Liberty Reserve: The Criminal Underworld’s Online Bank of Choice?

As probably one of this year’s biggest money laundering cases, has the online digital currency and money transfer firm Liberty Reserve now became the criminal underworld’s online bank of choice? 

By: Ringo Bones 

With the arrest of the firm’s Ukrainian born founder, Arthur Budovsky - who was en route to his digital currency and money transfer firm’s base of operation in Costa Rica, by the U.S. Department of Justice authorities, Liberty Reserve was shut down by the U.S. D.O.J., the U.S. Secret Service as the ongoing investigation by federal prosecutors in New York proceeds. With a massive 6-billion US dollar money laundering scheme that could be the biggest uncovered for this year, does Liberty Reserve made an error of corporate due diligence for the firm to be embroiled in criminal money laundering? Or is the firm actually has outright complicity in such a criminal act? 

Though the outcome of the investigation is still pending, the U.S. Department of Justice in conjunction with the US Secret Service made arrests of Liberty Reserve’s upper echelon personnel in 17 countries over the weekend of May 25, 2013 while freezing its online domain name and 45 bank accounts used by the digital currency and money transfer firm elsewhere in the world. Based on the preliminary investigation uncovered by the New York Federal Prosecutor’s office, it was found out that Liberty Reserve became during the past few months as the money laundering destination of choice for the world’s criminal groups currently engaged in identity theft, illegal arms trading and running illegal online pornography sites, and transnational narcotics smuggling  just to name a few of the criminal enterprise uncovered whose profits were allegedly laundered by Liberty Reserve.  

Even though digital currency schemes like Bitcoin had been actively used by transnational illegal arms traders and narcotics traffickers since it was introduced, police authorities around the world has had a rather Quixotic task in their hand when it comes to arresting “online enablers” of such criminal activity due to a lack of established brick and mortar institutions. Given that Liberty Reserve has a real bricks and mortar office located in a rather “infamous” tax-haven destination called Costa Rica in which authorities could conduct raids and make arrests, this could be the primary reason that over the years this is the first time that such criminal activity has finally been “tangibly” clamped down.