made of wood?
The forestry industry is still a big player, especially with the recent disconnection of Russia from the world economy. Biofuels may play a part in that. But not sure it's a big enough differentiator these days.
The country is well-educated, however it suffers from the same problem as much of Europe: not enough young people to support a growing retired population. That retired population is also more conservative leaning and doesn't want more immigration, yet Finland needs more skilled immigrants. Again, a common European story of an older voting base who want to live off the fruits of other peoples' labour (whether as recipients of government largesse, or as landlords on their property investments) but do their darnedest to make it harder for that labour to make those fruits.
Disconnected Russia is also a problem for the Finnish forest industry: the processing capacity greatly exceeds domestic wood supply and was relying on raw material imports from Russia. This now results in reduced industrial output.
In my opinion, Finns are very honest, hard working, and reliable. They obviously don't try to sell themselves as cheap, so they don't compete on price, but on quality.
Their advantage might be quality though. I have a bunch of tools from Finland, because they're heavy duty and reliable. Cost is much higher than Chinese made, but it's still value for money.
I don't think they lack skills on Cyprus and in Denmark. Hungarians are also quite bright.
Sure, I don't expect that Finland's economy would just implode. Developed countries don't do that. But it's quite possible it will enter multiple years long economic malaise, even by post-2022 EU accounts. As other countries slowly eat its lunch by developing matching skills while having better logistical disposition to use them.
> "we are like a banana republic that has to import its bananas from Finland"
Wasn't there some trade policy wierdness back in the 90s that made Finland (on paper) one of the world's top banana exporters or something? A short search didn't come up with anything, so I can't tell if I only imagined that back then.
If you look more into the money laundering that has been happening in the Baltic countries a lot of it it wealthy Russians attempting to get their money out of Russia and into tax havens around the world.
The whole region(central and Eastern Europe) has great economic potential especially if you consider many transport links are being finished linking the North with the South through Poland, Czech Republic and beyond(hopefully Ukraine too in future) .
In recent history in the region all important railroads and motorways were always East-West to facilitate quick military transfer while new North-South links are a lot more valuable for the region's economy. If only we manage to keep our tax/business laws stable, have more effective judiciary and work towards common interests instead of being played against eachother by various "powers" we'll have it pretty good.
These things are rather subjective don't you think? Where does the center end and the North start? I guess it depends what you are used to. Similarly with East-Central-West. Whenever people use terms like "Central Europe" they may refer to a geographic center (Poland, Czech Republic, I put the Baltics in the same category because they are in the same region - what do I mean? For example there is a sea between the Baltics and the Nordic countries,however culturally I'm told the Baltics have much more in common with the Nordics), they may refer to the EU, the center being probably around Austria, or I even heard people consider Center to be West part of Germany, because Europe they know ended at an Iron Curtain in Berlin.
I don't think geography is subjective. I suggest you google Northern Europe, or read the wikipedia pages for Estonia, Latvia and Lithuania, as they all say "a country located in Northern Europe". In the UN geoscheme, Baltic countries are part of Northern Europe. According to EuroVoc, Baltic countries are part of Northern Europe.
Northern Europe usually refers to Norway, Sweden, Finland, and sometimes Denmark. But they are further north than most of the other countries people think of as "eastern", that is true.
CIA indeed defines Northern Europe as you describe, including Denmark, plus Iceland. [1] However the United Nations has a different definition, which also includes the Baltics, UK, and Ireland. [2]
what potential you are talking about? I am from there and there is absolutely nothing. no human capital, no resources, no political willingness (only huge corruption). the only viable business was to be a sort-of-kind-of-middleman between EU and Russia and thats also gone. most young people left for greener pastures towards EU. go visit all of these places and please wander outside the tourist area, and better yet, rent a car a travel through countries (they are small, a road trip through baltic states will take you less than a week). after that tell me more about this "tremendous potential".
I moved from Germany to Estonia because in Germany, there really is no political willingness to support entrepreneurship, startups or the internet in general. If you’re not a big car company, you’re not going to be happy in Germany as a company owner.
