In toppling Liberty Reserve, one of cybercriminals' favorite money-laundering organizations, U.S. prosecutors have attacked Internet crime by targeting its financial infrastructure, a strategy advocated by experts.
The U.S. attorney's office in New York on Tuesday unsealed an indictment charging the operators of Liberty Reserve with money laundering and running an unlicensed money transmitting business.
The site, shuttered on Friday, laundered over $6 billion generated from criminal activity ranging from credit-card fraud and identity theft to child pornography and narcotics trafficking.
"We are now entering the cyber-age of money laundering," said Richard Weber, chief of the Internal Revenue Service, Criminal Investigation. The IRS-CI assisted in the case.
The indictment named seven of the company's principals and employees, including founder Arthur Budovsky, a former U.S. citizen who was arrested on Friday along with four other defendants in Spain, Costa Rica and New York.
The suspects are accused of running an operation that had 1 million users worldwide, including 200,000 in the U.S. The business conducted 55 million transactions since 2006, "virtually all of which were illegal," according to prosecutors.
By going after one of the world's largest online money laundering organizations, law enforcement is pursuing a strategy used in combating the narcotics trade.
"If we take the money out of crime, we put a crimp on crime," said Paul Rosenzweig, founder of Red Branch Consulting, which provides legal and strategic advice on national security. Rosenzweig is a former assistant secretary for policy at the Department of Homeland Security.
Roel Schouwenberg, a senior researcher for Kaspersky Lab, said that busting up the financial support of cybercriminals makes it a lot harder for them to operate. "I've long advocated going after the money, especially when arrests seemed unlikely," Schouwenberg said. "This will definitely serve as a major disrupter to the underground ecosystem."
Because of the borderless nature of the Internet, clamping down on money laundering will be difficult, Rosenzweig said. Nevertheless, "the instinct [of law enforcement] is the right one."
Most experts advocate a holistic approach to battling cybercrime, which is more than just hacking computers and stealing data -- it's a business. "There is also the market side that converts these activities to real cash for the perpetrators," said Murray Jennex, a computer security expert and associate professor at San Diego State University.
Despite U.S. prosecutors' claims, not all Liberty Reserve users were criminals, the BBC reports. For example, Mitver Holdings, which has offices in Texas and London, used Liberty Reserve as a way to let foreign visitors buy goods from U.S. stores as if they had a locally issued credit card.
Prosecutors will have to prove in court that the main purpose of Liberty Reserve was to meet the financial needs of criminals.
Sign up for CIO Asia eNewsletters.