YELLOW TOURISM CONFERENCE 2017, Corfu, Greece – Call for Papers


Call for Papers!
Yellow Tourism Conference 2017- Register Now!


Crime and Corruption do not merely constitute an intriguing holiday theme (and having common characteristics with the area of ͚Dark Tourism͛); but they also constitute a bitter reality counting many victims. Tourism is a globalised business sector impacting the livelihood of millions of people in all parts of the world. As any other ͚big business͛, where significant circuits of capital and information, and power imbalances exist, tourism is fertile ground for corruption and economic crime.Concurrently, the globalised scope of the tourism industry renders it into a very challenging field of action for national legislators and law enforcement agencies. Novel tourist experiences, interactions with unknown environments and places, and a sense of freedom from care, represent core elements of the holiday experience. For these very reasons, holidays inherently entail a number of dangers for tourists, rendering them vulnerable to crime. Conversely, the anonymity that is combined with the consumerist/hedonistic mindset of many tourists, may well lead to irresponsible and even criminal, behaviour towards locals and others. Although, the casualties of mainly politically-motivated terrorism are few worldwide, safety and security issues related to terror are extensively covered in tourism literature. In contrast, and despite of their quantitatively greater impact on the holiday experience, economic criminality and corruption have received relatively little attention in tourism scholarship. We seek to address this imbalance with this action.
The aim of this project “Yellow Tourism” is to place crime and corruption in the tourism-research agenda, expanding the interdisciplinary scope of tourism to include perspectives from law, business, economics, political science and the social and behavioural sciences. Contributing fields may include, but not be limited to the following:

Business ethics,
Behavioural and social psychology,
Critical tourism studies,
Information systems / Data

The project “Yellow Crime” is carried out by a research consortium consisting of the Ionian University of Corfu, Greece, the University of Bremerhafen Germany, the Ovidious University of Constanta, Rumania and Bournemouth University, U.K.

The two kick-off events of “Yellow-Tourism” project are planned for October/November 2016 and April 2017 in Corfu, Greece

Call for Papers!

Yellow Tourism Conference 2017- Register Now!


Welcome to the dark side: GDP revision and the non-observed economy | Silvia Merler and Pia Hüttl at

Welcome to the dark side: GDP revision and the non-observed economy | Silvia Merler and Pia Hüttl at

AML’s Year in Review


Record Settlements, Russian Tanks and Legal Weed: AML’s Year-in-Review
By Colby Adams, Kira Zalan and Irene Madongo

This time last December, one might reasonably have expected that 2014 would be a year of modest changes for the anti-money laundering and sanctions compliance sector. Then came JPMorgan Chase, BNP Paribas and a convoy of Russian tanks to quash that notion.

That the year would unfold differently than 2013, which saw a sharp drop in compliance outlays paid by banks, was signaled as early as Jan. 7, when the U.S. Justice Department and Office of the Comptroller of the Currency (OCC) disclosed a $2.05 billion settlement with JPMorgan Chase for its failure to report suspicious transactions linked to Bernard Madoff’s hedge fund.

The settlement, which also faulted the bank for not communicating its suspicions about Madoff across its affiliates, eclipsed a then-record $1.9 billion deal reached with HSBC in December 2012 for not vetting trillions of dollars in transactions potentially tied to drug traffickers. By the end of 2014, banks had paid more than fourfold of JPMorgan’s total and pleaded guilty to criminal wrongdoing.

“The BNP Paribas case was surprising because not only was it a stunning amount of money and it involved a guilty plea but also because, at the end of the day, it wasn’t viewed as that big of a deal in terms of this string of wire-stripping cases we’ve seen,” said Laura Billings, a white-collar criminal defense attorney with Miller & Chevalier in Washington, D.C.