As a founder, I am much happier in Estonia. Life is much simpler when you don’t have to jump through twenty hoops because of some stupid political decision for every action you take as a small business. While I can’t speak for all of the Baltics, Estonia truly has a lot of potential in that regard. Hell, the „IRS“ here has a support chat! Unthinkable in Germany.
Sure, a lot of things need work and are still developing, especially in rural areas, and of course no country comes without issues, but Tallinn isn’t far off German cities in many areas. In some, it’s even outright better. Free public transport anyone? Being able to pay by card everywhere? Self-checkout in supermarkets? Not a thing in Germany.
> Life is much simpler when you don’t have to jump through twenty hoops because of some stupid political decision for every action you take as a small business.
There is the same issue in France. I'm pretty sure it's viewed by big companies that own the government as a feature to impede concurence (however small) to arise.
Let's look at some data. Estonia ranks extremely high in math, science, and reading tests given to 15 year olds as shown by the international PISA tests. [1] In fact only a handful of Asian countries rank higher. The results are basically the same as the highest ranking state in the US - Massachusetts.
> huge corruption
Estonia ranks #14 in the Corruption Perceptions Index, which is really good. [2] Also, having lived in Estonia most of my life I have never encountered a situation that involves a bribe, whether explicit or implied.
> most young people left for greener pastures
Young people want to see the world. I personally spent years living in other countries, and a lot of my friends as well. However most of us ended up returning in our 30s. Turns out Estonia is pretty great.
Not the OP, but my house (in the US) has very nice triple-paned windows that were manufactured in Latvia by Intus. Estonia certainly has a cool, digitally-savvy reputation, though I gather a lot of that is closer to "these things which should be easy like getting licenses etc. are actually easy" so maybe that's partly hype. Haven't heard much about Lithuania recently, to be fair. I would be willing to believe the Baltics aren't going to change the whole world overnight, but is it really as bleak as you're suggesting?
It's really not, but we do have our share of doomers and high throughput of dezinformation campaigns from Russia, so substantial amount of public only sees the negatives. Trust issues with government is also somewhat explainable with being free country for only about 50 out of the latest 200 years.
Perfect climate: not too hot, not too cold, no earthquakes, underground fresh water basically anywhere you dig. Fiber optics covering the entire country. Full 4G coverage, because no mountains. Soil perfect for growing food. Lots of country still covered in natural forests, when compared to other EU nations.
The problem is not corruption, the problem is this self-loathing victim mindset. I am also from there and I am sick of it. If you don't like it, go away somewhere where the are no problems and no corruption.
This has been going on before crypto. Between 2007-2015 some very wealthy Russians laundered more than €200 billion from Russia to tax havens around the world using Danske Bank's branch in Estonia.
The article only mentions how it benefits Russians, but omits the fact that almost any Ukrainian or Ru opposition donation page has crypto addresses on it. The money flows both ways, the way it was intended. Also, Russians laundered hundreds of billions through Baltic banks (Danske Bank, Swedbank etc) with oh so real AML officers.
Crypto is actually net negative for UA if it is what keeps Russia going. If crypto vanished overnight UA would still get aid through legal channels while Russia would be crippled.
Btw I think those bank laundering events you mention date to before the war.
Cayman Islands does this AML compliance officer requirement too, I pay out the ass for them (and so does every VC fund you fawn over)
These jurisdictions really just keep adding layers of obligatory professionals and it neither changes the reputation of the jurisdiction or helps a fundamentally flawed problem of trying to whitelist transactions accurately
I’m still of the predilection that states should just give up on trying to police money flows
It doesn't work in the US, Caymans, Estonia, anywhere!
Domestic gangs would always pass KYC, and foreign terrorism just simply isnt that expensive to always worry about funding them. Terrorism doesn't happen because nobody’s interested in flying planes into buildings. You don't need to encumber the GDP by 1% trying to prevent financing that, ostensibly.
> These jurisdictions really just keep adding layers of obligatory professionals and it neither changes the reputation of the jurisdiction
It depends. I used to live in Belgium and now in Luxembourg and both countries have been removed from an international gray list of countries refusing to share banking information (they do share now).
