Taking AML to the Next Level


Bob Tie, CFE, CFP
Fraud Magazine contributing editor

Liberty Reserve, S.A., a Costa Rica-based Internet money transfer system, served a million customers around the world and in the U.S. Not any more. On May 28, FinCEN director Jennifer Shasky Calvery and Preet Bharara, U.S. Attorney for the Southern District of New York, initiated tough administrative and prosecutorial measures against Liberty, which they said employed its widely used digital currency to launder criminals’ illicit profits on an unprecedented scale.

This case and others like it exemplify a major challenge facing fraud fighters today: Innovative fraudsters in lax jurisdictions — unless prevented — can run Internet-based fraud schemes, which can undermine even the world’s most carefully regulated financial systems.

Shasky Calvery therefore issued a Notice of Finding that Liberty Reserve, operating outside the U.S. as a financial institution (FI), was “of primary money laundering [ML] concern.” At the same time, Bharara indicted seven Liberty principals and employees for processing 55 million allegedly illegal transactions to launder $6 billion in suspected proceeds of crimes including credit card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking.

FinCEN’s issuance barred Liberty from the U.S. financial system and alerted the international community to the risks the firm presented. The Department of Justice’s (DOJ) indictment charged each Liberty official with conspiracy to commit money laundering, which carries a maximum prison term of 20 years, and with other charges that could draw terms adding up to 10 more years.

Further, the DOJ, in concert with the U.S. Secret Service, IRS Criminal Investigation, Immigration and Customs Enforcement, Homeland Security Investigations and law enforcement agencies from 17 other countries, arrested five Liberty officials and seized the firm’s Internet domain (formerly www.libertyreserve.com), terminating its operations. They also shuttered the sites of several currency exchangers that had electronically funneled depositors’ allegedly illicit funds to Liberty for transfer to accounts that disguised their true origin.


FinCEN’s mission, as a bureau of the Department of the Treasury, is to safeguard the U.S. financial system from ML and other abuses and to collect, analyze and disseminate financial intelligence, while helping to coordinate anti-money laundering (AML) and counterterrorism financing (CTF) activities for maximum effectiveness.

FinCEN has been coordinating its efforts with the DOJ plus domestic and foreign law enforcement for years. The financial services industry — FinCEN’s eyes and ears in the marketplace — has long reported possible ML and terrorist financing. And FinCEN has always worked closely with U.S. and international financial regulators to increase the effectiveness and practicality of domestic and global AML compliance and enforcement regimes.

So is the status quo good enough? Not if AML teams hope to do more than merely react to the latest schemes, which as the Liberty Reserve case shows, can involve a staggering number of global participants whose various criminal activities finance the spread of organized crime.

Read the rest of the Special to the Web article on Fraud-Magazine.com.