From: Duncan Frissell <frissell@panix.com>
Date: Mon, 28 Feb 94 10:19:40 PST
To: CYPHERPUNKS@toad.com
Subject: Re: Blacknet worries
Message-ID: <199402281818.AA14703@panix.com>
MIME-Version: 1.0
Content-Type: text/plain



D.>With all due respect....the U.S Government has PLENTY
D.>of tools to go after those deemed to be violators of
D.>various rules and regs...with or without Blacknet,
D.>with or without encryption.

D.>What other tools can be used, well...
D.>
D.>1.  Imputed income. 

Try to do this some time.  It is very expensive to 'net worth' someone.  
The CIA didn't manage in their recent case.  There are 114 million 
'taxpayers' in the Naked City..


D.>2.  Criminal conspiracy.  Elements are
D.>   a.  two or more people
D.>   b.  a preparatory act

If they can decrypt your conspiratorial communication.  Conspiracy charges 
are rare in the absence of an overt act.  

D.>3.  CCE (Continuing Criminal Enterprise).

If they can find out something is happening and connect disparate 
encrypted activities to you.

D.>4.  IRS-1040, Schedule B, Part III, Foreign Accounts and Trusts.
D.>    Except for one relatively minor loophole, if you fail to
D.>    report a foreign bank account, it is considered prima
D.>    facie evidence of tax fraud.  Sound like a really bad
D.>    day in the making?

Prosecutions are rare and are dependent on linking you to the accounts, 
proving the balance of the accounts, and in any case only apply to US 
citizens/residents.

D.>5.  If you have more than $10,000 in US Dollar value in
D.>    an offshore account, you are required to fill out a
D.>    special form for the IRS giving your account numbers;
D.>    unless you want to declare that you have more than
D.>    20 such accounts, aggregating to more than $10,000.

Likewise.

D.>6.  RICO.  They got Mike Miliken using this...indeed, Barron's
D.>    magazine did an interesting report on RICO, with the
D.>    conclusion that a determined Federal Prosecutor could
D.>    use the law to convict a ham sandwich.

Mike was not convicted under RICO.  He plead to two counts of stock 
parking and something else.

D.>7.  Did you know that Federal prosecutors have a better than
D.>    90% conviction rate?

In the several thousand annual prosecutions out of a US population of 256 
million.

D.>8.  HOW does one spend "magic money"?  If you have bunches of
D.>    cash offshore, and bring it in, records are created.  If
D.>    you buy something, potential witnesses are created.  Can
D.>    you really expect that the clerk in wire transfer at XYZ
D.>    bank (who makes $6.50/hr) won't tip off someone when you
D.>    wire in the $20,000 to buy ...whatever?

Since much of future commerce will be online anyway, why not just spend it 
for telecoms time, software, living expenses in a VR environment, other 
non-physical services.  Use it overseas.  Expat yourself (see the current 
issue of Forbes for an article on expatriation as the ultimate tax 
shelter.  Or just get cash from your local ATM.

D.>9.. Spies, criminals, and others often get in trouble due to their
D.>    own and others' lack of discretion.  Can we really expect
D.>    users of a hypothetical blacknet would never drink too much,
D.>    never wish to impress someone, never trust someone unwisely?

Lost in the noise with millions of 'violators' extant.

D.>I'm all for more of it;  but, I really don't think it will
D.>be anything more than a minor inconvenience for law enforcement
D.>and prosecutors if people engage in wholesale criminal acts.

Studies show that where the perceived risk is low, people are fairly 
willing to violate mere regulations.  Most people can tell the difference 
between murder and tax evasion.  The Common Law recognized this difference 
calling one malum in se (wrong in itself) and the other malum prohibitum 
(wrong because it has been prohibited).

In any case, since US tax laws don't apply to non resident non citizens of 
the US but these sorts of people will be able to fully participate in the 
US economy over the nets, either US citizens and residents will have to 
fiddle their regulatory compliance or they will lose out in competition 
with foreigners who can undercut them or do things Americans are 
prohibited from doing.  Sell strong crypto par example.  

DCF

1993 - Perhaps the first year in American history in which the Justice 
Department killed more people than the Defense/War Department.
--- WinQwk 2.0b#1165