Money laundering: Digital currency

Cash Is King

by Nathan Vardi, 03.18.08, 10:45 AM ET

New York's governor was felled not by "Kristen"--but by Osama bin Laden.

Since Sept. 11, 2001, stronger anti-money-laundering rules and new technology have made it tougher to hide dirty transactions of all sorts. As a result, the feds are just as likely to nab a high-profile john as they are a terrorist or drug dealer. "It's very difficult to avoid creating a paper trail," says Gregory Baldwin, a lawyer specializing in money laundering issues in Miami. "If you try too hard, you can trip a wire." In other words, it's easier to cheat on a spouse than to cheat the system. Here are five ways spenders try to cover their tracks...

4. Digital currency. According to the Justice Department, between 1999 and 2005 child pornographers, hackers and identity thieves made use of E-gold, an online payment system in the Caribbean. Users provide an e-mail address to E-gold, then go to a currency exchange (like Cambist.net) to swap greenbacks, euros, yen and so forth for digital currency backed by gold; from there the customer is free to conduct anonymous transactions anywhere in the world. The feds indicted E-gold last year for money laundering and illegal money transmitting because it operated without an appropriate license. The company pleaded not guilty, and its lawyer, Andrew Ittleman, says E-gold fully complied with anti-money-laundering laws and did not need a license to operate.

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Cash Is King - Forbes.com