If you felt the floor shake after the feds helped indict the owners of e-gold on money laundering charges, it might be attributable to an underground fraudster community in panic mode.
Cybercrooks — long reliant on the decade-old online money transfer system's seemingly anonymous, irreversible and untraceable nature to buy and sell credit card dumps, spam lists and child pornography, or to launch investment scams — may be looking elsewhere for an alternative not in the feds' firing line.
Jens Hinrichsen, product marketing manager of RSA Consumer Solutions, says his team has witnessed significant "chatter" in online bulletin boards among people wondering whether e-gold should remain their preferred payment method. "We could see a migration and acceleration to other types of channels."
E-gold owners Douglas Jackson; his brother, Reid Jackson; and longtime friend Barry Downey, were indicted by the Separtment of Justice in late April on charges of money laundering, conspiracy and operating an unlicensed money transmitting business. They have denied the charges.
According to the indictment, the defendants ran and benefited from a business that catered to cybercriminals seeking to hide their proceeds through the digital currency. New customers were only required to offer a valid email address to open an account.
But Douglas Jackson, the e-gold chairman, says it is "ridiculous" to believe the gold-backed payment system — created to withstand swings in business cycles and to give people of all incomes a means to transfer money — would cater to thieves. He says the 15-person company has cooperated with authorities and instituted controls to identify illegal activity.
Requiring additional verification to open an account would do little to prevent illegal transfers. "They're going to set up a good name and address," Jackson says.
Meanwhile, financial institutions should take note of the indictments. They must proactively monitor for money laundering, says Amir Orad, EVP of anti-fraud provider Actimize. "Even larger organizations, with hundreds of billions of dollars in assets, have gaps in their anti-money laundering programs," he says.
— Dan Kaplan