There was a time where people would literally come to Luxembourg with duffelbags full of bank notes and nobody would ask anything.
But these times are definitely gone.
> I’m still of the predilection that states should just give up on trying to police money flows
Having been directly hit by this and KYC/AML making my life miserable I fully agree with that.
Some people have their entire bank account frozen, sometimes for months, because they make one wire transfer of a few thousands EUR to another country: happened to someone I know (who's an AML specialist, which is ironic) for buying a watch in Dubai and happened to someone else I know for... Paying for his wedding (which was taking place in another country than the one he was living in). His wedding nearly got cancelled due to zealots at the bank convinced they found an international drugs trafficker or something...
The worst of the worst is that everybody at the bank is convinced they're some super important person, part of a global elite secret service or something, where nobody can talk. Worse than the mafia. And that they'll lose their job or go to jail if they ever mention to the client why their account is getting frozen.
You can and will quite literally go to jail if you tell the client why their account is getting frozen while it's a part of a money laundering or terrorism financing investigation.
Seriously, it should not be legal to freeze people's assets without giving them the same right to defend themselves - which includes seeing and challenging the evidence against them - that they'd get in a criminal trial. What happened to innocent until proven guilty?
Compliance workers in the bank are, in fact, on the line to the tune of jail time, in some jurisdictions, and the fees for institutions found inadequate usually start with 'b'. Not that every zealot is right, but the penalties in their line are approximately as bad as your exaggerated examples.
While cash is not practical today, Money Laundering is still happening. I'd say the current regulation does little to nothing to stop it.
Think of the experiences you described in your comments. They almost always happen when you make/receive money from certain jurisdictions (third-world, not necessarily a money laundering ___location). The West, in the last few years, has become less competitive. This switched the money flow which was predominantly from third-world to west. Most of the money laundering happened in the Western countries in the past. (think dictators moving their monies to European capitals to buy real-estate).
Now that the flow has flipped in favor of the third-world, the West has decided to "stop" the flow. The lower taxation rate in these countries makes this worse. The exception is the US. They weren't a favored ___location before but they figured they could pick up where Europe left off. And FATCA made it easier for them.
Seychelles had some legal changes in recent years that has made it much less attractive for such activity.
Strange as it may seem, the US is now one of the best countries for money laundering, particularly a few states that are very business-friendly, like Delaware.
It's true. There's a whole Planet Money episode about this somewhere in their archives; I think Economics Explained on YouTube also touches on this. Shell corps are the way to go (not that I would know, of course).
Episode 390: We Set Up An Offshore Company In A Tax Haven
It's been a long time, but remember thinking how well done it was. TLDR was (as previous poster mentioned) that Delaware corps were best for anonymity.
In BC our GDP is 1/5 real estate. It’s surreal. I’m willing to be wrong, but my spider senses tell me a whole lot of weird stuff is going on in that sector.
They seem to be a hub of money laundering in general. Danske Bank and then Swedbank. I think the latter case may have been the biggest ever, or at least they got the biggest fine for it ever.
There are organised groups that will launder funds via Twitch tips. Another common pattern is to sell a digital good like an ebook.
Money laundering cannot possibly be stamped out. The best you can do is try and limit giant one-time affairs through a bank, but laundering money is extraordinarily easy, with crypto or not.
Multiple accounts, small amounts. The hard part about money laundering is not really getting money in the system. It's building a credible story for when someone (e.g. the police) asks where your money comes from. In this case, "I'm a popular Twitch streamer". Products that have high profit margins (e.g. streaming, digital products, gambling, software, etc.) are ideal for that and why they are often considered "high risk" by financial institutions.
Money laundering isn't about getting money into the system, it's about making it look like it comes from sources that aren't illegal.
If entity A can set up hundreds of fake twitch accounts, all of which tip entity B from A's pool of illegal money, then B can claim that it's revenue is entirely above board, it just came from Twitch tips.
It was a way to extract money from stolen credit cards! It's quite easy to pay for card info, but difficult to use it without it being brought back to you.
