Abstract
It has been argued that with the increasing crypto economy and the liquidity of cryptocurrency globally, cryptocurrency could potentially serve as another vehicle for money laundering activities. Yet, only a handful of studies probe the emerging nexus between cryptocurrency and money laundering and the feasibility of anti-money laundering (AML) strategies presented by law enforcement and financial institutions from a criminologist’s perspective. Therefore, this study uses the literature on money laundering to analyze the features of cryptocurrency that account for its popularity. A money laundering triangle is presented that corresponds with the use of cryptocurrency from within a criminological framework. This study also suggests that in addition to domestic and international interagency cooperation across jurisdictions, future developments should target the characteristics of cryptocurrencies such as anonymity, decentralization and blockchain which could help make cryptocurrency usage less attractive to motivated offenders across money laundering stages.
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Notes
Briefly, exchanges and other third-party services would be considered as “nested services” including Over the Counter (OTC) brokers and instant exchangers. Nested services usually operate within one or several larger exchanges and tap into exchanges’ liquidity and trading pairs (Chainalysis 2021).
The use of cryptocurrency also raises other crime prevention concerns such as tax evasion, Ponzi schemes, fraud and theft. For example, over $500 million of a cryptocurrency named NEM was stolen from Coincheck, an exchanger based in Japan, by hackers (Hochman 2018). However, those types of crimes are not the focus of this article.
CVC refers to all types of centralized and decentralized virtual currencies that have equivalent convertible value as fiat currency. It applies to different terminologies such as digital currency, cryptocurrency, crypto asset, digital asset and others.
According to the FTR, a transaction of $3000 or more (or its equivalent in CVC) may trigger a certain intermediary financial institution alert.
The data is available on the SAR statistics website (https://www.fincen.gov/reports/sar-stats).
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Wang, HM., Hsieh, ML. Cryptocurrency is new vogue: a reflection on money laundering prevention. Secur J 37, 25–46 (2024). https://doi.org/10.1057/s41284-023-00366-5
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DOI: https://doi.org/10.1057/s41284-023-00366-5