To keep each articles integrity in place this report is in two parts.
  • This article is PART 1 and covers how banks are forcing traders to learn how to launder money or lose there businesses and end up in the unemployment line
  • PART 2 is focused on the sometimes humorous, but very serious and many times harmful process companies and individuals are going through to have a bank account or use certain financial services


Money Laundering By Banks of America

Financial service organizations worldwide are expected to help governments prevent money laundering, however, their actions are forcing many customers to unknowingly gain vast experience in the activity.

I certainly know what you are thinking... "the hell you say"? Well maybe not, unless that is, you work for a bank or an organization such as Netspend, GreenDot, or any other number of prepaid or stored access providers, and payment systems.

Banks, and other financial service companies are required by regulation in many countries to report suspicious activity, among other actions, to prevent illegal activity and the funding of terrorism. Instead, most of these organizations have engaged in a "shoot now, ask questions later" approach to the issue in an attempt to eliminate the hassle rather than help solve the problem.

They close accounts, ban identifications numbers, and wash their hands of everything at even a thought of a suspicious activity rather than exercising customer due diligence or proper account monitoring to obtain any information that would support a legal activity. They are they Judge and Jury, and everyone is guilty until proven innocent without being given a chance to prove any such thing. They are far too worried about profit loss than doing any KYC to determine who their customer actually is, much less what they might be using their money for.

This behavior is inadvertently creating an army of experienced money launderers who are becoming exceedingly skilled in the practice.

The Money Laundering Armada

The aforementioned customers are digital currency peer-to-peer (P2P) traders, or what would be more accurately described as bitcoin retail sellers. Instead of trading on an actual exchange, bitcoins are obtained, and then sold on a marketplace or in classifieds, such as eBay or Craigslist respectively, or one of the many specialized platforms for P2P trading. Some of these include:


Payment (Trade) Methods 

Here's where it starts to get tricky. Along with these platforms come a range of payment methods (what the bitcoins are being "traded" for) and the faster the payment method can be safely converted to cash or back into bitcoins, the hotter and more desirable it is to sellers. These payment methods include cash in person, bank deposits, prepaid cards, remittance, payment services, and about a hundred other various flavors of funds transfer.

In many cases, using any of these for trading or purchasing bitcoin is either against each services terms of agreement, not intended for the purpose, or causes increased monitoring or reporting they would rather not deal with resulting in account closure, usually with funds frozen and held for months. In some cases funds are never recoverable.

So what do they do? They learn to avoid detection, how to stay within certain threshold limits, and fly under the radar. They learn how to move large amounts of cash from point A to point B without raising any red flags and essentially learn how to effectively launder money.

This is not to say the are laundering money, they're not. However, if they ever chose to do so, they would certainly be well equipped to handle the task with ease and the reason is due to the account closures, frozen funds, and related activity conducted by financial organizations and service providers.

It There A Better Way?

There is a proper way to do this, however, many P2P traders are part-time and simply doing this for extra money or as a hobby. Even the professionals struggle with similar issues because the correct procedures to secure safe accounts for use are not ready available or easy to obtain.

Ridiculously, it is easier to learn how to launder money.

Additionally, the requirements to legally setup an entity to conduct transactions on a professional level is expensive and overly complicated because it crosses over into a regulated trade. Even once a practice is setup legally, it is still difficult to obtain proper accounts.

It's not impossible, it's just not easy and not something that's going to be accomplished in a day or two. In fact you'd be lucky to accomplish this in a week or two. A month or two is a more realistic time frame to put all of the necessary things in place to have a shot and that's being lenient.

This has actually caused some companies to go out of business all together and some individuals to lose everything to the point they are bankrupt and unemployed.

The Metamorphosis

You know how a ugly brown little caterpillar cocoons into a dainty wisp of a butterfly? This is like the opposite of that process, where something seemingly good goes from sugar to shit in the blink of an eye.

You can read more about this in PART 2

It's starts out innocently enough where an individual obtains some bitcoin and then attempts to sell them to another individual. Generally at first, this process goes smoothly, and then it is repeated. Everything appears to be going fine so they throttle forward, usually giving it a little too much gas, and then they hit the wall.

Most people know up front, as with anything on the internet, to be wary of scams and scammers. Scams will happen, but where the ass is more viciously bitten is by the financial organizations trusted to handle the payment methods, or what the bitcoins are being traded for.