I am glad I never got involved. I know I shouldn’t ascribe a feeling to what is essentially some type of distributed self maintaining database (yes I know it is more than that) but there was always something that just felt off about that entire technology.
The whole current AML scene is very sad. Sanctions against Russia don't harm any of the Putin's friends who can figure out another way to get money across the border. Sanctions against Russia only harm ordinary Russians.
> Sanctions against Russia only harm ordinary Russians.
That's by design. Sanctions put pressure to the country as a whole. Once people start getting angry they will question their leadership and maybe demand for changes.
Sure, sanctions can also target specific individuals, like the russian elite, olygarchs, but that alone doesn't change the status quo.
I propose starving people to death in countries we don't like. That way the people will surely revolt against their government and we can then go in and spread democracy :)
Well isn't that how going to war works? You're not going to be shooting the political leaders, you're going to be shooting the poor chumps at the bottom.
Economic sanctions are not great, but they're meant to be an alternative to war. When you really need a country to change course, anything you can do is going to involve hurting regular citizens there, it's just about finding the least bad option.
> I propose starving people to death in countries we don't like. That way the people will surely revolt against their government and we can then go in and spread democracy :)
Yeah, I agree with you. The design is broken and unfair.
I see it as a loss-loss situation: Either nobody cares and autocracies get a free pass to do what they want in the global stage, or countries can react and restrain relations with governments based on some (sometimes subjective and biased, sure) criteria.
> Overall, the share of all cryptocurrency activity associated with illicit activity has risen for the first time since 2019, from 0.12% in 2021 to 0.24% in 2022. [2]
Definitely depends on what you classify as illegal and how you count it. For example, if I count FTX ($9bn), UST ($18bn), and LUNA ($40bn) I'm already at 5% of the crypto market cap.
This is not what money laundering means. The origin of money that was deposited to FTX and Luna was not criminal original. There was nothing to launder here, as the source of funds was clean and proper.
What are the other crypto activities? I dont see that many places where you can pay with crypto, so what are those other activities, or is that just trading?
Stablecoins (payments or store of value) are likely the largest non-trading activity today with $123B market cap and $30B in daily volume. You'll see a lot of volume around staking crypto / running validators. Tokenized treasury bonds and other real-world-assets like carbon credits are getting up there, so is credit investing with companies like Maple / Credix / Centrifuge.
The long tail of activities includes things like DAOs (remember Constitution DAO?), prediction markets, internet infrastructure (VPNs, Arweave, ENS), synthetic assets, and more.
“See, right here is the public record of how you were fooled into buying a worthless NFT. Then right here is where you converted USD into Crypto Bux so you could earn an impossible 25% interest rate… for a month… until Bux went to zero…
right here. See? Can’t be a scam! It’s all public!”
Never thought about it that way. Just wondering what is the percentage of crypto used for criminal activities? I guess it won't be easy to thing to measure?
We're finding about this because Estonia has transparent government services and a tradition of investigative journalism. These days, though, every crypto company and plenty of scamsters of all sorts seem to be located in Dubai, and good luck finding any transparency or doing any investigations in the United Arab Emirates.
Edit: Bc it got downvoted first. I saw a documentary about her and she had tremendously good contacts to Dubai and it was hinted she lives there now. The Wiki page claims that she is rumoured to have been killed.
> “These days, though, every crypto company and plenty of scamsters of all sorts seem to be located in Dubai”
Hopefully they’ll one day scam the wrong sheik and get thrown in jail with no exit visas in sight.
It’s one thing to run your crypto empire in a place like the Bahamas where you expect to be able to simply buy the government (like FTX openly bragged about). It’s another to run it in an authoritarian country where the money you’re stealing might belong to the billionaires who own the whole place and hand out death sentences to critics.
I know it sounds a bit crazy but what if the government hired people to investigate and arrest criminals instead of requiring private companies to do that? AML is a costly and ineffective security theater.
Everyone who is money laundering lies on the AML/KYC forms. The banks know this, the government knows this, the criminals know this. The point of all the AML/KYC stuff isn't to prevent money laundering, but to replace a difficult-to-prosecute crime (money laundering) with an easy-to-prosecute crime (lying on bank forms).
