According to an article in UPI, the three principal executives of E-Gold Limited have pleaded guilty in a case brought against them by the Department of Justice.

The three executives in question—Dr. Douglas Jackson, Principal Director of E-Gold and CEO of Gold & Silver Reserve Incorporated, and two of his Senior Directors (Barry Downey and Reid Jackson)—pleaded guilty to conspiring to engage in money laundering and operating an unlicensed money transmitting business.

The corporations involved (E-Gold and Silver Reserve) face a fine of $3.7 million and have already agreed to pay a judgment of $1.75 million. Jackson faces up to 20 years in prison and a fine of $500,000 and Downey and Reid face a maximum of 5 years in prison and a $25,000 fine.

Anonymous means of transmitting money are favorite ways for criminals to conduct illegal business and scam people. In the current case, the Department of Justice charged that the criminal activity included investment scams, credit card fraud, identity theft, and even child exploitation.

They did mention that E-Gold assigned employees to monitor accounts for fraud, but the employees allegedly didn't have any previous experience in dealing with illegal activity.

Another article in PC World about this story pointed to a blog post, where Douglas Jackson announced some new security procedures to verify their customers and prevent fraud. No new accounts are being opened until they can find out an "interim means" of verifying who their customers actually are. Also mentioned in the blog post was that a systems design flaw made it difficult for them to get rid of a user, effectively. The logic behind this seems to be that if one account was blocked, another one would be opened. Please note that with all kinds of free e-mail accounts—which was the only requirement to open an E-Gold account—it wouldn't be very hard for a criminal to simply move on to another e-mail address if they got caught committing fraud.

It will be interesting to see how they plan to verify customers over the Internet.

In 2006, BusinessWorld reported that the ShadowCrew—a 4,000-strong credit card fraud and identity theft ring operating in carder forums on the Internet—used E-Gold to launder some of their proceeds.

Having worked around financial crimes for a number of years, I noticed they seemed to be on the rise. One reason for this is technology, which grows more rapidly than laws designed to protect us from it. Although the blog is a resource to educate people on identity theft, it also strives to educate the common person on the rapidly growing problem of crimes enabled (made too easy) by technology and the Internet.

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