Anyone could have an account with Liberty Reserve, and use it to fund just about anything without raising an eyebrow among the company鈥檚 administrators. As part of the IRS鈥檚 criminal investigation, an undercover agent created an account with the username 鈥淛oe Bogus鈥� with the address 鈥�123 Fake Main Street鈥� in 鈥淐ompletely Made Up City, New York.鈥� The agent conducted a series of transactions and put things like 鈥淎TM skimming,鈥� and 鈥渇or the cocaine鈥� in the memo sections. Prosecutors say accounts were routinely created with 鈥渂latantly criminal monikers,鈥� including 鈥�Russia 丑补肠办别谤蝉.鈥�
As with traditional money laundering, the objective of digital laundering is to obscure where the money came from, what it鈥檚 for, and where it鈥檚 going. In Liberty Reserve鈥檚 case, accountholders couldn鈥檛 process money directly through the service. Instead, they had a traditional bank wire money to a third party 鈥渆xchanger,鈥� which 鈥渢ended to be unlicensed money-transmitting businesses without significant government oversight or regulation, concentrated in Malaysia, Russia, Nigeria and Vietnam,鈥� according to the indictment. The exchanger then converted the money to digital currency, untraceable from its original source. That digital currency was then deposited into a Liberty Reserve account. From there, the account holder could send the money anywhere: a second Liberty Reserve account holder, or back to dollars to put into a traditional bank account. These steps were taken to avoid a 鈥渃entralized paper trail,鈥� Bharara said, and 鈥渟hielded Liberty Reserve from prosecution.鈥� Until now.
