home Export Controls The Deep Web, Export Controls, and Economic Sanctions

The Deep Web, Export Controls, and Economic Sanctions

In order to better advise clients on compliance with U.S. export controls and economic sanctions, I’ve been mining, with the help of some younger and more tech savvy team, an interesting region of the cyber world called deep web.

I was going to publish listings and photos of a few of the more choice items we found. I decided against it. Best leave to leave it mostly your imagination; however, there are references in this post to a few of the more interesting products and services that we found.

There is really no limit to what you can legally buy on the web. Depending on your personal views on the extent of existing government regulation, the great majority of commerce moves without much government policing.  Then there is that “other” web, the deep web. Some call it the dark web. That’s too spooky. Call it what you will, experts say to stay out of it.

The deep web seems like one mighty complex digital bazaar. Your imagination, as well as your technical ability to reach and interact with the dark web, are the two main skills you’ll need to navigate it. While there is a great deal of free content and information on just about anything, there is a lot for sale that you will not find on Amazon.com and other online retailers. A lot of it is illegal. If caught buying it, such transactions could land you in prison.

False passport and identity cards. Counterfeit currencies. Weapons of all sorts. Hacking services. Consumer goods. Need to boost your blog or Facebook traffic stats? Purchase some. Heavily encrypted computer equipment and software programs. Artwork, many genres. A lot of narcotics and prescription drugs. Cuban cigars, of course. There are even some folks posing as professional assassins.

Of all the items I was shown, what we really caught my attention was the currency used in a lot of these transactions, BitcoinsBitcoins are not coins at all. It is a virtual currency and, unlike your greenbacks, it is not backed by any central bank or government, nor is it taxed or regulated. China recently banned them from government exchanges. I expect more regulation is coming from just about every major economy in the world. Why? Part of it is that governments and central banks have been left out and are not making any money from these transactions.

Ironically, the deep web but more so Bitcoins, may be the closest thing to free-markets that exist these days. Devoid of taxation and other government regulation, transactions usually involve just the buyer and the seller. No taxes. No middlemen, mostly. Meddling lawyers and politicians? Not may, for now. There are a lot of scams, however, it not as big or pressing of an as the government says it is.

Yet before you run out and try to purchase Bitcoins or buy something on the dark web, remember that you are stepping in to a legal black hole. Many of operators of these dark web sites are not seasoned in the law. And there are things out there that are illegal in the bricks and mortal world. Then there is the lack of legal information about what you’re doing. Consider this message by a popular Bitcoin wallet operator (emphasis added):

We’re a simple Bitcoin wallet and Escrow service. We do not know who our clients are, and we also doesn’t have any information about what types of goods our clients trading with. We’re just offering them a simple escrow service, with the “less you know, the better for you” mentality.

There are a lot of legally insignificant and wrong disclaimers out there; this being one of them. One area of legitimate concern with the dark web and Bitcoins involve export controls, economic sanctions, and money laundering. Whether these dark web website operators like it or not, facilitating transactions for terrorists, drug dealers, or money laundering is a crime. So is selling items controlled for export by the State Department and Commerce Department. There is no “less you know, the better for you” defense.

The good news is that even in the deep web there is some respect for these bricks and mortar rules. We found a few sites that claim that they refuse to sell items controlled for export or listed on the USML or the Commerce Control List. Whether that is true or not, who knows. It is a good idea for these folks to come up with a solution to deal with these real world issues, especially in the Bitcoin market.

When it comes to Bitcoins, Congress does not really understand it, nor does the executive branch, at least not yet. I’m certain if they start tinkering with it at this point, it will ruin a potentially lucrative source of revenue and a very efficient way of doing business. Bitcoin operators also need to step up and address the security questions raised by un-policed currency flows, maybe set up an auto-policing policy. Impossible? May be, but they should try make a go of it. If they do not, Uncle Sam is coming with the regulatory hatchet.  And it is coming sooner than you think.

 

 

 

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