Is it possible for an individual to commit money laundering like a bank?

Question

In the classic example of money laundering, Charlie the Criminal would take his dirty money to Bob the Banker and get it in some form that is spendable and transferable. In this situation it would be expected that Charlie would know it is dirty money, but Bob the Banker does not need to be specifically aware the the money has criminal origin. Because of this he implements, if he is for example a cryptocurrency exchange, Know Your Customer (KYC) checks and refuses to deal in certain products, Monero in the UK for example.

What if however Bob is not a financial institution but a member of the public (Bob the Builder perhaps)? If he uses a decentralized exchange such as bisq he would be performing much the same actions as Bob the Banker or Cryptocurrency exchange, including exchanging fiat currency for cryptocurrency and trading in Monero. The design of the market makes it impossible to perform any such KYC checks, and at least when exchanging fiat currency makes it clear that there is an covert element in the process (you are informed by the interface not to reference the transfer as "bisq" or "cryptocurrency transaction").

It is possible for an individual to commit the crime that a bank could be found guilty of by having insufficient money laundering prevention measures?

As far as jurisdiction as one never really knows where the other party is located any jurisdiction where this is illegal probably makes it illegal anywhere so the most restrictive rules are probably the most relevant.

Answer 1

Because money laundering is a form of transnational crime there is an extensive system of treaties which harmonise, to some extent, the laws of most developed countries. Relevantly to your question, the United Nations Convention against Transnational Organized Crime provides in article 7:

Each State Party … Shall institute a comprehensive domestic regulatory and supervisory regime for banks and non-bank financial institutions and, where appropriate, other bodies particularly susceptible to money-laundering, within its competence, in order to deter and detect all forms of money-laundering, which regime shall emphasize requirements for customer identification, record-keeping and the reporting of suspicious transactions …

Generally, local laws will define concepts like "money transmitting business" and require individuals engaged in these businesses to obtain a licence and comply with similar KYC and reporting obligations to a bank.

For example, in the United States, 18 U.S.C § 1960 makes it illegal to run an unlicensed money transmitting business. In United States v. Rockcoons (3:17-cr-03690), the defendant committed this offence through peer-to-peer bitcoin trading:

Rockcoons advertised his Bitcoin exchange services on the website LocalBitcoins.com. In 2015, HSI identified Rockcoons as the most prolific San Diego-based seller. In April 2016, the defendant’s LocalBitcoins.com profile showed that he continued to advertise as a trader and seller of Bitcoin in San Diego, with his profile reflecting that he had engaged in more than 500 transactions. As of October 2017, the defendant’s profile indicated that he conducted more than 1,000 bitcoin trades with more than 644 people. Rockcoons received a commission of as much as 36 percent per transaction.

On the other side of the Atlantic, the law in the United Kingdom is explained in Vladimir Consulting Ltd v Financial Conduct Authority [2022] UKUT 168 (TCC). VCL had been trading on LocalBitcoins.com since 2017, but from 2020, was required to become licensed as a "cryptoasset exchange provider" under the Money Laundering and Terrorist Financing (Amendment) Regulations 2019. VCL was refused a licence because it had consistently failed to comply with requirements of the money laundering regulations. VCL challenged this decision in the Upper Tribunal, which analysed the applicable rules and confirmed the Financial Conduct Authority's decision.

Answer 2

The short Answer is yes, of course; why might it not be? Isn't the suggestion that it might not be, to deny the nature of laundering?

What you suggest is more than possible; it prolly happens all over the world, every day.

The main barriers are of scale, not principle.

Half the reason it’s called ‘money laundering’ is that size aside, a literal laundromat would be the perfect vehicle… unless the tax-people are staking the place out, how can they know which machine was used on any day by a single customer, or 100?

That no individual can really run a 24/7 laundromat alone, or that even 100 machines can’t move much money are problems of detail, not theory… and they’re largely why real money laundering takes place in places taking far more cash, such as bookies.

The advantage banks or the like have over individuals is purely numbers: numbers of customers, of staff and and of procedures… ie, numbers of rocks under which to hide their nefarious doings.

The laundering process cares only that black or dirty money comes in and white or clean goes out… preferably with no grey stages in between, because each means more susceptibility to scrutiny.

Here’s a big pile of cash that I took in from un-named customers and you, Mssrs Revenue, aren’t going to get a look at it? Oops!

Here’s a big pile of cash that I took in from any 947 un-named customers and you, Mssrs Revenue, are clearly entitled to whatever %? Yeah, why not?