Technological Considerations of AML/CTF Programs

LexisNexis Anti- Money Laundering and Financial Crime

Since its introduction, Bitcoins popularity has grown rapidly, though commercial use is currently small when compared to its use by speculators. The currencys initial value was one bitcoin for US$0.00310, but it has rapidly grown in value, passing US$1000.00 in 2013. Commercial use is growing, primarily as a form of payment for products and services, as merchants find the low transaction costs attractive (lower than the 23% fees commonly imposed by credit card processors). The anonymous and peer-to-peer nature of bitcoin makes it attractive to criminal groups. The FBI stated that "bitcoins will likely continue to attract cyber-criminals who view it as a means to move or steal funds" while the Washington Post labelled it "the currency of choice for seedy online activities". Services which facilitate illicit activities, such as bitcoin "mixers" (such as Bit Laundry), where bitcoins and cash are exchanged for "clean" ones, typically for a one percent transaction fee, are also emerging. The rapid growth of bitcoins value in 2012 and 2013 and a corresponding increase in transaction volume, attracted the attention of regulators. The Financial Action Task Force (FATF) (an intergovernmental body established in 1989) updated its anti-money laundering recommendations in February 2012 (previously updated in 2003 prior to this), and included wordings relevant to Bitcoin. The Financial Crimes Enforcement Network (FinCEN) a bureau of the U.S. Department of the Treasury issued guidance on virtual currencies in March 2013 to clarify the applicability of the Bank Secrecy Act 1970 (USA) to persons (individual, corporation, partnership, etc), creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies. The Australian Government particularly the ATO has confirmed that it is monitoring digital currencies. The above extract is taken from the January 2014 update to Anti-Money Laundering and Financial Crime. Technology and strategy thought leader, Peter Evans-Greenwood, analyses the technological factors that must be considered by organisations when detecting anti-money laundering events and when implementing anti-money programs in the chapter Technological Considerations of AML/CTF Programs. In this update, Peter discusses the emergence of various cryptocurrencies such as Bitcoins. Find out more about the LexisNexis Anti-Money Laundering and Financial Crime at http://www.lexisnexis.com.au/en-au/products/anti-money-laundering-and-financial-crimeservice-online.page or visit www.lexisnexis.com.au/riskandcompliance for the full suite of risk and compliance products and services.

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