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Comment by koolba | Hacker News Reader

> The plot, prosecutors said, was simple: members of the Make Money Online (MMO) team would purchase crime proceeds via cryptocurrency at a discount and transfer those proceeds into bank accounts held by entities affiliated with newspaper.

> The illegal proceeds would ultimately be moved back into the Epoch Times accounts through "tens of thousands of layered transactions", including through prepaid debit cards and financial accounts opened using stolen identification information.

What are “crime proceeds”?

Are these seized assets by the Feds sold at a discount? Or stolen assets by criminals (also sold at a discount)?

Either way, sounds like classic money laundering as the follow up.

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> What are “crime proceeds”?

Typically any proceed from a crime. In the simplest case, if someone stole money from someone, the money stolen is proceeds from the crime. Similar is if someone stole property and sold it, the money is the proceed. Same with selling illegal drugs, or money received from extortion or bribery. Like you said, regardless of the crime the money needs to be laundered.

The indictment says very little about the underlying crime schemes. (I understand indictments usually don't say and don't need to say very much).

- "The prepaid debit cards were issued by different debit card companies and loaded with U.S. dollars that had been unlawfully obtained through various frauds (i.e. , the crime proceeds). For example, certain of the prepaid debit cards were loaded with fraudulently procured unemployment insurance benefits obtained using stolen personal identification information of U.S. residents." (page 4)

That seems clear to me. They used stolen identity information to make false unemployment insurance claims in other people’s names.

The CFO bought the prepaid cards at a discount and then transferred the whole amount to the company account.

Maybe there’s more to it but it doesn’t sound like it was very sophisticated and seems inevitable they would be caught eventually.

> They used stolen identity information to make false unemployment insurance claims in other people’s names.

I don't think "they," meaning Epoch Times, did the actual identity theft / unemployment insurance fraud. The indictment says they "purchased" the debit cards, and there are no charges related to those crimes.

It sounds like Epoch Times found a platform where such fraudsters were offloading their phony unemployment debit cards at a discount (this started in 2020, when I presume there was a huge boom in unemployment fraud) and tried to flip them around as legitimate donations and subscription revenue for an easy profit.

> It sounds like Epoch Times found a platform where such fraudsters were offloading their phony unemployment debit cards at a discount [...] and tried to flip them around as legitimate donations and subscription revenue for an easy profit.

Just to be clear, since the framing here doesn't make it clear if you understand: that is textbook money laundering. "I didn't know where the money on these cards came from I was just buying them as a product" is not remotely a defense. AML/KYC laws apply to all financial transactions, not just to banks, and yes, "buying millions of dollars of pre-paid debit cards for real money" is quite clealy a "financial" transaction.

One example was buying up fraudulent unemployment insurance debit cards.

It would be the latter, because "transfer those proceeds into bank accounts" implies currency, rather than other types of assets.

These indictments always read so weird, like they're trying to describe a nefarious criminal organization even though its behavior is just the same as any other enterprise.

So they performed an unspecified financial transaction (allegedly illegal but not proven), which turned a profit, then paid the money out to a lot of people, who in turn paid some of it back to them later. Isn't that just... the economy? Walmart pays Alice for doing customer service, then Alice pays Walmart for breakfast cereal and soap.

Even the ostensible crimes are like, they opened a bank account, deposited their own money in it and then withdrew it again without stealing anything or harming anyone, but you're not allowed to do that under someone else's name. Meanwhile lots of people have reasons to want to have an anonymous payments system and a lot of them are quite sympathetic, to the point that the only reason it's even illegal is to help lazy prosecutors who can't be bothered to prove the original crime. And then lots of sympathetic people break the law, because it's a bad law and they have little alternative.

Then the whole thing is alleged to be a grand conspiracy. But wait, what percentage of the accounts were under someone else's name? Was it done for this purpose, or do they just do business with a lot of people and some of them are e.g. undocumented immigrants who couldn't use their own name?

If there is some kind of theft happening here then why can't they prosecute the stealing instead of these moving money around allegations?

The last line of the story is also just uncanny. One of these things is not like the others:

> In the years since, it has grown into purportedly one of the US's most powerful conservative news organisations and a home to conspiracy theories, right-wing misinformation and sharp opposition to the Chinese Communist Party.

Right?

> they opened a bank account, deposited their own money in it and then withdrew it again without stealing anything or harming anyone, but you're not allowed to do that under someone else's name

Yes, you're not allowed to do that under someone else's name, that's what the crime is.

> can't be bothered to prove the original crime

The entire point of money laundering is to make it as difficult as possible to find the original crime or connect it. In an environment of anonymous payments, how do you prove X made a payment to Y?

It's basically an extension of anti-fencing law, which is a pretty old principle. You're not allowed to help people fence stolen goods, and it's not a defence to look the other way. Money has to be treated specially because it's fungible and not a "good", but the principle is the same. If you were running a "cars bought for cash" scheme and refusing to check if any of the cars were stolen, I would assume you'd eventually be prosecuted for that.

> Yes, you're not allowed to do that under someone else's name, that's what the crime is.

