As most of you know, Anti-Money Laundering suggests a number of procedures, laws and regulations that are implemented to prevent the practice of generating income through illegal actions and criminal behaviour. Targeting businesses providing financial services is an ongoing trend in the criminal world, and often occurs without the company’s knowledge or even suspicion.
Global Anti-Money Laundering Survey made by KPMG International in 2014 states that Western Europe (27%), North America (26%) and the Middle East together with Africa (18%) are the regions responsible for the majority of money laundering operations. According to the Criminal Investigation Management Information System of the IRS, in 2013 in the United States 1,596 money laundering investigations were initiated and 829 individuals were sentenced to incarceration on the average to serve 68 months. United Nations Office on Drug and Crime estimates that the annual amount of money laundered globally varies from 2 to 5% of the global GDP, and is equivalent to $800 billion–$2 trillion. However, every year governmental regulations and law enforcement agencies around the world are able to expose and pull back only $170 million, which makes less than 1 percent.
Potentially, Bitcoin, the leading digital currency with daily transactions equivalent to $20 – 40 million, can empower any user — legal or criminal — to transfer money instantaneously at a very small cost with few barriers to entry, virtual anonymity and no public imprint. With this in mind, anonymity remains one of the Bitcoin’s most appealing features that might possess as a harmful effect on AML policing. The impossibility of linking an identifiable user to a Bitcoin address creates significant complexity for the governmental forces to track the movements of laundered funds.
In many countries where governments are trying to implement AML policies, the image of the Bitcoin remains polarised, and the United States remains one of the most vivid example of the controversy. Namely, the state officials often refer to the threats and danger of the illegal marketplace, the Silk Road. Although the US federal and state regulation schemes have made numerous attempts to paralyse the Bitcoin community and obstruct the trading activity for certain users, this cryptocurrency falls out of most legal definitions and categories that suggest sanctions or prosecution.
Currently, the Bitcoin community is undergoing certain changes with regard to the Anti-Money Laundering schemes. Although, cryptocurrency exchanges do not fall in the scope of the AML regulations in many countries, the senior management of some crypto-exchanges have taken the initiative of implementing systems and procedures corresponding to the AML legislation. Bitstamp is a good example of such pro-activeness and it obviously demonstrates strong desire to facilitate law-enforcement agencies in stopping money laundering in the virtual world.
Due to the complexity and decentralised nature of the Bitcoin and the significant number of participants — senders, receivers (possibly launderers), processors (mining and trading platforms), Bitcoin development teams, currency exchanges — a single AML approach does not exist. Some attempts to prevent money laundering may incorporate registering as Money Services Businesses (MSBs), initiating know your customer (KYC) procedures and identity verification, reporting suspicious activity internally and to the relevant law enforcement authorities, ensuring staff competence, etc.
As the interest towards cryptocurrencies and the Bitcoin’s share of the overall financial transactions continues to grow, the risk increases and soon would require more profound actions. On the other hand, Bitcoin specialists are concerned that the attempts to take control the crypto-world could stifle innovation and result in a global crypto-collapse. Maybe, rather than amplifying and strengthening regulation and struggling to foresee the next generation of troublemaking innovations, it would be wiser to grasp the essence of the new technologies and enforce the links between the public and the existing legal schemes. Summing up, continuous professional development remains vital to maintain Bitcoin’s progress and popularity.