It's creating a paper trail for the prosecution when the feds decide they want to take someone down.
It's not money laundering per se that the feds have an interest in prosecuting. They have an interest in prosecuting sanctions evasion, tax evasion, black mail, drug smuggling, etc. It's the source of dirty money that they want to stop, not the dirty money itself.
What happens is they think someone is smuggling drugs. They see they have money, the money looks suspicious, they get a warrant from the bank, they give them all their AML/KYC forms, and the feds go and track down the real source, and find out that the forms were full of lies and now they can get the drug dealer on bank fraud charges -- which means they don't need to connect them to drugs or murders or anything else, even if that's the real reason they're interested in them.
AML/KYC stuff only prevents crime in that it forces criminals to commit other, easier to prosecute crimes to cover up their original crimes.
You are absolutely right, but I have two issues with that:
1) Non-criminals also lie on the forms. Mainly because it's sometimes their only way to open a bank account (if they are deemed risky by an AML department), even if they have a legal source of income. This renders people who would otherwise not be criminals into criminals. Just recently, I came across a Tweet[0] from someone who will have to face this dilemma sooner or later.
2) It's a loophole for prosecution, as you admit yourself. It's meant to circumvent well established legal principles. For example, in AML cases, the burden of proof is reversed ("guilty until proven innocent"). It's used as a tool to punish people for crimes when the evidence is not sufficient. Is this really something we want?
What you're describing is a tricky situation with trade-offs.
When you face a tricky situation with trade-offs, you have to find a smart and/or complicated solution. It's not usually productive to say "just throw away the solution we have" even if that can be an emotionally satisfying answer.
That thread is about someone determining the cost basis of their crypto and suggesting they go with $0 as they can't reliably ascertain that number. How does that relate to lying on bank forms?
The question was unrelated but they will nevertheless face this issue. Because if it's a decent amount of Bitcoin and they don't have a paper trail, they will get flagged and reported by their bank and/or crypto exchange. And they will possibly go to prison for money laundering as they won't be able to prove the source of their Bitcoin. So they have three choices:
1) Give up on on their legally acquired BTC, potentially worth millions of dollar.
2) Be honest on the form and pray that they don't get flagged.
3) Lie on the form.
There's basically no legal option for cashing out their BTC. A lot of early BTC adopters face this issue, as not everyone had the foresight to keep a paper trail for their 50$ "funny internet money" purchase at Starbucks.
Be honest on what form? I've moved hundred of thousands of dollars and crypto through exchanges and have never filled out a form regarding the provenance of the funds.
Which country? Your exchange or bank would not be compliant in the US. Money transmitters have a duty to determine the source of funds for large transactions. And they have to report any "suspicious activity" to authorities (FinCEN in the US). By the way, it's not necessarily a literal form, they can ask by phone or email for example. The specific details vary from country to country, like what amount threshold triggers the verification or what constitutes acceptable proof, but it's pretty standard thanks to the FATF[0].
This was in the US. SARs are filled out by banks, not individuals. I've literally never been asked for any proof from Coinbase for over 300k in transfers.
Coinbase does ask that. You can Google "coinbase source of funds" for confirmation. They even mention it in their user agreement[0].
You got lucky and/or maybe forgot that you supplied that information when you signed up. Sometimes it can just take the form of asking for occupation and income. It's possible that they didn't ask further proof if they determined that your transactions were not unusual given your declared occupation and income.
Fair enough, it is probably not unusual given my occupation. I would mention, though, that if the person in question stood to profit potentially millions of dollars as you mention, they can more than likely afford legal counsel to help them through this, rather than taking to Twitter.
These early adopters are paying for their lack of bookkeeping the same way someone who kept a similar amount of trail-less cash out of the bank would. It's hard to find sympathy for that kind of glibness, especially when crypto actually can be traced back still under most conditions - assuming your bank didn't lose their records from the time, you could show a purchase and vague value increase over time, and accompanying account statements would resolve any AML concerns.
