By Emily Flitter

NEW YORK (Reuters) - Three months after a
team of international law enforcement
officials raided the digital currency firm
Liberty Reserve, cyber experts say criminals
are increasingly turning to another online
currency called Perfect Money.

Idan Aharoni, the head of cyber intelligence at
EMC Corp's RSA security division, said that
some online scam artists and thieves are
using Perfect Money's digital currency to
launder money and conceal profits in much
the same way they allegedly did with Liberty
Reserve's currency.

On behalf of their clients, which include major
financial institutions, Aharoni and his team
monitor Internet forums that hackers use to
sell stolen credit card information. After
Liberty Reserve was taken down in May,
activity on these forums initially slowed and
then picked up again, with some hackers
saying they would accept Perfect Money for
payments, he said.

"We expected a large migration to another e-
currency, and that has happened," said
Aharoni, whose RSA unit sells security
services to 30,000 corporations and
government agencies, including the popular
Secure ID tokens that protect access to
computer systems.

Perfect Money, which has been in operation
since at least 2007, could not be reached for
comment. A request submitted through its
website failed to elicit a response, and the
company does not list a phone number for its
offices or identify any management or
employees.

Reuters could not determine who owns Perfect
Money. Its website says it is based in
Panama, but the Panamanian government
said in a statement in January that Perfect
Money does not have offices in the country
and has not been issued any licenses by
securities regulators to operate there.

Law enforcement agencies in the United States
and around the world have expressed concerns
that digital currencies, which are not tied to
any particular government, are emerging as
vehicles for hackers, cyber criminals and drug
dealers to launder money.

Currencies like Perfect Money are governed by
a single company or entity that administers
the transfer of units between customers. Once
a user obtains an account, he or she can
transfer Perfect Money units to other users
inside the system. These units can be
redeemed for cash or bank credit by third-
party exchange services, which are separate
businesses not under control of the currency's
operator.

Online vendors of all kinds can choose to
accept digital currencies like Perfect Money as
payment for their goods and services. But the
feature that makes some digital currencies
ideal for money laundering is anonymity. User
identities can be kept hidden, both from each
other and, with varying degrees of effort, from
the currency operator itself through false
names and locations.

U.S. prosecutors in May accused Liberty
Reserve's Costa Rica-based operations of
laundering some $6 billion in illicit profits
over about seven years. Authorities arrested
Liberty Reserve's principals and shuttered the
firm.

Seth Ginsberg, a lawyer for former Liberty
Reserve principal Mark Marmilev, who has
pleaded not guilty to money laundering
charges, said it is not fair for the authorities
to punish his client because some customers
use Liberty Reserve to hide their illicit
activities.

"It's my understanding that Liberty Reserve
was designed to compete with mainstream
financial providers. The fact that it may have
been misused by various customers should
not reflect on the company," said Ginsburg.
"There is a legitimate need for alternatives to
the mainstream financial market, so the fact
that there's another company out there filling
the void left by Liberty Reserve is not
surprising."

A spokesman for the U.S. Secret Service, the
U.S. law enforcement agency that focuses
most closely on cyber attacks on financial
institutions, declined to comment.

VIRTUAL MONEY
Venture capitalists and free market advocates
have voiced strong support for online
currencies such as Bitcoin, saying they are
alternatives to conventional monetary systems
that can burden the poorest people in the
world with transaction fees.

The more due diligence that currency
operators perform on their customers, mostly
by verifying the personal information they
submit when signing up for an account, the
harder it is for criminals to use them to
launder money.

According to its website, Perfect Money
performs an identity check on each customer
to try to identify the computer used to enter
the account. It said the company collects
information about each customer's online
activity and monitors transactions for signs of
suspicious activity.

Perfect Money is not the only payment system
that cyber criminals use, experts said. Stefan
Savage, a computer science professor at the
University of California, said he had observed
several different currencies, including Bitcoin,
being used by people selling stolen credit
cards in Internet hacker forums.

"Perfect Money is certainly one that comes up
a lot," Savage said. "There are tons of these
payment systems out there."

Patrick Murck, general counsel for The Bitcoin
Foundation, declined to comment. The
Foundation is a non-profit group of software
developers and entrepreneurs that helps
promote the use of Bitcoin as a currency.
Bitcoin exists through an open-source
software program and is not managed by any
one company. Its supply is controlled through
a computer algorithm.

A Reuters review of postings on Internet
message boards for digital currencies found
hackers offering to sell stolen credit cards are
open about accepting Perfect Money as
payment.

"If it was expected at first that the Liberty
Reserve takedown would have a long-lasting,
substantial effect on the level of fraud, that's
not true," Aharoni said.

Tyler Moore, an assistant professor at
Southern Methodist University, said a 2011
study he conducted with two other academics
found that Liberty Reserve and Perfect Money
were two of the most widely accepted digital
currencies for online Ponzi schemes. Of 1,000
websites that linked to Perfect Money, they
found 70 percent that were Ponzi schemes.

"Perfect Money seems to be a very popular
choice among this subculture," Moore said.
(Reporting By Emily Flitter; Editing by
Matthew Goldstein, Tiffany Wu and Leslie
Gevirtz)

http://mobile.reuters.com/article/idUSBRE9780GM20130809