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Virtual haven for rogues and spies

Nicole Perlroth (via NYT/ SMH) | May 31, 2013
Liberty Reserve was shut down last weekend, but cyber security experts say it was just one among hundreds of anonymous internet payment systems.

Virtual haven for rogues and spies
Photo: Reuters

Eight years ago, Ernie Allen, the head of the International Center for Missing and Exploited Children, called the heads of major banks and credit card companies. Why, he wanted to know, were they letting child pornographers move illicit profits through their systems?

And so began a collaboration between his organisation, major banks, credit card companies, internet service providers, payment processors and internet companies such as Google and Microsoft.

They had hoped to follow the money and quash child pornography for good.

But at some point the money trail went cold. For the last year, Allen has been working with global law enforcement and financial leaders to find out why.

He may be getting closer to an answer. Today, cyber security experts say billions of dollars made from child pornography and illicit sales of things like national secrets and drugs are being moved through anonymous internet payment systems like Liberty Reserve, the currency exchange whose operators were indicted on Tuesday for laundering US$6 billion.

Preet Bharara, the US attorney in Manhattan, described it as the largest online money-laundering case in history.

"What we have concluded is that illegal enterprises - commercial child pornography, human trafficking, drug trafficking, weapons trafficking and organised crime - have largely moved to an unregulated system that is not connected to any central bank or national authority," Allen has said. "The key to all of this has been anonymity."

Authorities have reported that 45 bank accounts around the world had been seized or restrained in relation to the case.

Liberty Reserve was shut down last weekend, but cyber security experts say it was just one among hundreds of anonymous internet payment systems.

They say online systems such as the Moscow-based WebMoney; Perfect Money, based in Panama; and CashU, which serves the Middle East and North Africa, require little more than a valid email address to initiate an account.

The names and locations of the actual users are unknown and can be easily fabricated. And they worry that the no-questions-asked verification system has created a safe harbour for illicit activity.

"There are a multitude of anonymous payment systems out there, similar to Liberty Reserve, of which there are over one hundred," says Tom Kellermann, a vice-president at the security company Trend Micro. "Many pretend to 'know your customer' but do not actually do due diligence."

Representatives for WebMoney, Perfect Money and CashU did not return emailed requests for comment.

Currency exchanges such as Liberty Reserve do not take or make payments of actual cash directly. Instead, they work with third parties that take payments and, in turn, credit the Liberty Reserve account.


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