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Treasury Dept. Invokes Patriot Act Against Alleged Money-Laundering Service

Lauren Madow |
May 28, 2013 | 1:34 p.m. PDT

Executive Producer

Digital currency company Liberty Reserve is accused of laundering $6 billion (epSos.de)
Digital currency company Liberty Reserve is accused of laundering $6 billion (epSos.de)
Prosecutors are calling the Costa Rica-based online currency company Liberty Reserve one of the largest international money laundering organizations in history. 

Five Liberty Reserve employees and principals, including principal founder Arthur Budovsky, were arrested in New York, Costa Rica and Spain. These five and two others were named in an indictment which described the company as "designed to help criminals conduct illegal transactions and launder the proceeds of their crimes."

Law enforcement agencies in 17 countries cooperated in the arrests.

In a press release, the US Treasury explained that Liberty Reserve had been targeted under Section 311 of the USA Patriot Act, which grants the Treasury Secretary authority to take "special measures" against foreign entities suspected of money laundering. These measures, to be implemented by the Director of the Financial Crimes Enforcement Network (FinCEN), include the collection of otherwise confidential account information and the power to decide whether certain accounts can remain open.

Liberty Reserve, incorporated in Costa Rica in 2006, is thought to have allowed the anonymous storage and transfer of $6 billion in funds earned through theft, ponzi schemes, drug sales, distribution of child pornography, identity fraud and other illicit activities. One federal prosecutor called it "PayPal for criminals."

According to the Hill, US Attorney for the Southern District of New York Preet Bharara called the indictment "an important step towards reining in the 'Wild West' of illicit Internet banking...As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the earth."

The Treasury Department has invoked the special measures allowed under Section 311 of the USA Patriot Act against four jurisdictions and 13 financial institutions since 2002.

Passed by Congress in October, 2001, in the wake of the September 11 attacks, the Patriot Act's official title is "The USA Patriot Act: Uniting and Strengthening America by Providing Appropriate Tools Required To Intercept and Obstruct Terrorism." It gives the US government broad legal protection for the surveillance of citizens.

For discussions of the Treasury Department's use of the Patriot Act, see the Economic Policy Journal and Businessweek

Reach Executive Producer Lauren Madow here. Follow her here.



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