Virtual currencies and AML

07/06/2018

Virtual currencies present serious problems for those trying to prevent money laundering and terrorist financing, writes Hari Gupta in the May Gazette.

The need to stay informed

The Financial Action Task Force (FATF) – an intergovernmental body established in 1989 to address growing concern over money-laundering – drafted a set of 40 recommendations designed as a set of minimum standards to counter the practice of money-laundering.

Recommendation 15 of the revised recommendations provides that lawyers must keep pace with new ways in which money-laundering and terrorist financing are carried out. This is because a failure to maintain awareness of new technologies could result in them inadvertently committing the substantive offence of money laundering in advising their clients.

Cryptocurrency risk

A virtual currency, or ‘cryptocurrency’, is a form of digital money that has not been issued or guaranteed by a central bank. Virtual currencies remain relatively unregulated in many jurisdictions, including Ireland, and are yet to be recognised as legal tender in any jurisdiction.

The growing use of virtual currencies is a serious concern to those individuals and institutions focused on anti-money-laundering (AML) and combating the financing of terrorism (CFT).

Late last year, two houses were sold in England using Bitcoin. The Land Registry even allowed a purchaser to have the sale price recorded in a virtual currency. Policing these transactions is made even more difficult, as the parties exchange and complete at the same time to minimise risks associated with the volatility in the value of virtual currencies.

Stay vigilant

Authorities will be vigilant of legal professionals advising clients and helping clients to transact using these new virtual currencies, notes Hari Gupta (a policy development executive at the Law Society of Ireland). Writing for the Gazette, he stresses the need for solicitors to be vigilant about the use of Bitcoin or other crypto-currency, and to ensure compliance with anti money-laundering (AML) obligations.

Archive & subscribe

For current and past issues of the magazine, visit the online Gazette.

To have future issues delivered to your home or office, subscribe today.