February 3, 2015
Maxim Chukharev, a former IT manager for Liberty Reserve, was sentenced to three years last month, after pleading guilty at the end of last year to “conspiring to operate an unlicensed money transmitting business.” The charge is one commonly brought against intermediary businesses used to money laundering by a variety of criminal enterprises. Even though these intermediary businesses may not be easily prosecuted for their role in the underlying crime or for money laundering, there are significant requirements that “money transmitting businesses” (e.g. Western Union) are required to follow, including registration and recordkeeping, and reporting transactions to the government. When businesses don’t follow those requirements, they can become knowing or unknowing participants in money laundering schemes. This particular case is noteworthy because Liberty Reserve is one of the world’s most widely used digital currency services. According to the DOJ press release:
… Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes, and it emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store and launder the proceeds of illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals around the world to conduct anonymous and untraceable financial transactions.
According to court records, before being shut down by the government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking and other crimes.
More on this case can be found in the original press release.