Laundering of Criminal Proceeds Through Cryptocurrency Transactions
A Digital Threat to Economic Security
DOI:
https://doi.org/10.26512/lstr.v16i2.52003Keywords:
Money Laundering. Cryptocurrency. Economic Security. Criminal Offense.Abstract
[Purpose] The purpose of this study is to discuss, based on international as well as national laws and practices, various issues and potential solutions surrounding the growing problem of money laundering practices using cryptocurrency transactions.
[Methodology] A balanced combination of theoretical and empirical methods has been used in the course of research; in particular, the method of comparative legal research has been employed extensively throughout the text of article.
The theoretical component of this research paper includes commentaries by Ukrainian, German, other European as well as American researchers in this field. Their works are cited appropriately. The subject scope of the paper covers modern phenomenon of money laundering based on cryptocurrency transactions.
[Findings] This paper extensively discusses international and national legal frameworks for identifying and stopping as well as preventing various money laundering schemes and techniques based on cryptocurrency transactions and blockchain technology in general. It has been established that with the global cryptocurrency market valued at roughly $1 trillion, its attractiveness to money launderers endangers economies and financial systems of numerous world jurisdictions. Based on theoretical observations and relevant analyses of legal cases, authors’ conclusions on how to fight this latent type of criminality have been presented.
[Practical Implications] The research is deemed to be of value to national regulators, law enforcement agents and legal commentators, who think, write and act with the goal of fighting new money laundering patterns. It can serve as part of a broader international roadmap on how to identify suspicious money laundering schemes using various cryptocurrency transactions and also to impose effective sanctions on criminal actors behind those schemes.
[Originality] The paper originality relies on its comprehensive and balanced combination of economic and legal analyses of the issues presented and potential solutions to them. It also incorporates both sound theoretical research and in-depth coverage of law enforcement actions, as well as legal cases against crypto money launderers.
Downloads
References
U.S. Code § 1956 - Laundering of monetary instruments. Available at: https://www.law.cornell.edu/uscode/text/18/1956
Crypto Crime Trends: Illicit Cryptocurrency Volumes Reach All-Time Highs Amid Surge in Sanctions Designations and Hacking. Chainalysis. Available at: https://www.chainalysis.com/blog/2023-crypto-crime-report-introduction/.
Sanction Scanner (2023). Al Capone: The One Who Gives Us The Term ‘Money Laundering’. Available at: https://sanctionscanner.com/blog/al-capone-the-one-who-gives-us-the-term-money-laundering-348#:~:text=Al%20Capone%20is%20also%20known,buying%20laundries%20in%20cash%20invisible.
Berest, M. (2023). NABU Detectives and Analysts Mastered the Crystal Blockchain: Details from the Member of Parliament. Available at: https://meta.ua/uk/news/tech/97956-detektivi-i-analitiki-nabu-opanuvali-crystal-blockchain-detali-vid-nardepa/.
Carillo, L. (2024). Brazil Arrests Man Suspected of Laundering Nearly US $2.66 Billion. Organized Crime and Corruption Reporting Project. Available at: https://www.occrp.org/en/daily/18355-brazil-arrests-man-suspected-of-laundering-nearly-us-2-66-billion.
Crypto Money Laundering: Four Exchange Deposit Addresses Received Over $1 Billion in Illicit Funds in 2022. (2022). Available at: https://www.chainalysis.com/blog/crypto-money-laundering-2022/.
Crystal School of Crypto Compliance and Investigations. (2023). Available at: https://crystalblockchain.com/training-and-certs/.
Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or Terrorist Financing, and Amending Directives 2009/138/EC and 2013/36/EU. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32018L0843.
Dudorov, O. O. & Tertychenko, T. M. (2015). Anti-laundering of “Dirty” Property: European Standards and Criminal Code of Ukraine. Kyiv: Vaite.
Dumchikov, M, Horobets, N, Honcharuk, V & Dehtiar, R. (2022). Digital Currency as a Subject of Economic Criminal Offenses. The Law, State and Telecommunications Review, 14 (1), 20-30.
Dumchikov, M. (2022). Peculiarities of Counteracting the Legalization of Criminal Income with the Help of Virtual Assets in Cyberspace: Practical Dimension. Law. State. Technology, 1, 117-122.
Dyachkina, A. (2023). The Court Seized 1.5 Million Dollars of Crypto-Assets of the Ex-Head of the State Intelligence Service. Available at: https://www.epravda.com.ua/news/2023/11/30/707204/.
Dyntu V.A. & Mitrofanov A.A. (2017). Bitcoin in the System of Legalization of Proceeds of Crime. Scientific works of the National University “Odesa Law Academy”, 19, 122-129.
EU Context of Anti-Money Laundering and Countering the Financing of Terrorism. (2023). European Commission. Available at: https://finance.ec.europa.eu/financial-crime/eu-context-anti-money-laundering-and-countering-financing-terrorism_en?gclid=Cj0KCQiAsburBhCIARIsAExmsu4a0J5bgjDa6_nM4naIXlD97wt9N1ZA-OJ5qqIqw5RuLHenLaH4UdgaAmOTEALw_wcB.
Europol, ‘From Suspicion to Action: Converting Financial Intelligence into Greater Operational Impact’ (2017). Available at: https://www.europol.europa.eu/sites/default/files/documents/ql-01-17-932-en-c_pf_final.pdf.