The French bank pleaded guilty in June to a one-count information and agreed to pay a record $8.9 billion and suspend certain dollar-clearing services for knowingly allowing its clients to bypass U.S. sanctions targeting four nations. The settlement reflected the fact that the bank resisted negotiations and continued to obscure wire data after U.S. officials communicated their concerns, sources told ACAMS

BNP Paribas wasn’t alone in pleading guilty. In May, Credit Suisse put ink to a $2.6 billion settlement with the United States for its role in helping wealthy Americans hide taxable assets abroad. One addendum to the deal: a one-count information conviction.

The penalties against JPMorgan Chase, Credit Suisse and BNP Paribas remain the largest ever levied against banks for violations of anti-money laundering (AML), tax evasion and sanctions violations, respectively.

Restrictions and recidivists

Banks that entered into compliance settlements in 2014 also agreed to a raft of restrictions not usually appended to such deals.

The prohibitions—controls on U.S. dollar-clearing services, restrictions on opening correspondent accounts and data-sharing requirements for cross-border wires—came as part of agreements with the Justice Department and New York State Department of Financial Services (NYSDFS), an agency that made waves in the industry over the course of the year.

But in standalone fines, NYSDFS made equally arduous demands, ordering Standard Chartered Bank (SCB) in August to cease U.S. dollar-clearing transactions and require its affiliate operations to obtain and share information on payees and payers of wires valued at $3,000 or more. The bank also paid $300 million for flaws in its transaction monitoring system.

In a $315 million settlement disclosed in November, NYSDFS ordered Bank of Tokyo Mitsubishi (BTMU) to relocate its U.S. AML and sanctions compliance teams to New York and follow the direction of an agency-appointed monitor for 18 months. The agency fined the institution for pressuring PricewaterhouseCoopers to amend a compliance report.

Notably, both settlements weren’t the first for the banks or the regulator. Ahead of SCB’s $327 million settlement with federal officials in December 2012 for banking high-risk clients, the financial institution paid New York $340 million the previous August. BTMU previously paid NYSDFS $250 million in June 2013 for sanctions violations.

Eye on the individual

While U.S. regulators have long issued the occasional disciplinary action against bankers and broker agents, and though the number of such penalties handed down in 2014 fell below the 2013 total, federal and state officials made individuals more accountable than ever for poor AML compliance controls.

For one, the Justice Department, Federal Reserve Board and NYSDFS named nearly a dozen individuals to be banned from certain positions or fired outright for their purported roles in compliance mismanagement at BNP Paribas, BTMU, Credit Suisse and Standard Chartered Bank. The unusual steps followed public warnings by regulatory officials earlier in the year.

The warnings, coupled with a $25,000 fine by the Financial Industry Regulatory Authority against former Brown Brothers Harriman compliance chief Harold Crawford in February, prompted others in the industry to question whether they should obtain insurance.

“Individual liability—I think that issue really came about substantially” in 2014, said John Wagner, a former director of AML and Bank Secrecy Act compliance with the OCC who retired earlier this year. U.S. officials are “looking at this but they’re taking a measured approach because, obviously, going after an individual has an impact on that individual,” he said.

Those potential effects were perhaps most on display earlier this month, when the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) fined Thomas Haider, the former chief compliance officer of MoneyGram, $1 million for his alleged role in ignoring signs of fraud by employees and customers.

The lawsuit has “definitely had a chilling effect, certainly on people wanting to do compliance,” said Robert Rowe, a vice president with the American Bankers Association. “There’s just so much an individual can control within the organization, and being held liable for things you can’t control is causing a lot of compliance officers to get very nervous.”

De-risking takes center stage

In response to regulatory pressure, financial institutions in the United States and abroad further distanced themselves from high-risk clients in 2014—a trend that seemed to reach a breaking point of sorts. After years of asking banks to be more diligent, regulators asked them to take on more risk.

In July, the Federal Deposit Insurance Corp. rescinded a list of high-risk merchant customers that work with third-party payment processors after banks had used the list as a reason to turn away the businesses in the sector. In November, Treasury Department officials asked banks not to deny services to money services businesses outright.