These organizations are responsible for far more loss to traders than any scam and frequently referred to as a scam themselves. Most traders would prefer to deal with a scammer than they would a bank, at least they have a fighting chance with the scammer.

As time progresses and a trader becomes more successful, the battle with financial institutions equally intensifies to the point they are inadvertently persuaded by these organizations to either find alternate methods of accepting payment or move forward in a shroud of deception doing everything in their power to conceal the source of the funds being deposited.

The only difference between what they are doing and actual money laundering is that in this case, the origin of the funds is a legal source whereas with money laundering it is not.

One flip of the hat and you have a full fledged money launderer better than anyone you're going to find on the street. The regulation that governs these entities was meant to provide assistance to help prevent this type of activity, not provide a training program for it and force unknowing customers to take the crash course.

Route Cause

It all stems from the attempt to scrape past federal regulation with minimal effort and the easiest way to do that is to rid themselves of a traders business as quickly as legally possible. Financial organizations go overboard for one reason. To be more profitable.

It simply costs to much to do anything other than getting rid of the account.

It takes time, effort, and money to justify a customers unusual spending. If there is unusual traffic through an account, they face increased monitoring requirements and potentially face fines, law enforcement involvement, and ongoing reporting. All things that cost additional money, and far more then the $5 a month they are generally taking in from an account. They would rather just wash their hands of it and move on to the next customer.

Payment systems such as PayPal have gotten better recently, working harder to support sellers, but half the time sellers don't follow the recommended guidelines, such as obtaining identification, listing the proper information on invoices, or invoicing at all.

Prepaid cards target the "unbanked", which is really astonishing being that they are notorious for closing accounts and holding money for long periods of time which is not typically something the "unbanked" can easily survive, and card to card transfers are really not meant for selling anything to anyone. Services like Google Wallet, which does support P2P and Business payments, does not support those of the digital nature (anymore, they used to allow this) of which bitcoin is considered (in their eyes).

What is inadvertently happening is that honest people trying to earn a living have had to resort to practices synonymous with laundering money. This is not good for bitcoin, this is not good for the financial system, and this is not good for anything.

What Needs to Happen

All of these organizations need to wake up and realize there is a multi-billion dollar industry out there and they need to provide the proper direction. Banks, while reluctant sometimes, will allow a bitcoin business to operate with an account opened with their establishment, however there are specific leaps and bounds that have to be gone through to obtain this account and they don't make this readily available to an average individual who walks into a branch and asks about it. They just say no (however this is generally an inaccurate and in.

PayPal has made some improvements in this area recently, however, they do not go out of their way to provide guidance on this until it's a problem. This is how they have operated for years on just about everything so it comes as no surprise.

Traders, BitCo's, and financial institutions need to realize that they are on the same team and work together, not against each other. If this does not not happen, the end result is going to be an all time high of experienced money laundering experts created by the very institutions suppose to be preventing and reporting the activity.

Others Should Also Take Action

P2P traders need to do their part as well by following procedures, complying with regulations, and either refrain from, or get permission to, go against terms of service. It's not a major problem to accept an occasional Google Wallet payment, but if it's a scam, your account is going to be shutdown faster than a speeding ticket in a school zone.

Secondly, when issues happen involving a bank or other financial service organization, traders need to work with these entities. Contact them and explain the problem. Ignoring the issue doesn't make it go away and will end up in account closure or worse.

Government agencies could help out some here as well. It's unfair to require a company to comply with regulations, go through annual and periodic training, implement AML/KYC policy controls, and hire compliance professionals when this very compliance puts these organizations in a position where they are going to be refused service for the simple fact that they are following the law.

You cannot force someone to become an expert at money laundering by hurting them financially, then continue to demolish their infrastructure while beating them into the ground to the point they have no way to survive, and simply expect nothing bad to happen.

This situation is ridiculous, irresponsible, out of control, and something needs to be done.

With money laundering already an illegal trillion dollar industry, it's one fire that doesn't need any fuel added to it.

Article Footnotes
* Bitwallet doesn't appear to be used anymore with reports of the operators stealing the remaining coins on the platform (avoid
Existing markets (prior to 2009) that Bitcoin is now being sold or advertised on.
** Coinfloor is a normal exchange, but apparently offer P2P Services
 P2P Lending is an additional service offered by OKCoin 
*** CherryRace is an Auction Style service 

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