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    Author Topic: AML/KYC: the legacy financial system's strategy for strangling bitcoin  (Read 2949 times)

    • eldentyrell (OP)
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    February 20, 2014, 10:27:13 PM
    Last edit: February 21, 2014, 01:02:39 AM by eldentyrell
     #1
    At first I was glad to see the first few bitcoin ATMs coming on line.

    Then I found out that they require a palm print, facial photo, and government ID scan.  My jaw dropped.

    1. The legacy financial system's ATMs are under none of these onerous requirements.  Any Bank of America, Wells Fargo, or Citibank ATM will happily spit out $500 at a time to holders of anonymous prepaid cards issued from any country on the planet (except possibly Iran and North Korea).  No photos, no ID, nothing.  This is an unbelievably blatant double standard.

    2. The user has no idea who this information is being given to or what will be done with it.  Most importantly, there is no guarantee that use of a bitcoin ATM will not be grounds for an IRS audit.  Mark my words, two or three years from now any US person who's ever gone through AML/KYC with any bitcoin-related business, including use of one of these ATMs, will get audited.  The IRS has complete impunity to audit whoever they like, whenever they like, for any reason (including political orientation) or no reason at all.  If they can use audits to repress a wing of the Republican party, I'm sure they can use them to repress cryptocurrencies.  They've already used it to harrass open source projects.

    I really think this is the legacy system's strategy for strangling bitcoin.  They've apparently been able to convince regulators to impose AML/KYC requirements on bitcoin-related business above and beyond those imposed on all other money-related businesses.  With that little barrier out of they way they can now simply keep bumping up the regulatory requirements to whatever level is required to make bitcoin more inconvenient/risky than what they're offering.

    The people operating these ATMs need to stand up to FINCEN and point this out.  The potential users of these ATMs need to shun those based on an AML/KYC double standard.  Don't accept a level of regulation that exceeds what's imposed on the legacy financial system.  That's the only line in the sand.

    Edit: boldified "anonymous prepaid cards" since people seem to be missing that part.
    The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.

  • fancy_pants
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    February 20, 2014, 10:56:54 PM
     #2


    You don't ever have to use an ATM to get bitcoins.  Likewise, the ATM owner doesn't have to risk jail time just so that people can have anonymous access to his/her bitcoins.

    These ATMs are one option of many.  Feel free to choose your own path and be aware that not everyone shares your agenda.

  • eldentyrell (OP)
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    February 20, 2014, 11:53:53 PM
     #3
    Quote from: fancy_pants on February 20, 2014, 10:56:54 PM
    Feel free to choose your own path and be aware that not everyone shares your agenda.

    In the terms of your metaphor, I'm recommending a path to others, and advising them on the big-picture long-term consequences of the "default" path.  My agenda is nothing other than bitcoin's success, and I somehow doubt anybody who didn't share that agenda would be on this forum in the first place (and, if they are, this thread isn't for them).
    The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.

  • subSTRATA
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    February 20, 2014, 11:55:54 PM
     #4
    Quote from: eldentyrell on February 20, 2014, 10:27:13 PM
    I really think this is the legacy system's strategy for strangling bitcoin.

    I think their long-term strategy is as follows:

    1. Let digital cash live and slowly make everyone use it. Invade privacy as much as possible and overcomplicate "paperwork".
    2. Shutdown all physical forms of cash. Require even more "paperwork" to use digital cash and live.
    3. Move all "paperwork" to personal implanted chip, used and required for almost everything.
    4. Disobedience results in one's chip switched off. At that point one is utterly fucked.

    The ultimate control.

    I'm not really sure if having a lot of digital cash under such circumstances could be labeled as being rich ... unless one is psychopat, just like
    those at the top.

    Quote from: eldentyrell on February 20, 2014, 11:53:53 PM
    My agenda is nothing other than bitcoin's success

    And you dare speaking about big picture long-term?
    theres nothing here. message me if you want to put something here.

  • eldentyrell (OP)
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    February 20, 2014, 11:58:33 PM
     #5
    Quote from: subSTRATA on February 20, 2014, 11:55:54 PM
    3. Move all "paperwork" to personal implanted chip, used and required for almost everything.
    4. Disobedience results in one's chip switched off. At that point one is utterly fucked.

    This is a pretty far-out scenario, and while I don't doubt that it's possible I think that retail space travel and colonization of other planets will come first.  At least it will come before something like this is imposed worldwide in every country.
    The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.

  • eldentyrell (OP)
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    February 21, 2014, 12:00:18 AM
     #6
    Quote from: subSTRATA on February 20, 2014, 11:55:54 PM
    Quote from: eldentyrell on February 20, 2014, 11:53:53 PM
    My agenda is nothing other than bitcoin's success

    And you dare speaking about big picture long-term?

