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ComplyAnalysis

By November 29, 2017 May 4th, 2019 No Comments
ComplyAnalysis

Bitcoin: Prices may rise, but AML risk remains the same

Only a week ago Bitcoin was grabbing headlines for reaching the dizzying heights of USD $8,000. Seven days later this figure almost pales in comparison to its new valuation of just over USD $10,000. Throughout its meteoric climb in value, regulators and commentators worldwide have continued to debate the risk that Bitcoin and other cryptocurrencies pose as enablers of money laundering and terrorist financing.

The response from regulators has varied; from the reactionary total ban of exchanges in China, to the more practical placement of exchanges and coins under AML/CTF regulations, as Malaysia announced last week. We believe that the regulation of any financial instrument should be proportional to its potential risks, but also based on the actual evidence of its illicit use. In the case of Bitcoin, evidence of its use for terrorist financing remains limited and in no way compares to primary financing mechanisms. When it comes to its uses for money laundering however, there is considerably more evidence. It must be considered that total bans on the technology will only serve to push illicit actors back to traditional methods of money laundering, doing little to solve the root problem; and at the same time stifle innovation which is essential for pushing financial services forward.

A problem shared – combating terrorist financing in Southeast Asia

The terrorist threat in Southeast Asia is more prevalent than many in the West may be aware of. The 2002 Bali Bombing perpetrated by Jemaah Islamiyah, the recent siege by IS-loyal militants of Malawi in the Philippines, as well as the rise of Abu Sayyaf, a group known for beheading Western hostages, are but a few examples. Like all terrorists, these groups need money to sustain themselves and carry out attacks. This is the key issue that the Third Annual Counter Terror Financing Summit, held in Kuala Lumpur last week, is trying to tackle.

One of the the most significant announcements from the summit was the establishment of the South-east Asia Counter-Terrorism Financing Working Group (SEA CTFWG). This group will include 35 countries in Southeast Asia and Australia, working together to improve information sharing on terror financing in the region. Initiatives that promote the exchange of information on threat finance have been growing in popularity across the globe improving the quality of terrorist financing investigations. Hopefully this working group will create a consolidated approach to CTF, making it difficult and unsustainable for IS and its affiliates to operate in the region.

One year on from PANA, the EU’s response to the Panama Papers

Yesterday, the EU’s Committee of Inquiry into Money Laundering, Tax Avoidance and Tax Evasion (PANA), had its final sitting. Established 12 months ago in the wake of the Panama Papers scandal, its job was to find out why the EU had become a location of choice to launder dirty money and commit tax crimes. As the dust begins to settle on the latest leak, the Paradise Papers, the recommendations of the committee which were published last week, could not seem timelier.

In regard to AML regulation, the committee has issued recommendations which focus primarily on company ownership and transparency. On company ownership they recommend the banning of Bearer shares, the introduction of publicly accessible UBO, land and bank account registers and establishing the EU as the global leader in ending the use of Shell companies. These recommendations will go far in improving transparency as would further recommendations to supply a standardised definition of a PEP and making the real estate industry perform proper CDD on clients. Closer focus and research is also called for on the evolving risks that could emerge from FinTech and virtual currencies.

To many, these recommendations may seem to be the rallying cry that the EU has needed for years. For those however, with their ear to the ground on EU AML/CTF policy formation, these recommendations will resonate with many of the proposed amendments in the 5th Money Laundering Directive. And as those who have followed this directive closely will know, while these are all well-intended policy ideas, they will likely be incredibly difficult to pass into law.

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