The steps seemed to do little to mollify concerns that maintaining such relationships would be too costly and too risky for most financial institutions.

Broadly, “financial institutions are being forced to focus on the wrong thing,” said Stephen Barclay, a British member of parliament who previously headed AML and sanctions compliance for Barclays Bank.

“They are being forced to focus on regulatory compliance and spend millions of pounds on capturing the low-risk customer rather than targeting their resources and efforts on a much smaller number of high-risk, high-value individuals,” he said.

Lift and impose

For a year that was supposed to see an easing of sanctions against Iran, 2014 proved one of the most challenging in recent memory for banks charged with implementing economic embargoes. For one, there was Russia.

Following the country’s incursion into Ukraine’s Crimean Peninsula in February and its subsequent though oft-denied support of Ukrainian separatists, U.S. and EU officials imposed a series of sanctions measures targeting Russian President Vladimir Putin’s inner circle.

But the sanctions didn’t just follow the usual model of simply asking banks to identify and block related funds. They also proscribed certain energy-related projects and imposed restrictions on underwriting equity or long-term debt for Russian companies—variations that have proven difficult to implement and which likely hint at innovations to come.

The fall of the Ukrainian government in February, shortly before Russian troops arrived in Crimea, also kept U.S. officials busy looking for money looted by former Ukraine President Viktor Yanukovich, according to Deborah LaPrevotte, the program manager of the FBI’s kleptocracy program.

“We didn’t see that coming until Ukraine fell and 68 officials fled,” she said. “We [were] actually looking at Alexander Yanukovich, the son of the president, prior to his regime falling and so actually we [were] in a good position to already have a little bit of background knowledge when Viktor Yanukovich and his upper echelon fled the country.”

As world powers negotiated an ongoing and recently extended joint plan of action that could lead to a more permanent reduction in Iran sanctions, European financial institutions and other companies explored the possibility of doing business with the Islamic Republic. But Cuba sanctions may be the first to go, White House officials indicated this month.

Rules and warnings

In June, U.S. financial institutions got their first look at a potential customer due diligence rule that would require them to identify individuals holding a stake of 25 percent or more in corporate accounts. FinCEN’s proposed rule excluded language that would have tasked financial institutions with verifying the data as well.

The advancement of the so-called ‘beneficial ownership rule’ came in the context of efforts by the Financial Action Task Force (FATF) and European Union to shine a spotlight on corporate owners. The EU said this month that a plan to require member-states to create registers of corporate owners wouldn’t mandate that such data be widely available to the public.

In controversial guidance issued in February, FinCEN also outlined how it expects banks to treat accounts held on behalf of state-sanctioned marijuana businesses, calling on compliance officers to distinguish transactions on behalf of licensed businesses from those not approved under state laws.

The guidance drew criticism from bankers and lawmakers, who pointed out that the cannabis remains a controlled substance under federal laws. By the year’s end, bankers in Colorado said that conflicting state and federal laws on marijuana were creating compliance headaches.

FinCEN also drew criticism in 2014 but for reasons unrelated to its mission: U.S. officials launched a probe into FinCEN’s hiring practices following complaints that the bureau may have violated federal rules on employing military veterans. On multiple occasions, Republican lawmaker called on FinCEN to fully respond to the allegations.

Taxes and terrorism

Global tax enforcement continued to be an issue for international banks. In October, 51 nations agreed to a plan by the Organisation for Economic Cooperation and Development to automatically exchange tax-related data—an initiative that will mean changes for bank due diligence procedures much as the passage of a deadline for the U.S. Foreign Account Tax Compliance Act did earlier this year.

Seven months after the Credit Suisse settlement, Bank Leumi le-Israel agreed to pay U.S. prosecutors and regulators $400 million for helping wealthy Americans evade taxes through the use of shell corporations and funds transfers disguised as business loans. The agreement barred bank divisions in Switzerland and Luxembourg from providing banking and investment services to American clients.

