In response to my suggestion that operating a payment mix might expose one
to criminal liability for money laundering, Secret Squirrel wrote:
> Not necessarily. The payment mix could choose to fully comply with all
> relevant reporting requirements. It's not clear that there are any.
Agreed so far. But, to me at least, it's not yet clear there aren't,
either. More work to be done.
> The mix is not receiving cash, it's receiving some kind of electronic
> payments. Chances are the reporting burden fell on the financial system
> when the money got turned into electronic form.
Still with you.
> Let us keep in mind that it is not illegal to seek financial privacy.
> It is only illegal to launder the results of illegal activity. There is
> a large market of people who have fully legal funds but who would wish
> for more privacy in how they choose to spend them. This is the service
> the payment mix would offer.
Agree, but not sure the powers that be would agree. Remember, you don't
have to break a law to be convicted; you just have to do something
sufficiently similar to the conduct proscribed that a carefully selected and
deeply clueless jury can be confused, bullied, and bluffed into deciding
you're guilty of something, all with the assistance of a judge who is
definately not on your side.
> As a lawyer, can you point to specific code sections which would be
> violated by receiving electronic money and passing it on to a third
> party on request?
I've only just gotten interested in this question, and I'm only starting to
research things. Black Unicorn's 18 USC cite gets right to the root of the
matter. Did you "know" "that the property...represents the proceeds of
some form of unlawful activity?" Did you "know" that your transaction was
"designed" "to disguise" the "ownership" of the "proceeds"? Remember, the
feds have a very loose philosophical definition of "know" when it comes to
criminal cases. How much do you trust the aforementioned jury to disregard
prosecutorial arm-waving about the four horsemen and how you must have known
you were climbing in bed with all four of them? "Ladies and gentlemen of
the jury, you have heard evidence that this scheme of the defendant's is
only useful to criminals, people with something to hide, such as assassins,
drug dealers, terrorists, and child pornographers. Can there really be any
reasonable doubt in your mind that the defendant knew that the money
laundered through his scheme represented the proceeds of crime?" It's
terrible lawyering, but the feds do this shit all the time and they usually
get away with it.
I'll provide USC and CFR cites later, once I've learned enough to be talking
out of an oriface with vocal chords for a change. If I get time, and if
there remains enough interest in the question. Meanwhile, my point is that
there are laws that make this activity much riskier, legally speaking, than
just running a remailer.
> > The obvious implication, then, is that a payment mix should to be
designed
> > to conceal the identity of the operators of the nodes, whereas this is
> > merely an optional feature in a message remailing system. Always
assuming
> > (never safe on this list) that the parties involved have pretty standard
> > risk tolerances and are subject to US law or can be found in sympathetic
> > jurisdictions.
>
> This is impossible. Recall that the point of the payment mix is to
> provide anonymous payment services. We have no anonymity to start with.
Impossible is a strong word. Within the parameters we've been discussing,
however, it's probably accurate. If I'm right about the regulatory risk to
the operators, somebody would need to find a way to change those parameters.
> The mix is built on top of a system of fully identified payments,
> like paypal/x.com, or e-gold, or even regular Visa merchant payments.
> The mix operators (and users) have account numbers, names, addresses and
> social security numbers registered with the payment system. One thing
> the mix operators will not be is anonymous.
There may be ways to game these systems and obtain effective anonymity on a
sporadic or temporary but repeatable basis. But the need to do so, if there
is one, complicates the problem immensely.
-- Daniel