    Sorry, I should have said "the success of cryptocurrencies".

    Yes, I do think cryptocurrencies are here to stay, for many decades at the very least.
    The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.

  • subSTRATA
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    February 21, 2014, 12:03:06 AM
     #7
    Quote from: eldentyrell on February 20, 2014, 11:58:33 PM
    Quote from: subSTRATA on February 20, 2014, 11:55:54 PM
    3. Move all "paperwork" to personal implanted chip, used and required for almost everything.
    4. Disobedience results in one's chip switched off. At that point one is utterly fucked.

    This is a pretty far-out scenario, and while I don't doubt that it's possible I think that retail space travel and colonization of other planets will come first.  At least it will come before something like this is imposed worldwide in every country.

    Hahaha so let's all just cheer Bitcoin and hope we will be able to escape from Earth before situation for everyone reaches pitch black.

    You are fucking retard.
    theres nothing here. message me if you want to put something here.

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    February 21, 2014, 12:08:33 AM
    Last edit: February 21, 2014, 12:27:44 AM by DeathAndTaxes
     #8
    Quote from: eldentyrell on February 20, 2014, 10:27:13 PM
    At first I was glad to see the first few bitcoin ATMs coming on line.

    Then I found out that they require a palm print, facial photo, and government ID scan.  My jaw dropped.

    1. The legacy financial system's ATMs are under none of these onerous requirements.  Any Bank of America, Wells Fargo, or Citibank ATM will happily spit out $500 at a time to holders of anonymous prepaid cards issued from any country on the planet (except possibly Iran and North Korea).  No photos, no ID, nothing.  This is an unbelievably blatant double standard.
    ...

    The Bitcoin ATMs don't have to work that way but they do need to conduct KYC/AML checks and verifications.  The reason your citibank ATM doesn't verify any information at the time of use is because you are using your citibank debit card, and to obtain that you opened an account, and at the time they opened your account they conducted their KYC/AML checks and verifications.

    There is no special "Bitcoin rule" which prevents a Bitcoin ATM from operating the same way.  There is no reason a traditional bank ATM network couldn't offer bitcoins right from their existing ATMs if they wanted to.  

    However for a startup that type of model becomes a chicken and egg situation.  How useful is a Bitcoin ATM which requires an account and Bitcoin ATM card when none of your potential customers have one?  How many customers are going to go to your ATM find out it only works for account holders, go back home, open an account with you, enter all their sensitive information, supply you the documentation online, wait for it to be verified, then wait 3-5 days for their Bitcoin ATM card to arrive in the mail so they can then go back to the ATM to use it?  Starting to see why they did verification at the time of use.

  • CJYP
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    February 21, 2014, 12:18:11 AM
     #9
    The Bitcoin ATM in Boston does not require anything other than a QR code corresponding to your wallet for small deposits. If you want to deposit over about $500, this may not be the case, but it seemed to me like you just had to fill out a form.
    It certainly doesn't have the technology to read your palm print. It has the technology to take a photo of your face (or government ID) if you put your face in front of the camera intended for QR codes, but there was no indication that it uses that technology. And even if it does, you'd have to put your face in front of it willingly, at the perfect distance for it to get a photo of your face.
    I can't speak for any of the other Bitcoin ATMs.

    If anything, I've lost more anonymity posting here than making the transaction at the ATM.

  • eldentyrell (OP)
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    February 21, 2014, 12:54:40 AM
     #10
    Quote from: DeathAndTaxes on February 21, 2014, 12:08:33 AM
    Quote from: eldentyrell on February 20, 2014, 10:27:13 PM
    Citibank ATM will happily spit out $500 at a time to holders of anonymous prepaid cards issued from any country on the planet (except possibly Iran and North Korea).  No photos, no ID, nothing.

    The reason your citibank ATM doesn't verify any information at the time of use is because you are using your citibank debit card, and to obtain that you opened an account, and at the time they opened your account they conducted their KYC/AML checks and verifications.

    No, re-read my post.  I'm not talking about people using citibank debit cards.
    The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.

  • eldentyrell (OP)
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    February 21, 2014, 12:57:39 AM
     #11
    Quote from: CJYP on February 21, 2014, 12:18:11 AM
    The Bitcoin ATM in Boston does not require anything other than a QR code corresponding to your wallet for small deposits. If you want to deposit over about $500, this may not be the case, but it seemed to me like you just had to fill out a form.

    That is awesome.  Which vendor+operator is this, so I can start referring to them as the "good vendor/operator" and the others as the "bane of bitcoin"? Smiley

    This is how it should work; I will be sure to seek out and use these ATMs and recommend them to my friends.  Unfortunately I'm nowhere near Boston.
    The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.