The IRS will “continue to track the funds that are flowing, we believe, outside of Switzerland,” said Richard Weber, the head of the agency’s Criminal Investigations division, who also noted that the agency had racked up the settlements despite working with a historically low budget.

“We’re at the lowest staffing that we’ve been since the 1970s, and if the trend continues [over the next few years] we’re going to have 36 percent fewer agents than we did 20 years ago, and that’s just not sustainable,” Weber said.

A U.S. court ruling in September reaffirmed that, as with tax evasion, banks can be held responsible for their clients actions abroad. A federal jury found Arab Bank civilly liable for deaths caused by terrorist groups that had purportedly raised money and offered rewards programs to the families of suicide bombers through its accounts.

The ruling is the highest-profile of its kind from a bevy of lawsuits attempting to penalize banks under the U.S. Anti-Terrorism Act.

Bitcoin’s rapid development

The year proved a mixed bag for the virtual currency platform Bitcoin and competitors. As the price of bitcoins declined over the year, U.S. and U.K. regulators signaled a willingness to accept the crypto-currency, albeit with strings.

In July, NYSDFS disclosed plans to license virtual currency businesses that verify the identities of their accountholders, maintain know-your-customer profiles, screen transactions against sanctions lists and report suspicious activity, among other steps. The regulator has since said it could modestly tweak the requirements.

In August, British officials said they would soon examine the promise and perils of alternative payment services, including digital currencies, as part of a governmental promotion of financial technology.

Law enforcement agents also took a closer look at the technology over the year, according to Bryan Smith, the unit chief of the FBI’s Financial Institution Fraud Unit.

“We are doing a lot of work in that arena, both on our cyber side as well as criminal,” said Smith. “We’ve seen a rapid development of that technology, bringing new intermediaries of, and variations of, virtual currency into the equation that we have to learn to understand potential impacts on funds movements.”

Global cooperation

Under the guidance of FATF, nations tightened their AML and counterterrorist financing controls in 2014 as the intergovernmental group launched its fourth round of mutual evaluations. FATF released the first results of those examinations, including its first-ever effectiveness score, in December.

Governments also worked better together on cross-border investigations, according to Daniel Levy, a principal with McKool Smith and a former senior trial counsel with the U.S. Attorney’s Office for the Southern District of New York.

“Not only are prosecutors’ offices coordinating with each other more, but they are picking up on similar conduct investigated and oftentimes resolved with another prosecutor,” said Levy. “For example, French authorities have initiated an investigation of UBS for tax-related conduct several years after UBS resolved similar issues with the U.S.”

Cooperation between Mexico and the United States also improved after a lull that followed the inauguration of Mexican President Enrique Peña Nieto, sources told ACAMS But Mexico’s rollback of restrictions on U.S. dollar deposits More and the possibility that at least one U.S. bank in the Latin American country may have been infiltrated by cartel members worried AML professionals.

For Britain’s AML sector, efforts by FATF and the EU to clamp down on money laundering have coincided with political and legislative cycles to focus attention on fighting the crime, according to Matt Allen, the director of financial crime for the British Bankers Association.

“Perhaps more fundamentally, there has been a realization that financial crime has changed dramatically,” he said. “The types of criminal activities, the way financial services work has dramatically changed, and we need a legislative framework that is up to date and that is something that we support.”

Europe’s tax haven investments in Africa

From EUobserver

BRUSSELS – The honour of delivering the keynote address at the high-level EU-Africa Business Forum earlier this year fell to Dr Ahmed Heikal. In front of European Commissioners, leading politicians, chief executives of huge multinationals, senior bank bosses and billionaires, the Egyptian investment tycoon was asked to set the tone of the forum, a three-day lobbying event funded by the EU. Dr Heikal is founder and chairman of Qalaa, an African investment fund with $9.5bn on its books. The European Commission says he represents a company that has become an “African success story”. But although it is undoubtedly successful, Qalaa’s business model raises a series of questions about whether it represents the sustainable and inclusive growth that the EU says it wants to encourage in Africa.

