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Comment by kjrose | Hacker News Reader

You see. This is what bitcoin so fascinating... it is absolutely impossible to hide a transaction.

So imagine the field day the irs would have with this if everyone used it. They basically would be able to send bills to owners of wallets. And anyone ever caught working with an undesirable would be able to have their funds more or less locked up.

So now, we all watch as billions of stolen money moves and we know the moment it gets converted to anything real, the owners will be caught. However in the future I could easily see a government watch money that some undesired element has move and no one will want it because the moment they get it they are connected to an undesirable and their wallet becomes tainted.

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This fails to account for the fact that IRS currently (and maybe this changes in the future) has a hard time doing serious audits on any significant amount of wealthy people; and that the agency has pretty much been gutted over the years.

[0] https://www.propublica.org/article/how-the-irs-was-gutted

[1] https://www.propublica.org/series/gutting-the-irs

[2] https://www.gq.com/story/no-irs-audits-for-the-rich

all it takes is for one president in 2030s to create a new branch of gov that pays Google style salaries. would attract the best and brightest to write some powerful tools for all that, no?

you and I both know that could never happen, it would get contracted out to Oracle or something

Obama was that forward thinking, charismatic, enlightened leader that people wanted to work for. The White House Digital Service was by any metric a resounding success. But the pay did suck.

The problem with the government paying "Google salaries" is who gets them? Is an IRS auditor really worthy of half a million a year in comp? What about the DEA agent deep under cover and risking his life, much more deserving... right?

So you create a new branch of the government where keyboard warriors bang out solutions to government problems. Why is one of these hot-shots making what an entire department of inspectors is paid at the USDA? The resentment from other agencies will be a hard barrier to overcome. They also have no incentive to help your new Rockstar Agency to get access to all the data they need so they can put government employees out of work.

Not to mention, is it really beneficial to the tax payer to try and compete with tech companies? If FAANG companies start to suffer a talent drain, they will just re-up and double whatever the government offers.

This makes me wonder, was pay competitive for rocket scientists during the space race, or was the mission so compelling that nobody cared if they were making less than they might have at a defense contractor?

A friend of mine is an electrician, an in-demand skilled job. He can make +/- 10% working for the government directly, at Lawrence Livermore, or in the private sector. Each has tradeoffs like how interesting the work is or the hours, but in the end the government isn't really less competitive.

Now imagine Facebook steps in and wants to hire all the electricians and is willing to pay $750k/yr. Obviously the entire system becomes fucked and the government (or even "normal" businesses) won't be able to find electricians.

Don't get me wrong... I like my tech salary. But inserting a player into any market or economy with effectively unlimited resources breaks it.

If Facebook could create a local monopoly or competitive advantage to pay electricians $1M/yr, they would to deny the skills to their competitors.

I found this trying to Google around for NASA scientists pay during the space race. Turns out maybe money wasn’t the biggest factor involved.

tldr; Korolev, the lead Soviet engineer during the space race died in the middle of it from colon cancer and they never recovered.

https://www.forbes.com/sites/startswithabang/2019/07/11/this...

IRS agents are easy to calculate pay.

Base living wage ($70-$90k)

+ 1-5% of each amount recovered

Incentivize pursuing the biggest evaders, and the problem may solve itself.

As other commissioned jobs will show you, like in real estate, that’s only an incentive to close high volume easy deals, not move mountains to chase hard deals.

Your idea would likely just spur a movement to throw the book at normal working people to extract the most from easy targets, like self-employed misfiles.

You could address that to have the benefit only usable once per year.

Admitted, without much data to back myself up, I think I disagree. Real Estate has a tier of broker that handles the huge deals too.

Right now the IRS are spending too much time going after the low hanging fruit, which is hurting the little guys. The department has been gutted and understaffed, so they are trying to hit the easy less sophisticated targets.

A few $1 Million settlements could more than double their salary for the year. Even if the bonus was split between a team, a few whales would be a boon.

That’s the big lie. You just have to pay enough and have a process.

I’ve done consulting work for tax agencies. They are full of smart people and are very good, as most government agencies are, at implementing and consistently delivering processes.

The problem at the IRS is that a group of people with the ability to influence the purse strings have signed pledges and dedicated careers to make the IRS as ineffective as possible. I have a former associate who is a specialist in a few arcane areas of tax law and has the ability to basically look at the books of any company and figure it out in a day or two. He left because systematic cuts meant that he was one of a half dozen specialists in the country (there were 200+ when he started), and ended up traveling all across the country to testify at trials as an expert.

Look at the military as an example of how any government agency works. Billions are spent on weapons systems development with the best and brightest minds. In the field, the applied work is done by 19 year old kids, roughly sorted into an occupational category by IQ.

I wonder how many bitcoin people understand the history of banking regulations. Banks do not want to be accessory to crimes. They make plenty of money legally. So when the government says we know that you helped someone steal billions of dollars so we are going to shut you down, the banks will quickly offer to track and report and block people.

Banks are the most law breaking entities in the United States. They constantly have to make enormous settlements for the insane number of laws they break. These are just the settlements for Bank of America:

https://www.fool.com/investing/general/2014/10/01/the-comple...

