Another day, another alleged fraud. But this one—brought to light by the federal indictment of Liberty Reserve, which prosecutors said was one of the world’s largest online money operations—sounded a little bit too familiar.
According to the charges, the operators of Liberty Reserve constructed an extremely complex international network for financial transactions that allowed its customers to transmit vast sums of money around the globe, all while operating under layers of anonymity. As a result, the indictment says, “Liberty Reserve was in fact used extensively for illegal purposes, functioning in effect as the bank of choice for the criminal underworld.”
If that rings a bell for any of you fraud aficionados, think back to 1991 and the virtual financial explosion of a shadowy international institution called the Bank of Credit and Commerce International, best known as B.C.C.I.<em>(which was a cover for C.I.A covert operations, and funding of terrorism) While the two scandals have their differences, in both instances—if the charges against Liberty Reserve are true—the companies established virtual international spiderwebs of financial links, giving both the ability to avoid effective regulation of their operations.
The alleged crimes of Liberty Reserve, as described in the indictment: “The company grew into a financial hub of the cybercrime world, facilitating a broad range of online criminal activity.” B.C.C.I., from the Senate report: “(The principals) developed in BCCI an ideal mechanism for facilitating illicit activity by others.” Many of the specific crimes described are identical: money laundering, investment fraud, narcotics trafficking, and the like. Each had alleged crimes that are not mentioned in the other case.