Read more >>> EUobserver / Europe’s tax haven investments in Africa.

Το βρώμικο χρήμα των πλούσιων χωρών – γνώμες – Το Βήμα Online

Το βρώμικο χρήμα των πλούσιων χωρών – γνώμες – Το Βήμα Online.

Foreign Affairs: Bitcoin Goes Boom

Will the World’s Favorite Cryptocurrency Explode or Implode?

JANUARY 30, 2014

An artistic representation of bitcoins. (fdecomite / Flickr)

It might not have been word of the year for 2013, but “Bitcoin” figured prominently in the shortlists. Known formerly only to true geeks, the mysterious cryptocurrency was in the news almost every day. Many of the stories were tales of riches gained and lost: a Norwegian student who discovered that the 5,600 bitcoins he purchased for $24 in 2009 were now worth $700,000; a British man who accidentally threw away a hard drive containing digital keys to bitcoins worth over $6 million. Others were tales of crime: websites where anonymous buyers could use bitcoins to buy drugs or even pool money for potential assassinations of public figures. And still others focused on attempts at regulating Bitcoin, which ranged from declaring it altogether illegal (Thailand) to embracing it wholeheartedly (Switzerland).

Why all the fuss? Much of it has to do with Bitcoin’s pure novelty and its wild price fluctuations (from under $20 per bitcoin at the start of 2013 to a high of $1,203 in December to around $925 now). But above all, it is because Bitcoin is an extraordinary idea — one whose ramifications no one can fully foresee. Its foundational premise is that monetary systems do not need a central government. Instead, Bitcoin relies on clever mathematics to ensure that everyone plays by the rules. In theory, at least, no one can control Bitcoin. And this means, of course, that nobody can tell Bitcoin users what they should and shouldn’t be spending their money on — for good or for ill. That presents regulating agencies with difficult questions: Should they try to control Bitcoin? Can they control it?

If all this sounds familiar, it should. The world faced these same questions in the early days of the Internet. Whether Bitcoin is more like AOL or Google, of course, is yet to be seen. Still, how governments choose to respond to it could change global finance for good.

Click here for the full infographic.


Bitcoins are sometimes called virtual cash. But a better analogy is to Rai stones, a currency historically used in Yap, an island in Micronesia. Yapese used large stone disks, up to 12 feet in diameter, to pay for big transactions. Difficult to move, however, Rai stones were often just left in their place. A person using his stone to pay someone else would publicly announce the transfer of the stone’s ownership. According to one anthropologist, a large stone once fell into ocean en route to the island. Rather than mourn the loss, the islanders continued to accept the stone as a valid form of payment, even though no one ever saw it again.

Bitcoin works like Rai stones hidden in the sea. The system allocates units of value, called bitcoins. Like a stone under the ocean, a bitcoin has no use other than as a form of payment. You can’t touch or see it. But it has value because people agree that it does and because its numbers are limited. Around 12 million bitcoins are currently in circulation. That number can grow only by around 25,000 bitcoins per week. Such guaranteed rarity, users expect, will ensure that bitcoins retain their worth.

All forms of money require the currency to be in limited supply. Sometimes the supply is limited by nature — there is only so much gold in the world. Other times, we trust some authority to ensure it. The world relies on Washington, for example, to issue a limited supply of U.S. dollars and to punish anyone who puts out counterfeit ones. In Bitcoin’s case, no centralized institutional backer is needed. It is neither a company nor an association. No one party is keeping track of account balances — the participants do it collectively, aided by clever mathematics. The scheme is based on a paper published in 2008 under the pseudonym Satoshi Nakamoto, and a piece of software released by Nakamoto in 2009. (The software isopen source — anyone can inspect or modify it.) Nobody knows for sure who Nakamoto is, or even how many Nakamotos are out there. And nobody, not even Nakamoto, is fully in control. The system just proceeds by the rules defined in his paper, with rare modifications adopted by a consensus of users. The lack of centralized control makes regulating Bitcoin difficult — and intentionally so.

