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Ask HN: Bitcoin business unexpectedly taking off, help!

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Re: Ask HN: Bitcoin business unexpectedly taking off, help!

#41

Post by mhluongo »

lucaspiller wrote: post #36
TomGullen wrote: post #4

How automated is it? Any parts that could be automated that aren't? That would be step 1 I think. Secondly, don't panic! Thirdly, consider if I sell you my Starbucks card balance and I was evil, could I some how phone Starbucks up and say my card was lost/stolen? What happens in this instance? It's the biggest risk you need to look at from what I can see at first glance. Perhaps test this. Fourthly, is there a differ…

> could I some how phone Starbucks up and say my card was lost/stolen? What happens in this instance? It's the biggest risk you need to look at from what I can see at first glance. Perhaps test this. I lost my Starbucks card and somebody used it. I had auto topup, so they kept using it :) After I reported it, Starbucks replied two days later, cancelled it and transferred the remaining balance. Still I lost about £15…

I'm not accepting registered cards, which changes the fraud vectors quite a bit. No auto-reload, etc.

Re: Ask HN: Bitcoin business unexpectedly taking off, help!

#42

Post by patio11 »

mhluongo wrote: post #29
patio11 wrote: post #15

I would strongly consider not running a money transmitter as a side business. If you do not understand that you are running a money transmitter, I will be happy to elaborate. I would also mention, on the assumption you're not aware of it, that you are offering fairly effective money laundering for credit card thieves at below-market rates for that service, and you can expect heavy dedicated adversarial interest. I ra…

I've been hand-verifying the transactions so far to try to keep abreast of fraud. I've also taken some automated steps (that I'm improving now). I've been reading quite a bit about the money transmitter stuff, but I'd appreciate your take on why this would be categorized.

You should know that being a money transmitter is an exceptionally risky and time-intensive business to be in even if one is not "categorized as" a money transmitter. Even if the government ignores you, criminals will not. You are currently betting that your fraud prevention expertise is better than every criminal's fraud execution expertise. You will likely not win that bet. Do you understand that your adversary here has twenty people who are smarter than you and have years of experience on his payroll? I am not exaggerating in the slightest. Breaking your system wide open will not be his side project. It is his core line of business. You will just be a juicy target of opportunity, to the extent that you have worthwhile volumes. Note that four figures is already worthwhile.

As for the regulatory side of things, I'll pull you the exact citations when I get back from (ironically) a coffee run.

Re: Ask HN: Bitcoin business unexpectedly taking off, help!

#43

Post by rhino369 »

grotm001 wrote: post #23

You can find a lawyer to work for equity on EquityLancer

I won't want to belittle anyone, but payment processing law is really complicated. I doubt you'll find someone with experience willing to take equity.

It's not like making simple LLC membership agreements and employment contracts. This stuff is complex federal regulations.

Re: Ask HN: Bitcoin business unexpectedly taking off, help!

#44

Post by jorganisak »

brd wrote: post #20
patio11 wrote: post #15

I would strongly consider not running a money transmitter as a side business. If you do not understand that you are running a money transmitter, I will be happy to elaborate. I would also mention, on the assumption you're not aware of it, that you are offering fairly effective money laundering for credit card thieves at below-market rates for that service, and you can expect heavy dedicated adversarial interest. I ra…

This is exactly why I am horrified by the number of bitcoin companies cropping up. I can only assume many of them have no idea what they are potentially exposing themselves to from a legal perspective.

So goes disruption.

Re: Ask HN: Bitcoin business unexpectedly taking off, help!

#46

Post by ultramancool »

brd wrote: post #20
patio11 wrote: post #15

I would strongly consider not running a money transmitter as a side business. If you do not understand that you are running a money transmitter, I will be happy to elaborate. I would also mention, on the assumption you're not aware of it, that you are offering fairly effective money laundering for credit card thieves at below-market rates for that service, and you can expect heavy dedicated adversarial interest. I ra…

This is exactly why I am horrified by the number of bitcoin companies cropping up. I can only assume many of them have no idea what they are potentially exposing themselves to from a legal perspective.

For most of them it's no problem, they're just selling their product or service in an additional way.

However, something like this is scary as it's basically one hit easy money laundering. Not a bad idea if you're running the service anonymously. You'll make a good profit for sure. Otherwise there could be substantial risks and it may be better off to shut it down before feds get involved.

Re: Ask HN: Bitcoin business unexpectedly taking off, help!

#47

Post by ozi »

mhluongo wrote: post #37
rasengan wrote: post #14

How are you handling fraud?

Hand-verification right now before payout, though I'm locking it down further now.

Perhaps there's an api you can use to do the heavy lifting like http://dev.maxmind.com/minfraud/ or http://www.subuno.com/developers.html

Re: Ask HN: Bitcoin business unexpectedly taking off, help!

#49

Post by JumpCrisscross »

mhluongo wrote: post #29
patio11 wrote: post #15

I would strongly consider not running a money transmitter as a side business. If you do not understand that you are running a money transmitter, I will be happy to elaborate. I would also mention, on the assumption you're not aware of it, that you are offering fairly effective money laundering for credit card thieves at below-market rates for that service, and you can expect heavy dedicated adversarial interest. I ra…

I've been hand-verifying the transactions so far to try to keep abreast of fraud. I've also taken some automated steps (that I'm improving now). I've been reading quite a bit about the money transmitter stuff, but I'd appreciate your take on why this would be categorized.

Your adversaries have experience making illicit transactions appear benign to trained eyes.

Assume money laundering will happen on your platform. Your priorities are (1) being in compliance with all applicable money transfer laws, e.g. registration and (2) working, within the confines of those laws and industry best practice, to minimise its frequency.

Today, if your service were to be used to launder money I believe you would be looking at asset forfeiture and jail time. That said, I think this business can be run profitably in a compliant way - it just takes planning and some expertise.

Re: Ask HN: Bitcoin business unexpectedly taking off, help!

#50

Post by mhluongo »

patio11 wrote: post #42
mhluongo wrote: post #29

Earlier quoted context omitted.

I've been hand-verifying the transactions so far to try to keep abreast of fraud. I've also taken some automated steps (that I'm improving now). I've been reading quite a bit about the money transmitter stuff, but I'd appreciate your take on why this would be categorized.

You should know that being a money transmitter is an exceptionally risky and time-intensive business to be in even if one is not "categorized as" a money transmitter. Even if the government ignores you, criminals will not. You are currently betting that your fraud prevention expertise is better than every criminal's fraud execution expertise. You will likely not win that bet. Do you understand that your adversary her…

Ha, thanks, I'm looking forward to the docs.

Re: fraud I've definitely been disillusioned that I can handle the tide myself, but OTOH I imagine fraud prevention is a lot like security- make sure the wall is higher than the water. I'll just have to figure out how to do that in a way that's safe, economical, and keeps the core idea behind the service working. It will almost certainly involve hiring people, or cutting off the influx of business down to- say- 5 cards a day.

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