You think it's fair that someone should lose millions of dollars or go to jail because they didn't keep paperwork for a 50$ cash purchase they made a decade ago? In the early days of Bitcoin, a lot of the purchases were made peer-to-peer with cash. There were even websites called faucets that were literally giving it away.
> The point of all the AML/KYC stuff isn't to prevent money laundering, but to replace a difficult-to-prosecute crime (money laundering) with an easy-to-prosecute crime (lying on bank forms).
Absolute nonsense. There was a time when like half of all Russian mafia lived in London fully in the open, and they only vacated the place when they started being kicked out through visa cancellations, not fraud charges.
This change changes really nothing in the fact that first world country governments don't want to prosecute those guys.
At most, they don't give a fuck, at worst, they are actively conniving.
And it's not that they are hard to prosecute at all. Anybody who can read some Russian can get a completely damning charge sheet with a few minutes googling on most of them, let alone British MI-6 analysts.
The crazy theory that you can somehow increase prosecution chances with "Al Capon charge" makes little sense if criminals whose offences are provable in 5 minutes without that are walking around. like nothing.
There are many accounts in the press of banks employees saying they send hundreds of suspicious activity reports for absolutely clear cut cases without any reaction. And they can't do anything on their own, as their paperwork is completely impeccable from the reporting standpoint.
Thinking rationally, it makes sense that a mafioso who is going to launder few billion $, will ensure that his paperwork looks more full, and accurate than that of a legit company. Few percents of such sums will hire legions of top lawyers to do the reporting.
There are few problems with the anti-money laundering regimes, but these two are the main problems
- They do not address the underlying crime: prevent the crime in the first place, instead of moving funds
- The focus is on compliance, not on the crime prevention: make sure banks checks all the boxes on the form, so that no one will get a jail card
Furthermore AML tends to mix sanctions (we don’t like China) with organised crime (drugs). The political sanctions themselves are not always direct result of a crime.
Yes, that was the joke. The police should do their job and they are to blame for failing to identify (and to arrest) scammers and criminals. Yet the article blames it all on private businesses, who really shouldn't be tasked with detective work in the first place.
If blames the failures of these states to identify and shut down operations literally working against them. These crypto companies acted as intermediaries for financing Russian mercs with money out of drugs ops.
I think it might just get more complicated because without government's monopoly, and as shown in places where that wanes, anyone can decide people making money this way or that way are a problem they want to fix..
Sorry? The 'business model of Estonia'? I think you're conflating the actions of a company within Estonia with the actions of the country as a whole. Also: if you've been scammed your first port of call is not the Estonian law authorities but your own (other) Estonian lawyer (as in: a lawyer that you pay).
Child comment is now dead (and rightly so, but this was my reply).
> Yep. Have you read the headline of this post?
Yes, I did, as well as the post itself, in fact this sort of comment is against the guidelines but since you're a new account maybe you want to give them a read? Link at the bottom of every page.
> Good luck with that. Trust me, we tried.
I've had several dealings with lawyers in Estonia and no reason for a complaint so far. But I didn't get them from some other website, I asked around in Estonia with business contacts there.
> Again, if financial institutions are involved I am not sure you are right. This are is heavy regulated from AML to KYC to whatever.
That doesn't matter.
> Crypto scammers plague Estonia’s e-residency program
Yes, they do. Unfortunately. They also plague Twitter, Facebook, HN at times, the United States and the start-up scene in general. That's nothing to do with Estonia per-se but more a reflection of how easy it is to set up a business somewhere.
> This comes only three months after the crypto-friendly nation became the epicenter of a $220 billion money laundering scandal.
Latvia had a similar issue a few years ago, they US basically pulled the plug on that and since then it's a lot better. But countries with underpowered regulatory entities will always be at risk of these things. But that does not make it 'the businessmodel of the country' any more than that the drug trade is the business model of the Netherlands or the United States. It's a clear reflection of facts of geography, ability to regulate and oversee, ability to police, experience and so on. The Baltics are attractive because (1) they don't have a whole lot of experience fighting this stuff (2) are proximate to some very large sources of illicit funds (3) lack manpower and funds themselves (see your quote about 'how big is their GDP' -> that's not proof this is their business model but an excellent reason why they can't do as much about it as they should).