The 12 million bitcoins now in existence are distributed among individual accounts. Much like the Yapese and their Rai, account holders do not physically hold any bitcoins. Rather, everyone knows how many coins belong to each account, based on the public history of transfers. To transfer bitcoins, one simply announces the transfer, naming the new account. Once the announcement is confirmed, the bitcoins are understood to belong to the new account. Although all Bitcoin transactions are public, the identity of account holders is not. All anyone knows are the account numbers involved in each transaction. This creates two challenges.

The first challenge is easy to understand: How does one know that an announcement was made by the true account holder without knowing who that owner is? Bitcoin solves this first problem with so-called digital signatures, a well-worn cryptographic technique that dates to the 1970s. Each public account number comes with a secret matching key — essentially a long number that can be plugged into a mathematical formula to generate a confirmation code. The math behind this scheme allows others to verify the confirmation code without knowing the secret key. (However, if the owner of the account ever loses the secret key, as happened to the unlucky British man, then he or she can no longer transfer his or her bitcoins. In other words, the account holder still technically has the coins, but can never spend them.)

The second challenge is subtler: How do we prevent someone from gaming the system by falsifying the time stamps on his or her transfer announcements? One user could first announce a transfer of five bitcoins to a second user’s account in exchange for $5,000 in cash and then announce that he or she had transferred all of his or her bitcoins to a third account the day before. The second user would be tricked into paying for bitcoins from a now empty account. The problem of verifying the true time of an announcement without the aid of a trusted overseer has stumped computer scientists for years. If some computers record that they saw an announcement yesterday and others do not, which should one trust? Nakamoto’s paper finally solved the riddle with a clever combination of engineering and economics.

Bitcoin transaction announcements are recorded in so-called blocks, each block containing a record of transactions that happened in a span of roughly ten minutes. Every block ends with a mathematical puzzle. The next block must start with a solution to that puzzle to be considered valid. The resulting chain of puzzles forms an official history of all transactions.

Anyone can try to solve a puzzle. They are designed so that a computer using a simple program can figure out the answer, but only with a lot of trial and error. The difficulty of the puzzles is automatically adjusted so that, no matter how many computers are playing the game, someone hits the jackpot — successfully “mining” a block — roughly once every ten minutes. People who allow their computers to participate in this game are called miners. The lucky miner who is the first to solve the last block’s problem gets a prize, currently 25 bitcoins, worth a bit over $20,000. Those 25 bitcoins are generated out of thin air, so that the total number of bitcoins grows by 25 every 10 minutes.

Whoever generates the solution is also in charge of creating the next block, which includes a record of any transfers that were announced while miners’ computers were working on the last puzzle. Some of these transfer announcements will come with a small optional transaction fee — a tip from the transferor to the miner who will record the transaction. (Miners can skip transactions. The tip helps ensure diligence.) The new block defines a new puzzle to be solved by the next block. And the cycle begins again.

This scheme makes it extremely difficult to forge the history of transactions: to do so, the fraudster would need to create an alternative history of puzzle-solution pairs, one for every ten-minute period. That would require staggering computing power. Not even Google’s data centers would be of much help in this task.

Click here for the full infographic.


There are many legitimate uses for Bitcoin. It offers a simple and secure payment method: the payer is fully in control of how much money is transferred and when, so there is no reason to worry about unauthorized charges or identity theft. In the last year, many companies — including, Newegg, and, most recently, TigerDirect — announced that they would start accepting bitcoins as payment. Wider adoption of Bitcoin could help put a dent in a fraud problem that costs merchants billions of dollars every year.

