This study aims to analyze the concept of cryptocurrency and gaining a legal understanding in different jurisdictions especially in the US. The study will also seek to establish whether cryptocurrencies can be used to facilitate money laundering, and if they facilitate money laundering; finally, the study will seek to establish how well to address these risks.
Background of the study
Digital currencies, especially cryptocurrencies, permit financial transactions of all sizes to be executed and completed within a click of a button, often without the interaction of any financial institution or government agency to facilitate the transaction (Clegg et al.). The digital currency model depends on a publicly shared ledger kept by all gadgets in the system (Inery). According to Choudhri, computers ensure it is free from fraud and does not indicate individuals’ names (2). It replaces the names with unique public codes, ensuring that the transaction remains anonymous, a process known as pseudonymous.
Other researchers have concluded due to a limited understanding of digital currencies, the anonymity provided to the users can be seen as the ideal chance to launder money (Fabian et al. 2). Therefore, the objective of this project is to provide an in-depth understanding, especially on the aspects relating to regulations.
Digital currencies have had a loud existence since the introduction of Bitcoin in the year 2008 (Amrani and Ali). However, Bitcoin has had its fair share of dramatic changes in value due to its association with notorious scandals, for instance, shut down of Mt Gox exchange and the way it was used as a preferred method of payment for ransomware. As cryptocurrencies continue growing worldwide, their awareness, use, and regulation remain limited and wanting in the United States.
The study is aimed at answering the following research questions;
- What are the opportunities to implement anti money laundering regulations for cryptocurrencies?
- What are the approaches of the United States in addressing money laundering challenges posed by cryptocurrency?
Importance of the study
This study will try to critique the approaches used by the USA to address the aspect of money laundering activities and the risks posed by digital currencies. Due to limited awareness of cryptocurrencies and their role in facilitating money laundering, I developed an interest in diving into this area, intending to find a solution for the current challenges. In the future, I intend to be at the forefront of fighting financial crimes, and this project will provide a practical experience. This project aims to mitigate or alleviate some of these challenges (Choudhri 2). From what I have encountered, this project seems to be a perfect solution for money laundering since it entails cooperation and information sharing between banks in different geographical regions and different countries. Financial crime is a subject that is widely discussed by professionals, academicians, and the corporate world in general. The program has a comprehensive background on money laundering, the definition, and various methods of how it is perpetrated by criminals. The learning materials cover other types of financial crimes perpetrated by individuals or companies to further a certain objective. The case offers a practical solution to practical challenges investigators face in detecting, preventing, and responding to money laundering instances. From the project, I expect to have a deeper understanding of issues relating to money laundering and cryptocurrencies obtained through an interview with whistleblowers and professional experts. Generally, this project is aimed at curbing money laundering activities and enhancing risk assessment across countries. Therefore, at the completion of this project, I expect banks to have comprehensive continuous customer screening exercises for assessing risks and increased detection of money laundering activities. The best way to reduce money laundering activities is to increase the perception of detection in financial institutions through continuous risk assessment.
The study will use journal articles and commentaries as secondary legal sources of information. The commentaries will provide some clarifications required from the commenters and the interpretation of the law while highlighting issues of concern (Benson 110). Using both primary and secondary sources of information will provide a descriptive analysis of the law. This study will use secondary sources, as these sources are seen as not limiting the description of the law but criticizing the effectiveness of the law (Association of Certified Fraud Examiners). In addition, secondary sources will not be limited to legal journal articles only but also non-legal sources.
The data for this study will always be qualitative, as the research questions for this study center around the status and treatment of digital currencies, which is hardly found in quantitative data. If permitted, in some instances, the study will incorporate statistical data, but this will be applied to limited situations only. Both qualitative and quantitative approaches are necessary to study the existing interconnection between money laundering and cryptocurrencies. It might not be easy to prove the existence of the link between money laundering and cryptocurrency.
Amrani, Hanafi and Mahrus Ali. “A New Criminal Jurisdiction to Combat Cross-border Money Laundering.” Journal of Money Laundering Control (2021). Web.
Association of Certified Fraud Examiners. Fraud Examiners Manual. ACFE, 2021.
Benson, Katie. “Money Laundering, Anti Money Laundering and the Legal Profession.” The Palgrave Handbook of Criminal and Terrorism Financing Law. (2018): 109-133. Web.
Choudhri, Yousef. Report: Money Laundering via Cryptocurrencies up 30% in 2021.
Clegg, Pamela, et al. Cryptocurrency Crime and Anti-Money Laundering Report, August 2021. Web.
Fabian, Benjamin, Ermakova Tatiana and Sander Ulrike. “Anonymity in Bitcoin? – The Users’ Perspective.” ICIS 2016 Proceedings (2016). Web.
Inery. The role of shared ledger in blockchain technology. Web.
Tiwari, Milind, Adrian Gepp and Kuldeep Kumar. “A Review Of Money Laundering Literature: The State Of Research In Key Areas.” Pacific Accounting review (2020). Web.