Tracing cash in the underground economy

Tracing cash in the underground economy

Summary: They can't trace cash. Right? Wrong - and it's off the shelf IT making it possible.

TOPICS: Banking
As just about everybody knows paper currency is printed somewhere and distributed through some chain that typical ends with the new bills going from an ATM, bank teller, or retailer into the hands of an individual.

What you probably know but haven't put together in context is that the combination of automated bank scanners with simple web style OLTP means it's easy to track the path each bill takes as it leaves and enters the banking system. Think in terms of google's buzz maps or any of the other internet connectivity maps you've seen and you'll get the idea: a particular bill is first issued to Joe at this ATM and time, gets deposited by Jane at this bank and time, gets re-issued to Dick at this place and time, gets re-deposited etc and so on.

What you may not know, however, is that it's possible to go beyond that to look at where the cash goes between issuance and re-deposit.

If, for example, you focus tracking on bills moving in and out of banks in a particular region, and then further limit your scope by looking only at issuance to people thought to have drug connections and deposits from retailers and those same individuals, you will typically create a thin map that enters a kind of steady state after perhaps eight months to a year.

To improve on that map you sample bills to test for contaminants - and if you find that bills released to Joe tend to have more cocaine when redeposited by Jane's Casino and Bar; well then you know where to look, don't you?

This seems reasonable, unobstrusive, and even laudable in a drug enforcement context - but it's been possible for some years now to go well beyond this simply by seeding some bills with markers that transfer first to the person handling them and then to other bills that person handles.

So if your friendly neighbourhood VAT enforcers arrange for Joe to get some contaminated bills and Joe uses some of the cash to pay Dick for some home improvement work, Dick handles it along with the cash he got from Harry, and some of it later appears in deposits from Sally, Home Depot, and Superfoods - then they'll eventually be able to build up a a fairly detailed map of the cash economy.

That map will have holes in it - but if they grab up some of the players and talk them, they'll get most of those filled in.

You have to be paranoid not to think this all good stuff - it is, after all, a simple combination of high school science with off the shelf IT and analysis gear deployed in the interest of law enforcement - but although I personally favor stocking and advancing nuclear weapons too, this is one of those times when we should ask ourselves, as the IT guys who make all this stuff possible, Dr. Oppenheimer's most often misquoted question: just what horrors have we let loose on the world?

Topic: Banking

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  • paper dollars?

    That is an oversimplified picture of the movement of 'money' in the underground economy - perhaps appropriate for the US but elsewhere money is 'transferred/converted' and the physical cash seldom moves anywhere...add credit card, atm, western union style transfers, mail (yes it does work) and a host of other securities etc etc, makes for the implementation or development of an effective mapping of money flow nothing less than impossible. Any block on moving money around can and will be circumvented. Better on catching it (the crime) at the source.
  • Not paranoid but...

    "You have to be paranoid not to think this all good stuff - it is, after all, a simple combination of high school science with off the shelf IT and analysis gear deployed in the interest of law enforcement..."

    Or is it "Trust me I'm from the Big Government and we are here to watch over you..."
  • RE: Tracing cash in the underground economy

    I am confident that a worldwide and progressive natality rates contraction is the answer to many problems. Included the GOP...
    About the rest Larry Ellison said it straight years ago, if I remember well was: "You have (or ain't got) no privacy anyway. Get over it".
  • A simpler solution

    Given that the concept you outlined seems completely against your libertarianism, can I suggest a simpler solution.

    Do away with cash. I don't know how you pay for stuff from the museum, but modern people use plastic or the Web for a significant part of their purchases.

    Time to issue everyone with a card or get some serious biometrics functioning for identity services.

    Then the government (oooooo scary) can track money anywhere.

    So all the tax cheats, black market economy and the funny money people (sometimes called advisers and stockbrokers) will be caught - oh and the other criminals like drug and slave traders.

    Sound great Rudy, when does this nanny-state, proto-socialist regime start?

    The joke is, I think it's a good idea ;-)
  • Absolute fantasy

    I have seen for decades that people in the computer industry routinely make the ridiculous leap that just because someone can conceive of something someone else is actually doing it.

    I'm a U.S. lawyer and when I first got into law I was interested in getting into tax, so I studied the tax system a lot more than the average person. I also have a pretty good background in tech--I worked as an electronic tech for a decade and did database programming for several years.

    The general public thinks that the IRS compares tax returns year against year. They think various state and federal taxing agencies routinely exchange data. That's total baloney.

    My sister worked for the IRS as an AUDITOR for a number of years. The basic rule is that only one person can deduct a person as a dependent. She said IRS auditors routinely see where Mr. Smith files his return Married Filing Separately and lists Baby Smith as a dependent. Mrs. Smith ALSO files Married Filing Separately and ALSO takes off Baby Smith.

    You would think they would be smart enough to realize that one should file early (e.g., mid-February) and the other at the deadline. No--that would be to bright. She said they'll get a stack of returns, process Mr. Smith's, and then maybe 10 returns later see Mrs. Smith's! When she told her supervisor, the attitude was, "Are you in ENFORCEMENT? It's not your problem! Don't worry about it!"

    Once they're told that three or four times, they stop reporting it.

    Even if the tech is theoretically possible, it doesn't face the fact that the various agencies jealously guard their own turf and don't want somebody else's problem dumped on THEM. It also doesn't face the fact that government agencies routinely pay near market-bottom wages, which means the majority of the people who do the run-of-the-mill work have well-below-average skills and poor training. And they usually are massively overloaded with far more work then they realistically can handle. So inter-agency cooperation between village, town, city, county, state and national governments, police forces, etc., just isn't going to happen.
    • Agree a lot, but

      I accept the picture you give - I don't want to argue that there isn't a lot of inefficiency etc. in big gvernment. But is your picture fully complete?

      Collecting tax is going to become a lot more important - all those cities and counties etc. facing bankruptcy

      Not everyone at every agency is low paid and undertrained, some are able and motivated.

      "Where there's a will there's a way". The article shows a method for tracing more suspects, and chasing more tax.

      Thus, respectfully, Paul's fantasy is less than absolute.
    • The C-average government

      is completely incapable of being efficient - much less at keeping conspiracies a secret. My sister-in-law works for the IRS and they seem more interested in providing "consultants" (buddies) with high-salary positions - than investigating fraud. In fact this is how government works - instead of working together (conspiracy) to screw the public, they individually defraud whatever they can for themselves. There are NO (successful) governmental conspiracies!
      Roger Ramjet
  • RE: Test post

    does this work?

    Obviously not.
    Roger Ramjet
  • RE: Tracing cash in the underground economy

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