Cryptocurrencies and anti-money laundering: the shortcomings of the fifth AML Directive (EU) and how to address them

Haffke, Lars; Fromberger, Mathias; Zimmermann, Patrick

doi:10.1057/s41261-019-00101-4

Cited by 31 publications

(12 citation statements)

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“…The fifth Directive-EU Directive 2018/843 on combating money laundering-took effect on June 2018 (European Parliament and Council 2018), and amends the previous Directive (2015/849) and establishes new provisions to effectively combat the process of terrorist financing and to consolidate a high transparency in financial transactions, as well as the definition for the concept of virtual currency, and the introduction of measures to regulate them in European Union law (Haffke et al 2020). According to the European Central Bank, there are three types of virtual currencies: the first type presents the currencies introduced in a closed circuit; the following virtual currencies are unidirectional ones, which can be used to make payments or buy goods/services, and the third type are the two-dimensional ones called cryptocurrencies (Bitcoin) (Vandezande 2017, p. 341).…”

Section: Literature Reviewmentioning

confidence: 99%

Efficiency of Money Laundering Countermeasures: Case Studies from European Union Member States

Cotoc

Nițu

Şcheau

et al. 2021

Risks

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The aim of this study is to present the trends and effectiveness of money laundering countermeasures from the perspective of a number of suspicious transactions reported to the Financial Intelligence Units (FIUs), a number of analysis results submitted to law enforcement authorities, and the typologies of cases in European Union Member States. In order to determine the impact of the joint effort in the fight against money laundering, we used descriptive statistics to process the data and case studies from annual reports of the European FIUs for 2018 and 2019. The results of our study highlight the increase in the number of suspicious transactions notices, as well as in their quality level. There is an increasing tendency towards information exchange between European Union countries regarding the suspicion of money laundering, but there is no stable trend for referring cases to law enforcement and other responsible institutions. Based on the available data, it can be concluded that the EU anti money laundering measures are efficient, but further steps are needed to achieve higher international coordination and cooperation.

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Section: Literature Reviewmentioning

confidence: 99%

Efficiency of Money Laundering Countermeasures: Case Studies from European Union Member States

Cotoc

Nițu

Şcheau

et al. 2021

Risks

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“…The latter are usually structured as online bulletin boards where individuals that want to sell or buy cryptocurrencies post a message and then carry out the transaction privately; even though some of these websites do charge a commission this is not the rule. Some commentators believe decentralized exchangers can be included within the scope of the Directive through an extensive interpretation (Haffke et al, 2019, p. 10). However, this extension is not automatic, especially when such platforms perform this bulletin board activity not only for cryptocurrencies but for a wide array of goods.…”

Section: The Subjects Of the V Directive: Exchangers And Wallet Providers Between Advantages And Blind Spotsmentioning

confidence: 99%

“…Indeed, it would be enough for a platform, instead of memorizing the private key, to require the user to insert it manually at each access to avoid the onerous duties imposed by the antimoney laundering legislation. On the other hand, a user who would like to avoid such identification duties could simply choose a noncustodial wallet provider (Haffke et al, 2019, p. 11). Having to type a password at each access, even if a complex one—as is the case with cryptocurrencies—does not seem to be an excessive effort if compared with the stringent identification requirements provided by the AML legislation, especially for a clientele looking for privacy.…”

Section: The Subjects Of the V Directive: Exchangers And Wallet Providers Between Advantages And Blind Spotsmentioning

confidence: 99%

Regulating cryptocurrencies checkpoints: Fighting a trench war with cavalry?

Soana

2021

Economic Notes

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The rise of cryptocurrencies during the last decade has caused growing concerns among national and international regulators. One of the risks identified is that these instruments may constitute an innovative tool for criminals when laundering money. This risk has been confirmed by numerous recent cases which have underlined the criminogenic potential of cryptocurrencies. Through the V antimoney laundering (AML) Directive, the European legislator has first regulated this emerging issue. This legislation extends the AML duties to two players of the cryptocurrencies market: exchangers and wallet providers. This choice, however, does not exploit the opportunities offered by cryptocurrencies and fails to provide a customized regulatory framework. By maintaining a traditional regulatory approach centered on intermediaries it misses the key innovation of blockchain technology: disintermediation. Compared with traditional online money flows, intermediaries are not necessary nor fundamental in the cryptocurrencies environment. Failing to adapt to this reality, the Directive is employing chivalry to fight a trench war. To guarantee the integrity of this market, the policymaker has to abandon the traditional intermediary‐centred approach in favor of a strategy that seizes the new opportunities offered by blockchain. This paper advocates for a shift from an individual‐centered approach to financial crime control to a transaction‐centered one.

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“…The legislation adopted in April 2018 provides enhanced powers of EU Financial Intelligence Units (FIUs) and deployment of beneficial ownership registers for enhanced transparency (Marria, 2018), risk prevention in the use of virtual currencies, enhanced safeguards for financial transactions to and from high-risk third countries, enhanced access to centralized bank account registers, and the ensuring of central data retrieval systems in all EU member states (Corsoni-Husain and Savvides, 2018). The 5th AMLD's imprecise wording for virtual currencies and their limited scope might, however, contribute to legal uncertainty and loopholes for relevant entities where Member States transpose it verbatim (Haffke et al, 2019;De Vidp, 2019).…”

Section: Introductionmentioning

confidence: 99%

Banks’ vulnerabilities to money laundering activities

Yeoh

2019

JMLC

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Purpose This paper aims to provide insights as to why money laundering persists in banks and their weaknesses as gatekeepers. Design/methodology/approach This paper contextualizes the design and proliferation of anti-money laundering (AML) measures; investigates the different manners of conceptualizing them; and provides insights pertaining to probable limitations of these measures. The paper relies on primary data from statutes and secondary data from published sources. Findings The paper’s findings suggest that competitive pressures, shareholders return imperative, and lucrative misaligned incentives for management contributed to weaknesses in effective compliance in banks. Practical implications Insights drawn from this paper reinforces the notion that banks need to seriously review their business approaches, as well as their roles as gatekeepers. Social implications Given the slew of corporate scandals and other materially harmful misjudgments in money-laundering compliance, banks might need to seriously review their role and obligations in the economy. Originality/value Much has been said about money-laundering activities enabled by the banking sector. This paper contributed to insights as to why they persist despite AML rules, and what measures could be further taken to enhance compliance effectiveness.

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Cryptocurrencies and anti-money laundering: the shortcomings of the fifth AML Directive (EU) and how to address them

Cited by 31 publications

References 0 publications

Efficiency of Money Laundering Countermeasures: Case Studies from European Union Member States

Efficiency of Money Laundering Countermeasures: Case Studies from European Union Member States

Regulating cryptocurrencies checkpoints: Fighting a trench war with cavalry?

Banks’ vulnerabilities to money laundering activities

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