Bitcoin’s transparent and decentralized design also helps new players to enter the highly centralized and byzantine world of electronic payments and allows them to do things that would have been difficult otherwise. For example, a number of firms are starting to use Bitcoin for remittance payments, bypassing traditional gatekeepers and offering their services at a fraction of the rates charged by companies such as Western Union. (The global remittances to developing countries add up to hundreds of billions of dollars.)

Yet not all of Bitcoin’s implications are positive. Its promise of anonymity also makes the currency very attractive for illegal transactions.

One famous example of this is Silk Road, an online marketplace for illegal drugs and stolen credit cards that has been in operation since 2011. Briefly shut down by U.S. law enforcement in 2013 (only to be relaunched a month later), Silk Road attracted media attention for openly flouting the law. Processing a little over a million dollars’ worth of illegal transactions every month, however, Silk Road represents a relatively meager sort of criminality. Bitcoin might also become a tool for large-scale money laundering. In other words, it could be used for transactions that are not illegal per se but that help disguise the origins of funds obtained through illegal activities. If Bitcoin can, in fact, deliver what it promises, international efforts to stamp out large-scale crime and corruption might take a serious hit.

Consider a typical large corruption scheme: A company wants to bribe an elected official with $10 million, in order to “win” a contract worth 50 times as much. Both parties want to make the deal, but how would they actually make the payment? It is hard to physically transfer $10 million in cash inconspicuously (over 200 pounds of paper in hundred-dollar bills). Wiring that much money is also risky. In recent years, many jurisdictions have started to require financial institutions to monitor their clients’ activities and alert authorities about anything considered suspicious. Such regulation often requires especially close monitoring of high-risk individuals such as current and former elected officials. People who engage in money laundering usually know that all of their transactions may be closely watched.

The most practical solution today involves sending the money through corporate vehicles, trusts, or nonprofit entities. The company offering the bribe sets up an offshore shell company, which then makes a wire transfer to a trust fund that names a person connected to the official (a family member or a friend) as a beneficiary. Such schemes can, indeed, tie up investigators but even they have become increasingly risky with the expansion of international anti-money-laundering and anticorruption regulation.

Bitcoin promises a seemingly unbeatable solution: if the corrupt company can obtain $10 million worth of bitcoins, it can transfer those from their own anonymous account to one controlled by the corrupt official. Nobody would know where the money went. Not even the company that paid the bribe would be able to prove that the account into which it transfered bitcoins belongs to the official. And as long as the official was careful, the bribe could never be seized by the government or stolen.

In practice, of course, using bitcoins for such large bribes is not easy. One problem is the relatively small volume of dollar-to-bitcoin trade, which means that anyone attempting to make a large payment may have trouble doing so without adversely affecting the exchange rate. The fact that Bitcoin transactions are public also means that sophisticated analysis can undermine anonymity of users who do not takecareful steps to cover their tracks. Nor can Bitcoin protect users from many traditional police tools, such as informants or sting operations. Finally, the volatility of the dollar-to-bitcoin exchange rate remains a major problem: within the last three months, the value of one bitcoin has oscillated between $200 and $1,200. (Those fluctuations, of course, also make it harder to use Bitcoin for many legitimate activities.) Such problems, however, may turn out to be much simpler than those presented by alternative money-laundering methods. And they could further dissipate with growing use of Bitcoin. As more people use the currency, the price will likely be more stable and exchanging large amounts would present less of a challenge.


With all Bitcoin’s potential for good and ill, it might well make sense to try to regulate it. But would that be possible? Bitcoin’s decentralized structure makes oversight difficult. The government cannot order Bitcoin to flag suspicious transactions, since it is not a legal entity but a network of participants, many of whom are anonymous. Of course, the same used to be said of the Internet, yet today, almost every country on the planet enforces rules for online conduct. And although people can sometimes get away with breaking the law online, the get caught quite often. Similarly, there are several ways for governments to cope with Bitcoin. These steps will not prevent every instance of wrongdoing, but they will make each more challenging.

