Headline, January21, 2014

''' LIBERTY WITH LIBERTY '''

A CRIMINAL indictment, filed in New York against Liberty Reserve (LR)

and seven current and former employees, has shaken the world of digital currencies.

The defendants are charged with running a  ''money-laundering'' operation that allegedly acted as  ''a financial hub of the cyber crime world'', serving credit-card fraudsters, identity thieves, hackers and rug traffickers.

Authorities estimate that  LR  processed  55 million  transactions and laundered $6 billion between 2006 and 2013. That makes it the largest case in the history of cross-border money laundering.

With LR's website shut sown and regulators warning that virtual currencies should follow anti-money laundering rules more assiduously -cyber enthusiasts have been left wondering :

Which digital money will be next in the prosecutor's sights.

Attention has inevitably turned to  Bitcon, the darling of virtual currencies, which is widely used on Silk Road, an online marketplace for illegal drugs.

But the two are not the same. LR was essentially no more than a Digital Western Union or PayPal, albeit one designed to break the rules.

Users had to provide a name, address, and date of birth, but the firm did not verify the information. It charged a 1% fee for the transfer, plus a 75 cent  ''privacy fee'' to ensure untracebility   -even within LR's system.

To doge regulations and avoid creating a paper trail, LR made users deposit and withdraw funds through  ''third party''  exchangers.

Bitcoin  is more of a proper currency because it can be transferred without a recourse to a central clearing house   -rather like bundles of dollar bills.

But businesses which trade Bitcoins for central bank-issued money, such as Mt.Gox, an exchange based in Japan, resemble Liberty Reserve. They could find themselves chased down by prosecutors if too much dirty money starts flowing through Bitcoin.

On May 14, last year, federal agents seized some funds from an account held by Mt.Gox at Dwolla, another online transfer service, on the basis that laws governing money transfers were not being followed.

If prosecutors look for more cases, the most likely targets are online payment services that allow cash to be moved without verifying users' identities. The number that merely pretend to apply  ''know your customer'' and other anti-laundering rules is thought to be in the dozens.

The LR case will make regulators warier of digital money innovations such as Bitcoin.

The case highlights how hard it is to track such oerations. LR's founder, Arthur Budovsky had been known to the authorities for many years. After being prosecuted in America for running an unlicensed money-transmission firm   -the home of E-Gold, a now-defunct digital currency.

He moved the business to Costa Rica. When local regulators grew concerned, he allegedly designed a fake compliance portal, then pretended to shut the firm down while in fact taking it underground.

But crimefighters techniques have evolved too. As well as creating under cover LR accounts,  -they wiretapped Internet connections- and executed search warrants for  e-mail accounts and Internet Service Providers.

Prosecutors' offices are investing heavily in their Cybercrime Labs.

Money-moving businesses that facilitate  ''digital dodginess'' will find it increasingly hard to stay any step  -not even, half a step-  ahead.

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With respectful dedication to all the Networking, Cyber, and Every Law in the world.

With respectful dedication to the Students, Professors and Teachers of India, Siri Lanka, Bangladesh, and Nepal. See Ya all on !WOW! the World Students Society Computers-Internet-Wireless:

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SAM Daily Times - the Voice of the Voiceless