But that's the objection. That's a stupid crime. The only reason anybody wants to do that is that they can't open one under nobody's name, even though there are legitimate and innocent reasons to want to do that.

> The entire point of money laundering is to make it as difficult as possible to find the original crime or connect it.

Money does that already by itself, because it's fungible. It's why AML laws don't work -- their effectiveness is basically zero. The harm they cause to innocent people far exceeds the benefits in rooting out undiscovered crimes -- not least because crimes that are causing harm to people are generally quite easily discovered, when the victims go to the police and report them.

> In an environment of anonymous payments, how do you prove X made a payment to Y?

You ignore the concept of wanting to do this at all and just prove that X committed the underlying crime. Because if there is no underlying crime then there is no need to prove whether or not there was a payment. The government has no legitimate interesting in proving what kind of literature or contraceptives you like to buy.

> You're not allowed to help people fence stolen goods, and it's not a defence to look the other way.

The way this is typically implemented is that the stolen goods are returned to the owner if you're caught with them. You don't actually get prosecuted unless they can prove you were in on it. After all, how is anybody supposed to know that? You go to jail because you bought something at a yard sale not knowing it was stolen?

But that's exactly why it doesn't apply to money. Money is entirely fungible. If a criminal steals your car and sells it to a chop shop for $5000, and then the chop shop spends the money at Walmart and McDonalds, and then the money ends up in their bank account from which it goes to their suppliers and shareholders and other customers, just exactly who are you supposed to be entitled to recover from? And what is your retirement fund manager supposed to do, investigate each of Walmart's customers to see where they got their money?

It would also be double counting. The stolen property is the car, not the money the thief sells it for. Unless the buyer didn't know the car was stolen, which is a separate crime with a different victim. And even then you're not trying to recover those specific bills or care about where they went after, you're just trying to recover any equivalent amount of assets from the criminal you can prove fraudulently sold a stolen car.

Investigating crimes is for the police, not corporations. When you force corporations to do it, they do it capriciously and oppressively, because there are no constitutional safeguards.

>> Yes, you're not allowed to do that under someone else's name, that's what the crime is.

>But that's the objection. That's a stupid crime. The only reason anybody wants to do that is that they can't open one under nobody's name, even though there are legitimate and innocent reasons to want to do that.

It is far from true that the only reason people falsify identity in transactions is because KYC laws require identity. You should learn more about what criminals actually do.

Explain why someone would want to open a new empty bank account in someone else's name other than because they couldn't or don't want to open a new empty bank account in their own name.

That's the crime we're talking about here. Not committing fraud so you can steal someone else's money, but only lying about your name because you don't want to give your name and the law prohibits you from not giving a name.

The problem isn't even that it's illegal to open a bank account in someone else's name. The problem is that you're prohibited from anonymously opening a bank account.

> Explain why someone would want to open a new empty bank account in someone else's name other than because they couldn't or don't want to open a new empty bank account in their own name.

Putting income into someone else’s tax bracket is the obvious use case. You lack imagination or experience with the real world.

That has nothing to do with this. To do that you would be long-term leaving the money in their account, requiring their cooperation because they would have the legal right to withdraw it. The same scheme works when you have the person whose name is on the account open it themselves.

On top of that, that isn't even how withholding works. The tax isn't taken out by the bank, it's taken out by the employer, so to make your scheme work you'd have to be lying to the employer about who the employee is rather than the bank about whose account it is. And doing this kind of thing by any mechanism also doesn't need to be bank fraud because it's already tax fraud.

Moreover, in practice how those schemes work doesn't require you to put some other person's name on the account, because they would put a corporate entity's name on the account, where the corporation is a legal entity type or is incorporated in a jurisdiction that has different tax treatment. It seems like you're just making up fake problems with giving people the ability to buy things digitally without having their privacy invaded.

You need an example of something it would enable somebody to do that isn't already independently illegal. Otherwise you don't need this to be illegal because you can still prosecute them for that.

Not all transactions are subject to withholding, especially the ones one might want to hide.

But how does that help you? Whether or not your brokerage is required to withhold income tax, they're still going to file a 1099-DIV or what have you.

Unless you're talking about overt crime like drug deals, and then we're back to that already being independently illegal.

Brokerage? You are making assumptions again.

I am divesting of a business that has many kinds of transactions. Counterparties often suggest a cash discount so that one or both parties can hide the income.

> their effectiveness is basically zero

I think discussing this under an example of an AML prosecution is silly. AML does work, it just has a lot of collateral privacy loss. Whether that level of privacy is worth the economic destruction of an all-fraud economy is another thing.

> AML does work

It really doesn't:

https://content.11fs.com/article/aml-is-the-worlds-most-inef...

> This week I had an opportunity to properly deep dive into this work by Ronald F Pol. It finds that AML policy has less than a 0.1% impact on criminal finances. Compliance costs exceed recovered illicit funds recovered more than 100x. Banks, taxpayers, and citizens are penalised more than criminals. Policymakers keep blaming banks and hitting them with massive fines hoping to fix the problem, but it doesn't.

