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Liberty Reserve bust hits cybercriminals where it hurts

Antone Gonsalves | May 29, 2013
Shutting down what is believed to be the biggest online money laundering organization will make it a lot harder for cybercriminals to operate.

"This case is far from over," Jennex said. "But I do think the action of shutting Liberty Reserve down is legitimate and a good first step."

What made Liberty Reserve so enticing to criminals was the anonymity it provided, prosecutors said. Only a legitimate email was needed to start money transactions.

The company did not handle cash directly. Instead, it used "third-party exchangers" that would actually handle the transactions and credit or debit the Liberty Reserve account, according to the indictment. The system enabled the company to avoid collecting any banking information on its clients, thereby not leaving a centralized paper trail.

Along with shutting down Liberty Reserve, law enforcement seized four currency exchanges that worked with the company and 35 other websites. The case involved 17 countries and is believed to be the largest international money-laundering prosecution in history.

"Given the level of international cooperation involved it would seem that operators of these companies have fewer places to hide -- which is a good thing," said Alphonse Pascual, analyst for Javelin Strategy and Research.

While the sum of money laundered by Liberty Reserve seems large, it represents only a small portion of the revenue generated by online criminal activity. Last year, identity fraud alone cost U.S. consumers $21 billion, the research firm Javelin said.


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