Financial Crime World

Virtual Currencies: The New Frontier in Money Laundering and Its Policy Implications

A new study, “Virtual Money Laundering: Policy Implications of the Proliferation in the Illicit Use of Cryptocurrency,” authored by Christian Leuprecht, Caitlyn Jenkins, and Rhianna Hamilton, sheds light on the growing trend of money laundering using virtual currencies.

Insights into Virtual Currency Money Laundering

The study reveals that virtual currencies like Bitcoin are increasingly being used for money laundering purposes. The authors discovered that Bitcoin is popular among crypto money launderers, while most also use alternative coins. The use of third-party currency exchanges to create illicit funds and conceal the proceeds of crime is a common tactic employed.

  1. Prevalence of Crypto in Money Laundering

    • Bitcoin is popular among crypto money launderers.
    • Alternative coins are also used.

  2. Methods of Money Laundering with Virtual Currencies

    • Crypto is used to create illicit funds through third-party currency exchanges.
    • Proceeds from crime are concealed using virtual currencies (Leuprecht, Jenkins, & Hamilton, 2022).

Understanding the Challenges in Combating Virtual Currency Money Laundering

Law enforcement has made progress in understanding and monitoring popular cryptocurrencies such as Bitcoin. However, alt-coins pose a significant challenge, and the proliferation of crypto money laundering has surpassed the limitations of conventional anti-money laundering (AML) policies and legislation.

  1. Effectiveness of Current AML Policies
    • New regulations for third-party currency exchanges could help.
    • However, these regulations alone may not contain the use of crypto in criminal activity (Leuprecht, Jenkins, & Hamilton, 2022).

The Role of the Study in Understanding Virtual Currencies and their Impact on Money Laundering

The study contributes to the emerging body of literature on the role of technological change, such as virtual currencies, in facilitating the global flow of illicit funds (Leuprecht, Jenkins, & Hamilton, 2022). It also informs ongoing discourse on public policy relating to virtual currencies and AML regulation in Canada specifically.

References

  • Leuprecht, C., Jenkins, C., & Hamilton, R. (2022). Virtual Money Laundering: Policy Implications of the Proliferation in the Illicit Use of Cryptocurrency. Journal of Financial Crime, 30(4). doi: 10.1108/JFC-07-2022-0161
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