AML prosecutions happen, but that's mostly because it's easy to find otherwise-innocent people who run afoul of the rules, or as something to tack on when you're already prosecuting someone for something else. Not because they're doing any good against criminals who otherwise wouldn't be caught.

Just think about it. If someone is being prosecuted for money laundering in addition to an underlying crime, they would still have been prosecuted for the underlying crime without it. If they're only being prosecuted for money laundering, we don't even know that there was an underlying crime, in which case why are we prosecuting someone engaging in no apparent harmful activity?

> the economic destruction of an all-fraud economy

Where does this assumption come from? Historically most monetary transactions occurred in anonymous cash. Was the result "economic destruction" or "an all-fraud economy"?

The proposal isn't to legalize fraud, it's to legalize the digital equivalent of cash.

That’s an interesting opinion but there is a law and order benefit to a transparent financial system. Prosecuting launderers increases confidence in our economy.

Confidence in the financial system comes from knowing you won't suddenly lose access to your funds, and AML promotes the opposite of this. There are countless stories of small businesspeople suddenly being locked out of their bank accounts because their transaction patterns looked suspicious. On the global level, more and more countries are reducing the dependence on the US dollar to avoid sanctions or appropriation; without AML laws the US dollar would be in a much stronger position internationally as countries wouldn't have to worry about their funds being blocked or frozen.

> There are countless stories of small businesspeople suddenly being locked out of their bank accounts because their transaction patterns looked suspicious

This doesn’t sound like one of those stories. Remains to be seen once the prosecution and defense make their cases in court and a judge or jury rules on it.

> This doesn’t sound like one of those stories.

Even if this turns out to be one of the stories where the defendants are actually wrongdoers, those laws are still resulting in "countless stories of small businesspeople suddenly being locked out of their bank accounts because their transaction patterns looked suspicious." Which isn't worth it, because the wrongdoers can still be prosecuted for their underlying crimes without having that.

> source?

You're asking for a source for a logical argument. It's fairly straightforward: If other countries (e.g. BRIC) have to worry that the US can shut off their money, they're going to build and support alternatives to US dollars to mitigate the threat, which weakens the dollar.

Huh? I'm not big on police over-reach but to claim that the chain of responsibility for a crime ends at some arbitrary point is silly on its face. Should either side of a hitman-for-hire arrangement not be penalized for participating in a crime? Should we eliminate laws criminalizing murder because some people are wrongfully tried and convicted? Turning off a criminal's money laundering spigot is a deterrent against committing that crime.

I don't see how that's confined to a logical argument. Surely there must be data to back up this claim if it's so easily provable. How much stronger would the dollar be today? Source? Even a source for "countless small businesspeople being locked out of their bank accounts" would be interesting.

> I'm not big on police over-reach but to claim that the chain of responsibility for a crime ends at some arbitrary point is silly on its face.

It's not about an arbitrary point, it's about whether you're actively participating in the crime. So for example:

> Should either side of a hitman-for-hire arrangement not be penalized for participating in a crime?

Paying someone to commit murder is conspiracy to commit murder, not money laundering. It has nothing inherently to do with banks or KYC and is just as illegal if you pay the hitman in gold bullion or Monero.

> Turning off a criminal's money laundering spigot is a deterrent against committing that crime.

But that doesn't actually happen, because the rules only trap the unwary. Innocent people who don't know that doing something will get their account locked even though they've done nothing wrong.

Criminal organizations are repeat players with their own lawyers, so they know what not to do, and then they don't get caught because money is fungible. For example, if they're selling pot brownies and it's illegal to sell pot, they just put down on the form that they're selling ordinary brownies. Or cherry pie, or car washes, or it doesn't matter what because they just put a legal product on the form and then they only get caught if the government independently comes to investigate their criminal enterprise, which is the same way they get caught without any kind of bank reporting or KYC.

> Surely there must be data to back up this claim if it's so easily provable. How much stronger would the dollar be today? Source?

How would you even propose to measure this? If there was a source it would just be a paper someone published making the same case as the message board comment. To actually measure the effect you would need to get rid of the KYC laws and then measure the result, which hasn't happened, so the only thing you're going to get either way is reasoning for what would be expected to happen under the circumstances.

But how would you expect other countries to respond to the US leveraging the dollar in this way to infringe on their sovereignty and seize the assets of their citizens?

> Even a source for "countless small businesspeople being locked out of their bank accounts" would be interesting.

https://www.google.com/search?q=site%3Anews.ycombinator.com+...

The entire point of an indictment is to lay out a series of probable crimes in order to arrest the individual or individuals, stop the crimes in progress, and set up a potential prosecution. It is not a prosecution.

Further, as to prosecuting the thefts, for all we know that is the next step, or they have already done that and secured the cooperation of those conspirators as witnesses.

An indictment implies that charges are being filed and therefore that the prosecution already thinks they can prove their case. If they can't even prove if there is an underlying crime, what are they supposed to be preventing?

The entire problem is that they've set things up so they can charge people with something even if they can't prove the underlying crime, in order to exert undue leverage on them -- or even go all the way to conviction without ever proving the underlying crime, which is an injustice.

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