As far as I'm concerned Estonia (and Latvia and Lithuania) can pull the plug on all crypto companies in their respective company registries. And let's not get started about Slovakia, Serbia and Macedonia who all have their own problems to work through.
It argued that Mexico is not a failed state and compares the contribution and profit margins of the Mexican industry to GDP and the contribution and profit margins of the drug industry to GDP. The conclusion was that the country is basically geographically divided between the industrialized area and the drug trade area and both parts provide roughly similar shares to the Mexican GDP and that it would be irrational for the Mexican government to change or fight this.
Sorry, don't shoot the messenger.
Sorry, maybe I did not get my point clear here. The article about Mexico suggested that it would be irrational for Mexican authorities to really fight the drug trade. My thought was, for such a tiny economy as Estonia, were one fraud alone counted to 200 Billion, how rational would it be to fight this?
Maybe I am wrong. Probably. But it is at least worth a thought.
It would be very rational for both to fight it. But in the case of Mexico, if not for the DEA and a lot of assistance from the USA the government would be overrun by the narcotics operators, the fact that this isn't the case is the result of decades of work (and not all of it legal or above board). Mexican politicians are very much at risk, see:
This means that it may be right and rational to fight the drug trade and they are trying but the personal risks and risks to the rest of society are non-zero and may well be fatal to those individuals seen as instrumental to that fight (same in Colombia, perhaps more so).
For Estonia the desire to fight these things is definitely there, but the manpower simply isn't. And this is the only thing that I really begrudge the Estonian authorities in particular: they never really sat down to think through the abuse potential and what likely would happen as a result of their e-* programs. They went into it all naive and starry eyed whereas professionals the world over saw it and thought that it was going to attract a very mixed crowd with a very large risk of abuse.
I would not want to be someone to fight drug trafficking in Mexico. No doubt.
I have been in Colombia countless times and it is an amazing place. The cities have parts that look like Florida. The skyscrapers were likely build with drug money (Floridas were not?). It is the Colombian government that says, please, let us legalize Cocaine.
https://www.niskanencenter.org/colombias-efforts-to-legalize...
The e-residency was a good idea implemented on the cheap and poorly.
And yes, the Colombian government is on the side of legislation because that would give them better tools to deal with the fall-out of all of this. The USA is as much the source of the problem as it is the reason anything is done at all, what the longer term solution is I have no idea but these are very complex problems and generalizations do not help. Frustratingly Trump and his policies have turned back the clock in Mexico about a decade or so. Illegal immigration was down substantially and people were even moving back to Mexico because the standard of living was improving. Right up until the 'build the wall' bullshit.
I've spent enough time in Colombia to know that the average person is super nice and extremely friendly but at the same time I'm aware that their internal problems and the low key war - right now actually lower key than in many years past - going on there is a massive problem that no single individual or even any particular slice of government is going to solve. There are economic, regional, international and historical components to all this that will require a lot of time and effort to get it all to move to a better place. That said, Medellin today vs Medellin 25 years ago is a completely different affair.
I was not aware that I violate any guidelines. But that a lawyer is your first choice when fraud is involved with financial institutions is not obvious for me. Reminds me when people called the BaFin in Germany and wanted to report fraud agains wirecard and they just hung up on those people.
"I've had several dealings with lawyers in Estonia and no reason for a complaint so far. But I didn't get them from some other website, I asked around in Estonia with business contacts there."
We did not have this option. To get a reliable, English speaking lawyer in a foreign country, the list provided by your embassy is normally a good start.
Again: One scandal 220 billion? I mean, how big is their (Estonias) GDP
"Latvia had a similar issue a few years ago, they US basically pulled the plug on that and since then it's a lot better. "
It really should not be another country pulling the plug on you.
Today, only 353 companies own a crypto license in Estonia while 1,234 companies did so at the end of 2019.