  • eldentyrell (OP)
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    February 21, 2014, 12:58:37 AM
     #12
    Quote from: subSTRATA on February 21, 2014, 12:03:06 AM
    Hahaha so let's all just cheer Bitcoin and hope we will be able to escape from Earth before situation for everyone reaches pitch black.

    You are fucking retard.

    If you've got a better plan, I'm all ears.  I've tried several.
    The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.

  • CJYP
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    February 21, 2014, 01:25:43 AM
     #13
    Quote from: eldentyrell on February 21, 2014, 12:57:39 AM
    Quote from: CJYP on February 21, 2014, 12:18:11 AM
    The Bitcoin ATM in Boston does not require anything other than a QR code corresponding to your wallet for small deposits. If you want to deposit over about $500, this may not be the case, but it seemed to me like you just had to fill out a form.

    That is awesome.  Which vendor+operator is this, so I can start referring to them as the "good vendor/operator" and the others as the "bane of bitcoin"? Smiley

    This is how it should work; I will be sure to seek out and use these ATMs and recommend them to my friends.  Unfortunately I'm nowhere near Boston.
    It's called Liberty Teller.
    http://libertyteller.com
    I don't think they have any others outside of Boston - I've never heard of them before today, and I think they're just two people (who I met today when I went there).

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    February 21, 2014, 01:34:28 AM
     #14
    To the OP:

    The beautiful part about Bitcoin is that it can't be strangled.

    Nobody has to use the ATM.  And Bitcoin will continue in its current form, at least somewhere in the world.

    It may be regulated to death in the USA.  That's fine.  The US will miss out on all the innovation.

    But nothing will result in a strangulation of Bitcoin.

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  • DeathAndTaxes
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    February 21, 2014, 01:35:24 AM
     #15
    Quote from: eldentyrell on February 21, 2014, 12:54:40 AM
    Quote from: DeathAndTaxes on February 21, 2014, 12:08:33 AM
    Quote from: eldentyrell on February 20, 2014, 10:27:13 PM
    Citibank ATM will happily spit out $500 at a time to holders of anonymous prepaid cards issued from any country on the planet (except possibly Iran and North Korea).  No photos, no ID, nothing.

    The reason your citibank ATM doesn't verify any information at the time of use is because you are using your citibank debit card, and to obtain that you opened an account, and at the time they opened your account they conducted their KYC/AML checks and verifications.

    No, re-read my post.  I'm not talking about people using citibank debit cards.

    Not in the US.  Please name an anonymous prepaid card which allows you to withdraw cash from any ATM.  You won't find one, maybe prior to Patriot Act when AML/KYC took a giant leap up in restrictions.

  • eldentyrell (OP)
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    February 21, 2014, 02:48:42 AM
     #16
    Quote
    Quote from: eldentyrell on February 21, 2014, 12:54:40 AM
    Quote from: DeathAndTaxes on February 21, 2014, 12:08:33 AM
    Quote from: eldentyrell on February 20, 2014, 10:27:13 PM
    Citibank ATM will happily spit out $500 at a time to holders of anonymous prepaid cards issued from any country on the planet (except possibly Iran and North Korea).  No photos, no ID, nothing.

    The reason your citibank ATM doesn't verify any information at the time of use is because you are using your citibank debit card, and to obtain that you opened an account, and at the time they opened your account they conducted their KYC/AML checks and verifications.

    No, re-read my post.  I'm not talking about people using citibank debit cards.

    Not in the US.  Please name an anonymous prepaid card which allows you to withdraw cash from any ATM.

    "Mastercard"

    "VISA"

    I think you're having a really hard time understanding my post.  The card is not from the US, you use it in in the US at an ATM.

    Seriously, are you not aware of the fact that US ATMs will spit out cash to users with cards issued from any country?

    Here, I've actually used one of these, myself, to get cash (from a Citibank ATM no less!) less than a year ago (definitely post-PATRIOT act):

      https://bt.irlbtc.com/view/86382.msg950178

    The ATM-owning bank does absolutely zero AML/KYC on ATM withdrawals, and they don't check that the overseas card-issuing bank did any AML/KYC.  Bitcoin ATMs should be held to exactly that same standard.

    FINCEN is completely aware of this loophole and just looks the other way.  They even have a name for it: google candy for criminals.  They know that imposing AML/KYC on ATM owners would mean they'd all exit the business.  But that's the legacy financial system; they're special and aren't held to the same AML/KYC standards demanded of bitcoin-related businesses.

    It's very simple.  If an AML/KYC requirement is too burdensome for the legacy financial system, they're excused from it.  If an AML/KYC is not burdensome enough for anything that competes with the legacy financial system, it must be made more burdensome ASAP.
    The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.

