13

You can trace the coin back to its origin, the question is whether that information is meaningful. Say I steal 50 bitcoin. I can pass them around between several different Bitcoin accounts, all mine, and you can trace them. The problem is, you don't know whether any of those transactions are real. Say Jack has 50 bitcoins that come from a block reward and ...


11

Because all transactions in both Litecoin and Bitcoin are stored in the block chain, you run into the same issue you do here if you were just to try and withdraw USD for bitcoins, i.e., does your intermediary store logs of the off chain transactions? When you buy LTC using BTC on Kraken, if Kraken decides to log this transaction then there is now a link ...


9

In reverse order. Can we close a criminal's account? No. The owner of a bitcoin address can move all the money out of the address and then delete all copies of the key pair for the address. This would amount to closing the account, as the likelihood of someone having the same address in the future is infinitesimally small. However, moving bitcoin money out ...


8

A tumbler is used to hide/disguise/make it difficult to prove where bitcoins came from. It might help to first understand that every bitcoin transaction, right back to the genesis (very first) block is available for public inspection in the block chain. Note that the actual bitcoins are not trackable, only the amounts, addresses and the transactions - ...


7

The other answers are correct, in that a mixed wallet can be used to hide tainted coins. However they miss an important point: the operator of the wallet service does have the knowledge required to trace the outbound transaction back to the original input coins, because both flows have to be associated with the wallet's internal representation of a customer ...


6

The term "Tainted Coins" is often misinterpreted as a measure of provenance. That's understandable considering the traditional definition of the word "tainted" coupled with the reality that many Bitcoins actually have been used for what would be considered nefarious purposes by standard societal norms. In fact, it is a common occurrence to be holding or ...


6

When you send coins to a large shared wallet, chances are that the coins you withdraw won't be the same as the ones you deposited. That's how you can sever the taint trail. The key is that the wallet must not only be large, but also shared between a lot of users. The taint on the original coins would never go away but could be diluted by mixing them with "...


5

It can't be closed, because there is no account. Likewise if he/she were using cash dollars for criminal purposes, it would not be possible to "close his wallet" as if it were some "account".


5

I think your premise is flawed - when trading on Mtgox or other exchanges, there will only be transfers between you and Mtgox. If you're a day trader most trades will be internal on Mtgox and not be settled by the banks at all. Even if they do "send a notice to anti-laundering authorities", it doesn't mean the next day they will show up at your doorstep to ...


4

The U.S. Treasury's FinCEN describes money laundering as the process of making illegally-gained proceeds (i.e. "dirty money") appear legal (i.e. "clean"). Bitcoin is a pseudonymous digital currency but it can be used anonymously when certain precautions (using Tor, mixing, etc.) are taken. Presumably, some or all of the money would get exchanged to fiat. ...


4

No one -- not a government, not the Bitcoin core developers -- can "close" a Bitcoin "account" because no central authority has unilateral control to do so. The closest it comes to "closing" an account is deleting the private key to an account, and such could only be done by forcing the holder to do so or tricking them into using a service that compromises ...


4

While I’m not an attorney, the website you describe would be considered a “money transmitter business” (MTB) which, in the US, falls under the jurisdiction of The Dept. Of Treasury FinCEN (Finacial Crimes Enforcement Network) which has regulations to prevent money laundering with strict anti-money laundering (AML) policies. You would need to register with ...


3

TL;DR Businesses in the Bitcoin space face no special challenges to implement KYC regulation, except the privacy oriented mindset special to some bitcoin users. However, it is impractical to enforce KYC regulation on the entirety of the bitcoin network itself. Long version below Know Your Customer (KYC) regulation applies to financial institutions and ...


3

I have a third option: We get rid of Anti-money laundering (AML) regulations. Money laundering has been criminalized in the United States since the Money Laundering Control Act of 1986. Perhaps it's time to reverse that decision.


3

I recently came across an article that clearly articulates what a tumbler intends to accomplish. The analogy they gave was a collection plate at a church: You may have seen collection bags that go around churches, where you put a bill in your closed fist and stick your hand in the bag, so no one knows how much you put in or took out. Imagine that we come ...