Executive Order 14024 of April 15, 2021 “Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation”. (2021). Federal Register, 86 (73). Available at: https://ofac.treasury.gov/media/57936/download?inline.
FATF (2020). Money Laundering and Terrorist Financing Red Flag Indicators Associated with Virtual Assets. Available at: https://www.fatf-gafi.org/content/dam/fatf-gafi/reports/Virtual-Assets-Red-Flag-Indicators.pdf.
FATF (2022). Partnering in the Fight Against Financial Crime: Data Protection, Technology and Private Sector Information Sharing. Available at: https://www.fatf-gafi.org/content/dam/fatf-gafi/guidance/Partnering-int-the-fight-against-financial-crime.pdf.coredownload.pdf.
Feliba, D. (2023). Cryptocurrency regulation comes into force in Brazil. Fintech Nexus. Available at: https://www.fintechnexus.com/cryptocurrency-regulation-comes-into-force-in-brazil/
Haffke, L., Fromberger, M. & Zimmermann, P. (2020). Cryptocurrencies and Anti-Money Laundering: the Shortcomings of the Fifth AML Directive (EU) and How to Address Them. Journal of Bank Regulations, 21, 125-138.
Hayes, A. (2023). Blockchain Facts: What is It, How It Works, and How It Can Be Used. Investopedia. Available at: https://www.investopedia.com/terms/b/blockchain.asp.
Honcharuk, V. L. (2021). Impact of Legalization (Laundering) of Proceeds Obtained Through Crime on the Economic Sphere of Ukraine in Modern Conditions. Pravo.UA, 4, 124-130.
Joining Forces: Public-private Partnerships vs. Financial Crime. (2023). Forthline. Available at: https://www.fourthline.com/resources/public-private-partnerships.
Kamensky, D. (2021). Globalization, COVID-19 Pandemic and White Collar Crime: A New Threatening Combination. The Lawyer Quarterly, 4(11), 625-640.
Kamensky, D. (2022). War and Law in Ukraine: Wheels of Justice Still Rotate. The International Lawyer, 55(3), 541-550.
Koirala, B. (2021). 16 Advantages and Disadvantages of Cryptocurrency. Available at: https://honestproscons.com/advantages-and-disadvantages-of-cryptocurrency/.
Khomenko, V. (2023). 7 most important court cases regarding cryptocurrencies. Available at: URL: https://protocol.ua/ua/7_nayvaglivishih_sudovih_sprav_shchodo_kriptovalyut/.
Koshovyi, O. (2023). What is Wrong with the Law on Virtual Assets. Mirror of the week. March 17, 2023 Available at: https://zn.ua/ukr/ECONOMICS/shcho-ne-tak-iz-zakonom-pro-virtualni-aktivi.html.
Money Laundering through Cryptocurrencies. (2024). United Nations Office on Drugs and Crime. Available at: https://syntheticdrugs.unodc.org/syntheticdrugs/en/cybercrime/launderingproceeds/moneylaundering.html.
Money Laundering. (2024). United Nations Office on Drugs and Crime. Available at: https://www.unodc.org/unodc/en/money-laundering/overview.html.
Ovcharenko, A.S. (2020). Virtual Assets as an Object of Financial Monitoring. Bulletin Of Zaporizhzhya National University. Legal Sciences, 3, 98-103.
Review of the Legislation on the Regulation of Virtual Assets in the Field of Combating Money Laundering and Terrorist Financing. (2022). Available at: https://fiu.gov.ua/assets/userfiles/310/%D0%A0%D1%96%D0%B7%D0%BD%D0%B5/VirtualAssets.pdf.
Richardson, I. & de Lucas Martin, I. (2021). Investigation and Trial of Criminal Proceedings Regarding the Legalization (Laundering) of Funds. Strasbourg-Kyiv: National School of Judges of Ukraine.
The Law of Ukraine from February 17, 2022 “On Digital Assets”. (2022). Available at: https://zakon.rada.gov.ua/laws/show/2074-20#Text.
Townsend, J. (2001). Tax Crimes Materials. Houston: Townsend & Jones, L.L.P.
Treasury Designates Virtual Currency Money Launderer for Russian Elites and Cybercriminals. (2023). U.S. Department of the Treasury. Available at: https://home.treasury.gov/news/press-releases/jy1874.
U.S. Treasury Announces Largest Settlements in History with World’s Largest Virtual Currency Exchange Binance for Violations of U.S. Anti-Money Laundering and Sanctions Laws. (2023). Available at: https://home.treasury.gov/news/press-releases/jy1925.
Virtual Currencies and Money Laundering: Legal Background, Enforcement Actions, and Legislative Proposals. (2019). Congressional Research Service Report. Available at: https://crsreports.congress.gov/product/pdf/R/R45664.
Zakharov, V.P. (2014). Legalization (laundering) of proceeds obtained through crime: theoretical and legal aspect. Bulletin of the Lviv Polytechnic National University. Legal sciences, 801, 180-186.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Law, State and Telecommunications Review
This work is licensed under a Creative Commons Attribution 4.0 International License.
By submitting this paper to the Law, State and Telecommunications Review,
I hereby declare that I agree to the terms of the Creative Commons Attribution 4.0 International (CC BY 4.0).