A better summary wouldn't be "they make plenty of money legally." It would be they make plenty of money illegally after paying the settlements.

None of these fines are about laundering money.

Also, showing these fines is a long way from "the most law breaking entities".

I do believe Wells Fargo got in trouble for helping launder money - and they spent a LOT of money to help fix it.

HSBC then.

> HSBC Holdings Plc agreed to pay a record $1.92 billion in fines to U.S. authorities for allowing itself to be used to launder a river of drug money flowing out of Mexico and other banking lapses.

https://www.reuters.com/article/us-hsbc-probe-idUSBRE8BA05M2...

https://www.bloomberg.com/news/articles/2021-03-05/ubs-may-u...

https://www.theguardian.com/world/2011/apr/03/us-bank-mexico...

https://www.bbc.com/news/business-54597256

I could keep Googling but that should cover your complaints about laundering money.

Forgive my vagueness- I wasn't complaining that banks don't launder money - only that the original links didn't support that thesis. You have rectified that.

Do you also claim that banks are the biggest thieves?

Biggest source of theft in the US is wage theft by employers.

Wait.. really? I'd love to dive into some of those numbers. I'm not saying you are wrong - otoh, I want to see if I can screen for behaviors that are preparatory.

Yeah but they break those laws for their own gain, not for you.

This is what I'm saying. The banks are more than happy to pay fines and add regulations to their practices because they don't want the government to shut them down. Coinbase will be no different. They make too much money to have any principals around standing up for a "Permissionless and Decentralized financial system"

What? Banks lobby heavily against regulation and their lobbyists write the regulations that do exist. They also often commit crimes themselves, are accessories to others, and work in grey areas. This seems well known.

And when a corrupt federal agent asks a bank to delete records, because they’re allegedly part of a secret investigation, they also comply. This happened in the Silk Road case, but the immutability of the Bitcoin blockchain revealed their transactions.

Not sure how the scammers and thieves operate, but wouldn't they (likely) be laundering the money the same way they've always been doing it?

I.e, exploiting things like identity theft, countries and exchanges with little oversight, mules, gambling, etc.

If they want to launder the funds all they have to do is used a decentralized exchange to convert the bitcoin into something like monero. Monero has an encrypted blockchain and a bunch of other anonymization features. So once you convert it to monero, poof, the funds simply disappear into the ether just like that without a trace. They can then convert it back into bitcoin if they want as well.

But what exchange (in its right mind) would take those bitcoins? They're permanently tainted, and are likely very hard to convert into fiat currency, and therefore have, I expect, near zero value.

The exchange taking it wont be knowingly taking it, it is likely just a exchange that doesnt have system for detecting it.

There are thousands of btc exchanges all around the world. For sure there are some where they dont even know about bitfinex.

All it takes is one country like Switzerland legalizing cryptocoin tumbling. You send your bitcoin to a single address along with millions of others, and it sends out to millions of addresses different values, with no traceability between the sender and receiver (if done correctly, such as batching all transactions over a month into a single event). It would be used by many legal entities also in order to hide their activity (rich people don't want their financial activity known to the public even if it's completely legal).

Wouldn’t they have some trouble getting it into an exchange to change it to XMR?

I assume that even if they moved some portion of it, say 10 BTC, to N different wallets, those transactions would be traceable to the exchange?

I’m not sure how XMR works but then the exchange would know at least which wallet the XMR was sent to.

I’m also not sure of the law surrounding a P2P transfer (IE receiving stolen property) but I’m guessing you might be SOL if you did a trade with them on a P2P platform as well...

Very interested if someone in the know would like to chime in

Defi exchanges can help with this. You essentially give your money to a smart contract and receive whichever other token you’d like.

There's also wrapped bitcoins as an etf on etherum. Would they be able to detect or reject stolen bitcoins. Would you be able to trade the ETF coins instead without knowing?

I think this seems to be main reason crypto wasn't shut down by government when it was relatively easy to do ( now there are real players entering the fray ). There is already a small cottage industry based on selling insights from BTC nodes to FinCEN and banks ( but I do not know whether they are buying ).

I can think of a recent politician who’d take the money and spin it in such a way that half the country would believe it’s not a big deal. That every other politician would do it too if they had any balls... etc.

> the moment it gets converted to anything real, the owners will be caught

Is that how it works? Won't there be, say banking institutions that simply won't keep a record of who converted the bitcoin to money similar to how VPN providers are claiming to not log user's IP addresses?

I'm pretty sure there's no bank in the world that would be willing to make a transaction in the billions and not keep a record of it.

that's about 750,000 times what banks have to track. I think anything over $10k must be tracked or groups of transactions that are linked that are at/over that.

Anything over $10k must be reported. Or anything that "looks suspicious". Or anything that "looks like it is trying to subvert the $10k rule"

You're probably right. I was thinking of the usual suspects when it comes to offshore accounts but also Switzerland with historically very strong privacy laws. But I'm know nothing about the banking industry so I could be totally off here.