3

"AML-compliant" bitcoins are not anonymous/anonymizable by definition since most AML laws require the origin of funds to be traceable to real person, at least for bigger transactions. The "tainted" bitcoins are completely different thing, you should be completely fine accepting them in good faith if you have sender's real life ID. Law does know nothing about ...


3

In the U.S. there is the ACH bank network. Coinbase is currently the only service allowing bitcoin purchases to be paid for with a transfer from a bank using the ACH network directly. Mt. Gox and Camp BX use Dwolla which is an intermediary which allows funds to be drawn from a bank account through the ACH network. I'm unaware of any exchanges whose ...


3

It's funny, but Bitcoin laundering services are most likley used by people wishing to do illegal activities. So all the Bitcoin transactions on that laundering site are probably illegal and are criminal. Even though Fred would be caught for buying marijuana for Bob, whilst Bob would be caught for buying coke for Fred. So all the police have to do is ...


3

Most Bitcoin ATM vendors require you to identify yourself and track your buys and sells. This is done due to Know Your Customers and Anti Money Laundering regulation. You need to present the source of of your money in some point when you exceed some threshold of volume. If any Bitcoin ATM vendor chooses not do this it would be helping committing money ...


3

Fraud and money laundering are two different things. Fraud, or accepting or spending money under false pretenses, would be very difficult to detect on the blockchain because it requires outside knowledge. The way banks detect fraud is by using the context of what was purchased, and where. The blockchain doesn't contain that information, so supplemental ...


2

Bitcoin exposes many flaws in the current financial system, as it was designed to be an ideal. Yes all transaction are always visible after laundering - however the problem of matching entry and exit points is "computationally irreducible", to borrow a phrase from Stephen Wolfram, so the efforts of KYC and AML are kind of hopeless once funds go into any of ...


2

The mixing service could use various means to obfuscate the mixing - for example: It can make you send coins to some off-line address, then send you your coins from its own supply of bitcoins before introducing your coins into the circulation again. This way it would appear that the transaction took place before you send the coins to the mixing service, and ...


2

It is unlikely that we will account for most of the activity, as Bitcoin allows for high anonymity. Some of that hashing power is believed to come from some botnet, but one can't be sure. You could try looking for the owners of the IPs that relay the new blocks and check who they are, but that would be a tedious work that could be easily hidden, for example ...


2

Their shared sending feature simply combines payments from multiple users making it very difficult to know which funding inputs (Bitcoin addresses) were used to pay which outputs (Addresses being paid). Think of it like collecting money at the office to pay for a coffee run. Five people are buying coffee, each costing $3. Bob puts in a $5, for a latte ...


2

There's nothing about Bitcoin that makes it especially appealing for money laundering. In fact, given the nature of the block chain, I would think it would be a fairly unappealing prospect for money laundering, because every transaction is publicly posted. Of course, the real issue with money laundering is defining it. I don't even think the authorities have ...


2

In the EU AML regulations do not apply to currencies, they apply to financially registered entities and a couple of other ones. The entities required to ensure AML-compliance are : Banks, Payment Service Providers, Latin notaries (think about laundering money through real-estate transactions for example) Licensed currency exchangers, etc. Legally ...


2

Administratively, there should be plenty of evidence that Bob was working a legitimate job. If the web firm is a US company and Bob a US worker, then the company is required to file a form 1099-MISC. Yes ... even if they paid him in non-USD currency. Some time in that seven-month period, Bob should have paid his quarterly taxes. That adds to the ...


2

Yes I would say that this is quite possible but because litecoin is traceable like Bitcoin the entire laundering process you described reposes on the exchanges platform confidentiality. There is actually a coin called Zerocoin that is in preparation and that is designed to be completely untraceable. I hadn't a deep look into their White paper so I can not ...


1

There is already one alternative crypto-currency that is trying to solve the problem of staying anonymous while performing transactions: http://stablecoin.net


1

The way bitcoin transactions work causes them to be chained together in a permanent public record. They are traceable along the blockchain from one bitcoin address to another. A bitcoin laundry breaks this chain by having two independent wallets, receiving bitcoins to one wallet and sending them from another wallet. Instead of the transaction being a ...


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