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Bitcoin and The Anti-Money Laundering




Bitcoin and Anti-Money Laundering

Bitcoin is the most famous cryptocurrency in the virtual currency market. In Bitcoin, transactions take place without intermediaries, ie without banks, so it is a decentralized cryptocurrency that uses peer-to-peer technology for instant payments between individuals or companies. Bitcoin can be bought and used as a currency in the virtual world but can also be exchanged in traditional currencies and can also be a type of investment.

As you well know, the price of bitcoin has skyrocketed to thousands of dollars in recent years. Small businesses may like it because there are no credit card fees. Some people buy bitcoin only as an investment because it will increase in value.

Although many countries have accepted Bitcoin as an online payment method, Bitcoin is an attractive option for money laundering primarily because money laundering using cryptocurrencies is easier than other methods. In movies, criminals often transport illicit money across borders using duffel bags or suitcases to evade authorities; however, that’s not realistic in real life.

Bitcoin and anti money-laudering

With the advent of the virtual currency Bitcoin, this is possible, but without loading the money into suitcases to can carry it. This is easily done virtually through Bitcoin transactions.

Bitcoins can be used to buy goods anonymously. In addition, international payments through this means are easy and cheap, because bitcoins are not tied to any country and are not subject to any regulations.

Does such legislation need to be enacted?

As cryptocurrency transactions take place without intermediaries, ie without banks, this may make it easier for fraudsters to hide the source of their criminal proceeds and become increasingly the preferred currency of cybercriminals, and the purchase of illicit goods using Bitcoin as a method. of payment.

The fraudster who uses Bitcoin for fraudulent transactions can use both Bitcoin shuffling services and Bitcoin exchanges. Thus, Bitcoin blending services allow fraudsters to hide the origin of their illegal income, dissociating them from criminal activities to collect securely using a Bitcoin exchange, which is designed to convert Bitcoins into money spent anonymously.

In addition, many virtual currencies are volatile and most likely pose a risk to financial institutions and may be some of the riskiest assets a bank could hold. Therefore, regulators are trying to unpack and deal with these “virtual currencies”.

A regulator describes cryptocurrencies as “a digital representation of value that functions as a medium of exchange, a unit of account and/or a store of value”, other than a representation of the US dollar or foreign currency.

Cryptocurrency is a digital asset

Cryptocurrency is a digital asset that uses cryptography to secure digitally recorded transactions on a distributed registry, such as a blockchain, in units commonly referred to as coins or tokens. And yet, despite the fact that online transactions with cryptocurrencies are the most secure, there is still the issue of fraud, illicit transactions, and money laundering.

As a result, cryptocurrencies are increasingly being used to launder money. Most of the Bitcoin coins collected by hackers end up in private wallets.

Criminals have become increasingly sophisticated in the use of cryptocurrencies in money laundering, with hundreds of millions of dollars going through electronic wallets in 2019 that allow users to hide their traces, according to a study by the digital currency research firm.

About 15% of bitcoin’s illicit earnings went through private electronic wallets in 2020, making it difficult to track cryptocurrency transactions, and growth, according to a study by Elliptic, according to Reuters.

AMLA and Bitcoin

While cryptocurrency transactions take place under a pseudonym, they are still registered in the blockchain, which makes it easier to keep track of funds. But private wallets, which are of many types, combine, mix and anonymize cryptocurrency transactions, complicating the pursuit of money.

Most of the $ 120,000 bitcoin money raised through a hacker operation on Twitter went into a private wallet, as did some of the $ 280 million cryptocurrencies stolen in September from the Asian platform. KuCoin.

On January 1, 2021, as part of overriding President Trump’s veto of a defense spending bill, Congress enacted the Anti-Money Laundering Act (“AMLA”), which amended the Bank Secrecy Act (BSA) for the first time since 2001.

A vital purpose of the AMLA

The AMLA, like other regulatory initiatives, comes from several prior legislative attempts to reform various specific aspects of the Bank Secrecy Act (“BSA”), including the Corporate Transparency Act of 2019, the Illicit CASH Act of 2020, and the STIFLE Act of 2020.

A vital purpose of the AMLA is to expand coordination and information sharing among administering agencies, examining agencies, law enforcement agencies, national security agencies, the intelligence community, and financial institutions.

On January 1, 2021, as part of overriding President Trump’s veto of a defense spending bill, Congress enacted the Anti-Money Laundering Act (“AMLA”), which amended the Bank Secrecy Act (BSA) for the first time since 2001.

One notable reform of the AMLA is that it revised the BSA to include cryptocurrency and other digital assets within its scope. However, noticeable absent from the AMLA are the terms “bitcoin, crypto business, virtual assets, digital currency.”

Instead, the AMLA uses the language contained in existing guidance from FinCEN regarding “value that substitutes for currency.”

However, many countries take decisions that require that entities involved in cryptocurrency transactions be required to identify suspicious transactions and report them if they may raise issues from the perspective of anti-money laundering legislation.


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