When law enforcement in 17 countries shut down Liberty Reserve, a $6 billion digital money laundering operation, hackers didn’t blink an eye; They just turned to perfect money.
Or rather, Perfect Money, another private digital currency that cyber security experts say has emerged to meet the demand of Ponzi schemers and hackers with stolen personal data to flog. Like Liberty Reserve, it’s operated anonymously in tax havens (its mailing address is in Hong Kong, and the company at various times claims to be based in Panama or Switzerland), and it allows users to transfer money anonymously by purchasing and exchanging the proprietary currency for dollars, euros and gold.
Attorneys for Liberty Reserve’s operators maintain that their well-intentioned finance company was abused by bad actors, despite evidence that its creators were well aware of the fact and constructed it for that purpose. If Perfect Money’s operators are ever forced to explain themselves, you can expect similar responses.
While these virtual currencies are often linked to bitcoin because it has also been used by criminals—as have most currencies—the comparisons are superficial. Bitcoin’s open-source cryptography model, which maintains records of every single transaction, is fairly transparent compared to the black box in which proprietary currencies exist. While bitcoin’s so-called anonymity depends on measures that keep a person’s real identity separate from his or her digital address, these companies rely on layers of offshore companies with concealed ownership to mask their transactions.
Essentially, the internet just makes it easier for everybody to access the existing offshore financial system. While governments can crack down on digital currencies like Liberty Reserve and Perfect Money for violating money transmission rules designed to stop criminals from hiding their ill-gotten gains, the only thing that will really put a dent in money laundering is obstructing companies from hiding their real owners.