  • DeathAndTaxes
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    February 21, 2014, 02:57:09 AM
     #17
    Yeah it is called peering arrangements.  That is how a card from one issuer can work in the ATM of another issuer.  However part of the peering agreement is that each issuer WILL do AML/KYC.  For a card from slovenia national bank of snow to work on a US ATM network someone stated they do the min checks required by law.  Now the reality is there are tons of shady outfits which don't.  Eventually those shady cards stop working in US ATM networks.  Of course for each one shutdown, another one opens up.  Nothing prevents a Bitcoin ATM to reach a peering arrangement with card issuer by offload the KYC obligation on them.  

    I mean do you think ATM operators, or banks, or card issuers, or western union want to do ANY KYC stuff.  It doesn't make any money, it just adds cost.  They do it because they have to.

    There ARE NO BITCOIN SPECIFIC AML/KYC requirements.  None.  Absolutely none.  If a particular ATM operator is doing x,y, and z it is because the operator believes x, y, and z is what they need to do to compy with general money transmitter AML/KYC requirements.

    There is no regulatory in the US saying "cash ATMs" can do whatever they want but "Bitcoin ATMs" need handprints and photos of passports.  It is that operator who is decided to be cautious and make to without access to the existing networks.   Tomorrow someone could reach an agreement to have all of Chase's networks dispense Bitcoins instead of cash and there would be no different requirements on them than existing right now.


    If you still don't get it, you simply don't want to and I think we can both agree we are wasting each other's time.

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    February 21, 2014, 03:08:18 AM
     #18
    This is one to keep an eye on, I hope they succeed.

    Quote from: CJYP on February 21, 2014, 01:25:43 AM
    Quote from: eldentyrell on February 21, 2014, 12:57:39 AM
    Quote from: CJYP on February 21, 2014, 12:18:11 AM
    The Bitcoin ATM in Boston does not require anything other than a QR code corresponding to your wallet for small deposits. If you want to deposit over about $500, this may not be the case, but it seemed to me like you just had to fill out a form.

    That is awesome.  Which vendor+operator is this, so I can start referring to them as the "good vendor/operator" and the others as the "bane of bitcoin"? Smiley

    This is how it should work; I will be sure to seek out and use these ATMs and recommend them to my friends.  Unfortunately I'm nowhere near Boston.
    It's called Liberty Teller.
    http://libertyteller.com
    I don't think they have any others outside of Boston - I've never heard of them before today, and I think they're just two people (who I met today when I went there).
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  • eldentyrell (OP)
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    February 21, 2014, 03:16:57 AM
     #19
    Quote from: DeathAndTaxes on February 21, 2014, 02:57:09 AM
    Yeah it is called peering arrangements.

    It's called a flimsy piece of cover-your-ass paper.  Do you really think that Chinese banks, whose cards work in US ATMs, are subject even indirectly to Treasury/FINCEN requirements?  They give the SEC the middle finger on a regular basis; I doubt Treasury is any different.


    Quote from: DeathAndTaxes on February 21, 2014, 02:57:09 AM
    There is no regulatory in the US saying "cash ATMs" can do whatever they want but "Bitcoin ATMs" need handprints and photos of passports.  It is that operator who is decided to be cautious and make to without access to the existing networks.

    Of course not.  FINCEN/Treasury bully the bitcoin businesses into doing this but don't bully the legacy financial system into doing it.

    It's still a double standard.
    The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.

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    February 21, 2014, 03:22:45 AM
     #20
    Quote from: eldentyrell on February 21, 2014, 03:16:57 AM
    It's called a flimsy piece of cover-your-ass paper.  Do you really think that Chinese banks, whose cards work in US ATMs, are subject even indirectly to Treasury/FINCEN requirements?  They give the SEC the middle finger on a regular basis; I doubt Treasury is any different.

    A Bitcoin ATM could use the same "flmsy piece of cover-your-ass-paper" by getting a foreign bank to legal declare they have done the min checks before issuing cards to cardholders and then the Bitcoin ATM could offload that responsibility as well by accepting the card and PINs from that issuer as a proxy from direct verification.

    Quote
    Of course not.  FINCEN/Treasury bully the bitcoin businesses into doing this but don't bully the legacy financial system into doing it.

    It's still a double standard.

    There is no evidence anyone from any agency made this company take fingerprints and facial scans.  Have you used coinbase?  Did they start requiring a facial scan and fingerprints as well as scans of passport?  Two posts up you were applauding another startup which doesn't take these steps.  If the requirements were forced by FinCEN wouldn't it seem likely that all ATM companies would have the exact same facial scan and handprint capture in their ATMs?   It isn't like this second startup is hiding with their very public website and news stories.   Wouldn't that seem to indicate it wasn't FinCEN making some special "Bitcoin needs handprints" rule and instead it was just the action of an individual company deciding to play it safe.
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