The following is an excellent article from the February 17 – February 23, 2014 issue of Bloomberg Businessweek written by Drake Bennett on page 50 titled “Bitcoin Enables Drug Dealing, Just as Major Banks Do” and I quote:
“Bitcoin Enables Drug Dealing, Just as Major Banks Do”
By Drake Bennett February 13, 2014
(Updates a previous version of this story to reflect, in the fourth paragraph, that the banks reached deferred prosecution agreements and includes, in the sixth paragraph, comments from attorneys representing Shrem and Reid.)
Two weeks ago, Pascal Reid and Michel Abner Espinoza were arrested by police in Miami and charged with using the virtual currency Bitcoin to launder money. The week before, Charlie Shrem, co-founder and chief executive officer of BitInstant, was arrested in New York getting off a plane from Amsterdam. Shrem was charged by federal prosecutors with conspiracy to commit money laundering linked to alleged sales of more than $1 million in Bitcoins to people who wanted to buy drugs on Silk Road, a now defunct online marketplace.
The arrests underlined growing concerns among U.S. law enforcement officials that Bitcoin has become the preferred currency of the criminal underworld and that currency exchanges such as Shrem’s have become the enablers of drug trafficking and other nefarious enterprises. But you know who else has a history of enabling nefarious criminal enterprises? Banks.
HSBC (HSBC) in December 2012 agreed to a $1.9 billion settlement with the U.S. government over charges it failed to monitor $670 billion in wire transfers and $9.4 billion in purchases of U.S. currency. According to the U.S. Department of Justice, Mexican cartels deposited hundreds of thousands of dollars a day at HSBC México branches, placing the cash in boxes specially designed to fit the dimensions of the teller windows. Wachovia, now part of Wells Fargo (WFC), also admitted its failure to report suspected cartel money going through the bank as part of a $160 million settlement it reached in 2010. ING (ING) and Standard Chartered (STAN:LN), among others, have settled similar cases.
Story: Bitcoin Buyers Beware: Being Greedy Ain’t Easy
The banks got deferred prosecution agreements. Assistant Attorney General Lanny Breuer, in announcing the HSBC settlement, argued that a criminal indictment would have posed too great a risk to the financial system and potentially cost thousands of jobs. In other words, HSBC was too big to prosecute. No bank employees were charged.
Shrem, on the other hand, faces a potential prison sentence of 30 years in a case in which the amounts are a rounding error next to those HSBC and Wachovia handled. “I think there’s a double standard of justice that’s being administered by the [Eric] Holder Department of Justice,” says Jimmy Gurulé, a former federal prosecutor and Treasury Department enforcement official who is now a professor at Notre Dame Law School. “One standard for large global banks and their officials, and another standard for everyone else.”
Shrem’s attorney, Marc Agnifilo, says his client “denies that he laundered money and we anticipate that we’ll contest these charges in court.” Reid has pleaded not guilty. His lawyer, Ronald Lowy, accuses the state government of scapegoating his client “in an effort to make media waves to discourage the use and transfer of Bitcoins.” Espinoza’s lawyer could not be reached.
Video: Despite a Ban, China Is Largest Bitcoin Market
Some Bitcoin proponents have seized on this disparity to make an argument against money-laundering laws. Libertarians see the statutes as one more way the government, under the guise of protecting us from criminals, exerts control over our lives. A piece last May in American Banker by e-money researcher Jon Matonis was titled “Money Laundering Is Financial Thoughtcrime.”
Seen one way, the decision to prosecute Bitcoin entrepreneurs is evidence that the government is at least taking the currency seriously. We’ll really know it’s important, though, when the Justice Department decides it’s too risky to prosecute financial institutions such as Shrem’s.
Graphic: Interactive Demonstration: This Is How You Mine Some Bitcoin
The bottom line: U.S. authorities are bringing money-laundering charges to try to shut down Bitcoin companies.
Bennett is a staff writer for Bloomberg Businessweek in New York.”
(MEXICAN CARTELS ARE DEPOSITING MONEY IN HSBC MEXICO BANKS AND LAUNDERING THE MONEY. ASSISTANT ATTORNEY GENERAL LANNY BREUER IS INVESTIGATING HSBC. JIMMY GURULI, FORMER FEDERAL PROSECUTOR AND TREASURY DEPARTMENT ENFORCEMENT OFFICIAL AND NOW A PROFESSOR AT NOTRE DAME LAW SCHOOL, “ONE STANDARD FOR LARGE GLOBAL BANKS AND THEIR OFFICIALS, AND ANOTHER STANDARD FOR EVERYONE ELSE.” IF YOU’RE GOING TO HAVE A RESPECTED BANKING SYSTEM, YOU’RE GOING TO HAVE TO HAVE STANDARDS THE SAME FOR LARGE AND SMALL BANKS. YOU CAN’T HAVE THE SAYING THAT I’VE HEARD TOO MANY TIMES THAT SOME BANKS ARE “TOO BIG TO FAIL.” WHICH JUST MEANS WE HAVE A JUSTICE SYSTEM THAT HAS ALREADY FAILED BECAUSE OF LACK OF REGULATIONS TREATING THE SMALLER CONSERVATIVE BANKING SYSTEM DIFFERENT THAN THE BIG INVESTMENT BANKS THAT ARE PLAYING WITH OUR CURRENCY AND ADULTERATING IT WITH DRUG MONEY, AS WELL AS UNREGULATED TOXIC DERIVATIVES SOLD THROUGH HEDGE FUNDS, PRIVATE EQUITY AND VENTURE CAPITALISTS. THERE’S MANY BOOKS WRITTEN AND MOVIES MADE ON THIS SUBJECT. THIS SYSTEM HAS TO CHANGE BEFORE WE CAN START TO RESPECT IT AGAIN.
LaVern Isely, Overtaxed Independent Middle Class Taxpayer and Public Citizen and AARP Members