What you are proving is that they are in fact working on this problem. And it is a problem, but it is not Estonia doing this, it is simply criminals taking advantage of an underpowered state in the EU that tries very hard to create ways to hook up to foreign entrepreneurs. Unfortunately the crypto gangs are like cockroaches. But it isn't Estonia itself doing this and you really should stop making silly statements like that.
The US did the right thing in forcing Latvia to have a higher standard, at the same time, these countries are very weak in terms of controls and yet they have to have all of the trappings of a fully functional EU state to be able to play by the rules. This stretches local resources, sometimes beyond the breaking point. As an illustration: you, a citizen of another country also did business in Estonia, something that likely would be quite difficult in many other places for exactly those reasons.
Finally: BaFin had problems, they run a lot deeper than WireCard and you would be similarly silly in stating that fraud was the businessmodel for Germany. Such generalizations serve no purpose.
"What you are proving is that they are in fact working on this problem."
The scam site has been up for many years.
"be similarly silly in stating that fraud was the businessmodel for Germany"
No, I never stated that [financial] fraud was/is the business model for Germany. Especially Germany, while a hub for laundering money in other ways, is not very finance heavy. I was just pointing out that German authorities did not do their job in a nearly criminal way.
Germany considered ‘paradise’ for money laundering
> No, I never stated that [financial] fraud was/is the business model for Germany.
Please read more carefully.
> The scam site has been up for many years.
And likely will continue to be so until someone successfully brings a case to the Estonian courts. And that will require that party to go by the book, it will likely be costly (as it always is when bringing suit in a country not your own) and will take a long time.
> What you are proving is that they are in fact working on this problem.
But what I meant was: the fact that the numbers are going down is proof positive that something is being done, but probably just not fast enough. Otoh governments tends to be ridiculously ineffective in thse things.
FWIW Estonia has ~1.3 million people living there, the vast majority of them earn their living in legal ways and silly generalizations are not going to help you gain much sympathy. Estonia, Latvia and Lithuania (and a number of other EU states) all have underpowered financial, legal and enforcement branches in large part because they are simply not the wealthiest countries and this situation attracts scammers and other criminals like flies. This is a real problem. Solutions are neither going to be quick nor easy.
"FWIW Estonia has ~1.3 million people living there, the vast majority of them earn their living in legal ways "
I never said anything against Estonian people, neither did I say anything against Mexicans. Most people earn their living in a legal way. Even in a favela (Brazilian slum) the drug dealers make a tiny tiny fraction of the population. (In fact, I did not even say anything against drug trade. I think the war on drugs has failed tremendously and drugs should be legalized as much as they can be reasonably legalized).
"FWIW Estonia has ~1.3 million people living there, ..have underpowered financial, legal and enforcement branches"
Well, how many inhabitants does Luxembourg or Liechtenstein have? A fraction of this. This can't be an excuse.
Luxembourg and Liechtenstein are both fabulously wealthy and also have historically had a huge problem with illegal deposits. Not the best examples, to put it mildly.
What you wrote was that this was 'the businessmodel of Estonia', and I'm illustrating to you that this isn't true. Whether you intended to sleight the Estonian people or not goes right out the window when you make such generalizing claims about the entire country. It just isn't true.
No, I'm stating that they have already done so and that Estonia isn't doing this in a purposeful way. Liechtenstein, Gstaad, Monaco, Luxembourg, the Channel Islands and a bunch of other entities within Europe have all made bank over the last 100 years or so by taking illegal deposits of all kinds within their regulated banking system.
Estonia isn't in that league, nor are they trying to get there. They simply can't cope with the influx, whereas for those others that influx of illegal capital was the goal itself, which is well documented, and which, incidentally is one of the reasons moneyed interests aimed to have the UK secede the EU. Unless you have actual proof that Estonia created their program with the express interest of attracting illegal cash I think you should drop the generalization.
I will not belittle that in any way and I understand your frustration, and given the amount involved it is just in that grey zone where trying to recover it is likely just throwing good money after bad. For an extra zero it would be well worth it and a zero less and you probably wouldn't lose sleep over it.
Similar stories played out with companies affiliated with Bitfinex IIRC, where people got arrested and connections to cartels and human trafficking were revealed.