The crudest approach would be to simply prohibit the use of Bitcoin and similar systems. (For example, the central banks of Iceland and Thailand have declared the use of Bitcoin software to be illegal in those countries, although neither country appears to be set on enforcing the ban.) Treating Bitcoin software as a criminal tool and punishing people for using or having it would deter many users. Sure, you might never get caught, but most people wouldn’t want the risk. The downside, of course, is that this would also eliminate any potential benefits of the legal uses of Bitcoin as well, such as security and low fees. After all, paper money is also a key tool of money laundering, yet governments do not ban it, recognizing the many conveniences that it offers.

A milder version of such prohibition would be to allow personal use but ban financial institutions from engaging in Bitcoin transactions, as China did in December 2013. This would not affect the use of Bitcoin for smaller crime but would put a dent in large-scale schemes. Again, however, it would also eliminate many of the currency’s benefits. It is also worth remembering that no regulator can fully control today’s global finance sector. If the United States bans American banks from trading bitcoins, Swiss banks would be happy to take the extra customers. And if the United States manages to strong-arm Switzerland into the same regulatory regime, other countries will be standing in line.

Another solution would be to closely monitor Bitcoin transactions. Financial institutions could be asked to record all transactions involving Bitcoin and to report anything suspicious. Since the chain of Bitcoin transfers within the network is public, policing the endpoints of the system (where bitcoins are converted into traditional money, goods, or services) might make it possible to link any official offering a bribe to the one receiving it. For instance, the U.S. government announced in March 2013 that any financial institution issuing or exchanging virtual currencies would be subject to the same monitoring and reporting rules as regular financial institutions. And it has recently showed that it is serious about enforcing compliance. Such regulations may be quite effective in discouraging money laundering. Unfortunately, they may also endanger some legitimate uses: smaller companies might lack resources to implement the mandated tracking, leaving the market to the larger institutions that are less interested in pursuing innovative solutions based on Bitcoin.

A subtler approach would be for the government to work with large Bitcoin players. Although Bitcoin was meant to be fully decentralized, in practice, most transactions today pass through a handful of accounts. Shutting them down might be ineffective, since new ones would take their place. Working with them, however, could be productive. Eager to maintain their current position, the large players may agree to self-regulate rather than decide to take a stand and risk a more heavy-handed response from the authorities. Such self-regulation could involve modifying the Bitcoin protocol to reduce anonymity.


Whatever the fate of Bitcoin, it is worth remembering that it is only the first (and the most well-known) of several distributed cryptocurrencies in existence today. Such alternatives range from the likes of Dogecoin, a cryptocurrency whose most notable difference from Bitcoin is the use of a whimsical dog logo, to Zerocoin, which promises a substantially higher degree of anonymity. Without a doubt, there will be many more in the coming months and years.

Different cryptocurrencies will likely find different uses. Those that allow for a large degree of oversight (perhaps through some form of self-regulation) might enter the mainstream. Others that make oversight exceptionally hard might be ideal for truly illegal activities but find themselves shut out of the mainstream as a result. And a range of cryptocurrencies operating between these extremes could come on the market.

Today, no one knows what Bitcoin and other cryptocurrencies will bring. The situation harks back to the early days of the Internet, when expectations for the new technology ranged from utter skepticism to wild pipe dreams. Cryptocurrencies are likely here to stay, although they might look very different two decades from now. Bitcoin could turn out to be the cryptocurrency equivalent of CompuServe or AOL — revolutionary for its time, only to be forgotten later when a better technology emerged. Or it could turn out to be like, making the best of its first-mover’s advantage and dominating the industry for years. Cryptocurrencies will probably not bring about the libertarian rapture promised by some proponents — but ignore them at your own peril.

Bringing International Tax Rules Into the 21st Century


Organization for Economic Cooperation and Development

It’s a watershed moment for international tax policy. The debate over tax evasion by the wealthy and tax avoidance by multinational corporations has never before grabbed so many headlines or caused…

Read Post (via Huffington Post)