Chris Blec asks the following question:
 |
| Source: Twitter |
Chris's premise is that it is "not illegal" for him to get together with a bunch of strangers to mix cash. But that's not quite right. It can be legal. It can also be illegal. To determine which it is, we need to understand the motivations of Chris and the other ten strangers. Why are they getting together to mix in the first place? Alas, Chris doesn't mention this in his tweet.
There are certainly all sorts of perfectly legal albeit quirky reasons to mix cash. We could imagine that Chris and ten other strangers are waiting for the bus, and to decide who goes first, they all put a $20 note into a jar, remembering their respective serial number. After the notes have been mixed, one note is taken out and whoever it belongs to wins. The notes are then given back. Nothing wrong with that.
On the other hand, if Chris and the other 10 strangers are mixing their cash because they want to conceal the source, then they need to be careful. They've taken one step down the path to engaging in money laundering.
The U.S. has several money laundering statutes. Below is part of one of the most contravened ones:
 |
| Source: LII |
As you can see, one of the key triggers for a money laundering conviction is making transactions that are designed to "conceal or disguise."
Even if Chris and the other strangers' motivations for mixing is to conceal the origins of their cash, that's not necessarily illegal. Before they reach the point at which they can be accused of having crossed the line over to money laundering, at least one of the strangers needs to contribute banknotes to the jar that are the "proceeds of specified unlawful activity." For argument's sake, let's say that one of the strangers contributes cash that they've earned from contract killing. Chris and the other 10 strangers are now a step closer to a potential money laundering indictment.
Only one last criteria is lacking. Chris and the other strangers must participate in a "knowing" way. They must be aware that the property involved is criminally-derived. The most obvious example would be if one of the 10 strangers were to loudly announce just prior to putting their notes in the jar that the notes come from contract killing, and everyone hears this yet still participates.
At this point, the three triggers have been met. Chris and the other strangers have acted in 1) a knowing way 2) to conceal 3) the actual proceeds of unlawful activity.
The state of "knowing" needn't be established in such an explicit fashion as the criminal announcing it loudly. For instance, even if the criminal says nothing, but Chris and the other participants suspect the possibility that dirty money is entering the jar, but they don't do due diligence, then they could be found guilty of money laundering. To demonstrate that they aren't knowing participants, Chris and the other strangers may have to take proactive measures, say like checking ID.
So Chris is right to say that mixing cash in a jar can be legal, but he incorrectly omits to say that it can also be illegal.
Having fleshed out Chris's premise, what about his conclusion? Can the jar-of-cash thought experiment teach us about the legality of crypto mixing methods such as custodial mixers, Tornado Cash, or CoinJoin? I'll let the readers work that one out on their own.
A Jury could nullify that interpretation of the law, should they choose.
ReplyDeleteWorth noting that it need not be criminal to not want every purchase you made to be traceable back to you by anyone. Despite her authoritarian/puritanical arguments to the contrary, my mother doesn't need to know about my pornhub subscription. For that and a million other reasons that are completely natural in a free society, a crypto mixer or something that does the same thing is going to be a requirement.
ReplyDelete“If you've done nothing wrong, you should have nothing to hide” is a bad argument, whether it's about money history or location history or browser history.
I don't think it's illegal to want privacy.
DeleteWhere it becomes illegal is when, in the process of trying to obfuscate your own trail, you knowingly anonymize the trail of a criminal, too.
JP Koning: you just made an assumption that the jar and the mixing is in USA.
ReplyDeleteSo your whole premise building off that qouted law fails wholesale just on that.
Second, the _knowing_ part can be streatched quite a ways by that logic as any or all finicial property could be the proceeds of unlawful activity or conduct.
So next time you buy a cup of coffee or such you wont mind being subject to "due diligence" on where, how and why you got the money you are attempting to pay with.
Btw "checking ID" is not "proactive" enough "measure" to not be cought performing the crime of "money laundering".
So, try again?
"Second, the _knowing_ part can be streatched quite a ways by that logic as any or all finicial property could be the proceeds of unlawful activity or conduct."
DeleteYep. If you are a used car salesman, for instance, and a customer is regularly buying cars from you with cash, you need to take steps to make sure you aren't engaging in money laundering.
Here are a few car salesmen who got caught.
https://www.justice.gov/usao-sdoh/pr/owner-fairfield-ohio-car-dealership-pleads-guilty-money-laundering
https://www.justice.gov/usao-wdny/pr/car-dealer-convicted-money-laundering
This obviously isn't problem for coffee shops, since bad actors don't launder funds by purchasing cups of coffee.
The assumption "This obviously isn't problem for coffee shops, since bad actors don't launder funds by purchasing cups of coffee." is one you made that is not supported by the law you qouted. So it _is_ a problem for coffee shops or any merchant for that matter regardless what a hypothetical bad actor will or will not do.
DeleteSo, try yet again?
Now you’re just arguing for the sake of arguing. Thank JP for the content and move along
DeleteHow about another example - depositing cash into a bank. There have been cases of banks accepting deposits from proceeds of crime right?
ReplyDeleteYep, but the bank also does due diligence on the depositor. That way the bank can demonstrate that they haven't "knowingly" engaged in accepting dirty money, and thereby escapes a potential money laundering conviction.
DeleteYeah, makes sense. Thanks for the article, it's interesting.
Delete