14

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 - ...


8

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 "...


8

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 ...


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 ...


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".


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

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 ...


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

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

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 ...


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

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

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

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

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

While nothing stops you from paying a high fee to a miner and claiming it out of band, trying to launder any significant amounts through this would likely be discovered and linked fairly quickly. A pattern of disproportionately high fee transactions appearing in blocks that are mined by a subset of miners would be noticeable, as would linking the money - If ...


1

https://www.fincen.gov/sites/default/files/shared/FIN-2014-R002.pdf This ruling deals with your exact question.


1

You could spend it on miners, actually mine some bitcoins and then sell the mined bitcoins for fiat again. And then the IRS will tax the mined bitcoins because they consider it 'profit'. Using bitcoins to launder money doesn't really make that much sense. Besides, everything is kept 'eternally', or at least until the year 2100 something, because what goes on ...


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 ...


1

The Shared Recieve is also a mixer. When you get a new shared address, it will also show the "Forward To" address which will be one of your main addresses. If anyone sends bitcoins to that shared address, Blockchain.info will send them through its mixer then send it to the "Forward To" address. However, there are transactions costs and blockchain.info's 1.5% ...


1

It surely has some potential to help money launderers to conceal their identity from Anti Money Laundering regulation. Because a new wallet address could be generated at any time, without the prolonged process of Knowing-Your-Client (KYC), you can hypothetically conceal the owner of each account/address. For example, you have hacked a bitcoin exchange and ...


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