Mass laundering scheme exposed

Federal prosecutors charged seven people on Tuesday with running a currency transfer and payment processing company that helped criminals around the world launder more than $6 billion (4.6 billion euros) in illegal funds.

The case is aimed at Costa Rica-based online bank Liberty Reserve, which authorities say processed 55 million illicit transactions worldwide for 1 million users over the last seven years, with practically all of its business related to suspected criminal activity.

Announcing the indictment, US Attorney Preet Bharara called the case perhaps "the largest international money laundering case ever brought by the United States."

The network "became the bank of choice for the criminal underworld," Bharara said.

According to the indictment, "Liberty Reserve has emerged as one of the principal means by which cyber-criminals around the world distribute, store and launder the proceeds of their illegal activity... including credit card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking."

A corrupt global network

Liberty Reserve allowed users to open accounts using fictitious names and basic, unconfirmed, personal information.

"The coin of the realm was anonymity," Bharara said. "It was the opposite of a know-your-customer policy."

Liberty Reserve's currency unit was called the "LR," and once a user had a Liberty Reserve account, cash could be used to purchase LRs from third-party exchange merchants. Users could then transfer the digital currency LR units to each other, to be used in different parts of the world for cash using the third party exchange merchants.

Officials said five people in Spain, Costa Rica and New York were arrested in connection to the indictment on Friday, including the company's founder, Arthur Budovsky.

Budovsky, a Ukranian-born former American citizen, had already pleaded guilty to US charges of operating an illegal financial services firm out of New York.

The use of digital currency has expanded over the past decade and has been flaunted by some investors as the future of money.

According to court papers, Liberty Reserve also appears to have played a role in laundering proceeds from the recent theft of $45 million from two Middle Eastern banks.

hc/jr (Reuters, AP)