Background
Money laundering is defined as any activity that is designed to obfuscate the source of income and distribute that income from possibly illegal sources to legitimate recipients. Often this is a method of turning income from criminal activity into legitimate income. Money laundering has 3 phases;
- Placement – conversion of illegally obtained money into legitimate assets
- layering – using multiple transaction to distance the funds from their source
- Integration – converting the assets back into cash for the benefit of the criminal.
Troy Reid built the DIYTube we bite and associated concepts like his DIYCoin to facilitate this activity. Let look at the activities encouraged by Troy through his web site.
Placement- Troy had every intention of selling his DIYCoins directly to the public. This would have provided a ready avenue for the placement of dirty money within Troy’s website. He was not planning of collecting much information on who he was selling to but luckily, he ran afoul of anti-money laundering laws that prevented him from doing that. If he had been successful, his website would have been a nest of criminals.
Layering – Troy encouraged people to award each other his coins for activities on his site. Videos, comments, and other interactions would be used by criminals to move their wealth to either their accomplices or to their own puppet accounts. As the coins were traded, it would become impossible to trace the activity.
Integration - One of the very first things Troy did was to make sure his coins were listed on an exchange so people could convert them back into cash. Drug money collected in the United States would flow through Troy’s websites to foreign drug cartels who can’t utilize the legitimate banking system.
Fortunately, Troy’s incompetence caused his venture to quickly collapse. His attempt to sell coins was blocked by anti-money laundering laws but you can still find elements of his scheme. Even though Troy claims to have shut down the home brew concurrency, it is still listed on an exchange and looks to have some transactions occurring:
