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Treasury Names Virtual Currency Firm As Money-launderer: A First
WASHINGTON (5/29/13)--The U.S. Treasury Department announced Tuesday that it was entering new territory, for the first time naming a Web-based money transfer system as a financial institution of "primary money laundering concern" under the USA PATRIOT Act.

The subject of the Treasury's action is Liberty Reserve S.A., which a Treasury release said is "specifically designed and frequently used to facilitate money laundering in cyber space."

According to Treasury's charges, "Liberty Reserve is widely used by criminals worldwide to store, transfer, and launder the proceeds of a variety of illicit activities.  Liberty Reserve's virtual currency has become a preferred method of payment on websites dedicated to the promotion and facilitation of illicit Web-based activity, including identity fraud, credit card theft, online scams, and dissemination of computer malware.  It has sought to avoid regulatory scrutiny while tailoring its services to illicit actors."

Treasury said its action Tuesday was taken in coordination with the unsealing of an indictment by the U.S. Attorney's Office for the Southern District of New York, which charged Liberty Reserve and seven of its principals in Manhattan federal court for their alleged roles in running a $6 billion money laundering scheme and operating an unlicensed money transmitting business.

Treasury's Financial Crimes Enforcement Network has issued a notice of proposed rulemaking that, if adopted as a final rule, would prohibit covered U.S. financial institutions from opening or maintaining correspondent or payable-through accounts for foreign banks that are being used to process transactions involving Liberty Reserve. 

The proposal also would require covered financial institutions to apply special due diligence to their correspondent accounts maintained on behalf of foreign banks to guard against any transactions involving Liberty Reserve.  The intention of the new rule would be to cut off Liberty Reserve from the U.S. financial system.


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