Online currencies such as Bitcoins are attractive to criminals because they offer additional “layering” in the money laundering cycle and governments around the world should not underestimate the depth and breadth of bigger money laundering and funding of terrorism threats.
Criminals can exchange one digital currency for another before converting them into real-world currency. Such activity leaves little or no trail for investigators in pursuit of Bitcoin money launderers.
The use and movement of digital currencies such as Bitcoin is a global, and decidedly not a local, issue. That said, the regulation and oversight of Bitcoin must start at the national government level.
Recognition that digital currency movements should be monitored, regulated and controlled, first at the national level, then on a global basis, is the first, best and must do, for governments worldwide.
Implementing robust AML systems and controls that promote transparency and address the issues associated with anonymity is necessary and these must remain fit for purpose to deal with digital currencies like Bitcoin.
The US requirements can be used as a best practice here. Virtual currency exchangers in the U.S. are required to know their customers, monitor for suspicious transactions, and file suspicious transaction reports (STRs), where applicable.
This is no small task as customer identification for virtual currency exchanges poses a unique challenge since, by its nature, the ecosystem wants to maintain some degree of anonymity.
And while this increases the cost of compliance, this is the only way Bitcoin and other virtual currencies to gain broader acceptance.
A large number of Bitcoin businesses have come to this realisation. Even in countries such as the UK where AML/CTF regulations are not required, many exchanges already have such policies in place in order to build trust and attract customers.
At the same time, Bitcoin organisations should maintain a strong culture of business ethics and compliance as part of their corporate values.
The more such a tone is developed and practised the better chance that fraud risks will be reduced.
By Craig Richardson - CEO, Wynyard Group