Even Switzerland eventually bent to pressure from the United States:

https://www.wsj.com/articles/SB10000872396390443713704577601...

https://www.wsj.com/articles/SB10001424127887324412604578512...

https://www.wsj.com/articles/BL-MBB-23415

Ye of little faith. Google: HSBC cartel money.

HSBC knew what they were doing.... Because of their records.

“The confidential records and interviews with former employees reveal that compliance officers often filed SARs lacking even basic information about who owned companies banking with HSBC, the nature of their businesses, and where the money came from. Sometimes, records show, they asked branches for the information and were ignored or rebuffed.”

There’s records and then there’s “records”.

https://www.icij.org/investigations/fincen-files/hsbc-moved-...

And the record of not having a proper record.

So we’re good? A record of a record (of a record of a record of a...) that doesn’t tell you who the money went to, doesn’t fill in that blank. It’s useful to ascertain fault at the bank (which in HSBC’s case didn’t result in much of consequence ).

So yes records (of sometimes dubious quality) are kept from a pedantic standpoint, but I understood GP to mean that this would prevent someone from laundering large sums through (large respectable) banks which is demonstrably not always the case.

Not only may these logs be questionable, but apparently the penalties, using the HSBC example, don’t seem to be a deterrent.

TLDR; banks having records doesn’t mean shit when you want to launder large sums of money.

The US has regulations around banks knowing their customers and being responsible about things like this. For better or worse, those regulations have in many ways "leaked" into the regulations of other countries, because the US makes many of them mandatory in order to get access to the US financial system, which most countries see as essential.

Sure, there might be places where you could convert that Bitcoin into a local fiat currency, but then what? You have US$7.5B denominated in some random fiat currency that is likely mostly cut off from the "main" transactable currencies of the world. You'd have to find ways to slowly launder it and convert it into something else. Doable, I guess, and maybe worth the time and effort considering you can't do anything with the money otherwise, at least not without getting caught. But doing all that is risky as well... make a mistake and you could get caught.

> it is absolutely impossible to hide a transaction

What about tumblers?

Tumblers don't hide transactions, they just obfuscate them. Afaik the coins can still be easily traced programmatically.

That depends on how the tumbler is implemented. If the transaction from sender to receiver is instant and from a single address to another single address, well then yeah it's obvious. But if you batch the transactions of thousands of users over the course of a day for example, and make sure to split the amount to send to multiple addresses with random values, now the only thing that you can correlate is that one of the thousands of senders might also be one of the seemingly tens of thousands of receivers. If the tumbler is allowed to spread it out over multiple days or weeks or even months, well then good luck ever correlating the sender and receiver.

They just shuffle coins around. Still possible to track. It's also obvious to everyone watching that the shuffling service was used. Exchanges have already started to refuse coins that passed through these services. They might as well be tainted.

The real solution is to drop bitcoin and use better technology. Monero looks like the best option right now. Private transactions, concealed amounts, fungibility, low fees and fast transaction processing. It's everything bitcoin was meant to be.

> The real solution is to drop bitcoin and use better technology.

Walk into WalMart with cash and buy a prepaid gift card. Voilà. And the best part: it works literally everywhere. Both the buying and the using. Unlike flavor-of-the-week crypto.

Though, let's be real for a second, the ways to screw up from this point are many and varied. Accidentally use your home IP address to make the purchase? Oops. Did the naughty thing at Starbucks and there just happened to be a CCTV cam on you? Oh noes.

Probably best to stay offline, use cash everywhere, limit your banking, turn off your smartphone, and move from location to location constantly.

Or just give up.

> O cruel, needless misunderstanding! O stubborn, self-willed exile from the loving breast! Two gin-scented tears trickled down the sides of his nose. But it was all right, everything was all right, the struggle was finished. He had won the victory over himself. He loved Big Brother.

The Walmart gift card will only get you so far.

You can't: buy a fancy boat, car, or house. You can't pay for your kids school supplies (or school tuition), or treat your wife to a fancy hair do.

The money laundering laws try to stop people dealing in tens of thousands of dollars, who LIVE off of the money.

I think you could buy a prepaid Visa? Or is that not a thing anymore?

Hmm.... That IS a thing, and I think they have limits up to $5k. Mind you, if you try to buy anything too big, you'll get put on a list somewhere.

Also, something to keep in mind, most financial companies have a "Know Your Customer" stage where they verify you employment and income. If you are trying to buy a $20k thing, and your only income is "a stack of Visa Gift Cards", you're going to have a bad day.

It’s a pretty obvious strategy that is scrutinized already. Try buying $500 gift cards routinely,

So, you're saying a hacker controlling an innocent person's machine can easily get away with it because law enforcement would catch the innocent person instead?

Or letting someone else to do that in Starbucks by buying him off would be quite easy.

You have to find some clean bitcoins to tumble them with .... why would someone with clean coins tumble theirs with dirty ones?

Do online casinos check whether some coins are dirty?

Pretty sure I'd be mad if I gave a casino $100k in clean money, then checked back out with $100k that included $50k worth of marked bills from a bank heist ....

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