Bitcoin’s value has soared in recent days to the $600 level. Welcome to the murky world of virtual money, which is now assuming a veneer of legitimacy with Congressional hearings on the dangers of its online existence.

Bitcoin, Other Virtual Currencies Need Anti-Laundering Controls, Feds Say

Bitcoin, Other Virtual Currencies Need Anti-Laundering Controls, Feds Say

Bitcoin, Other Virtual Currencies Need Anti-Laundering Controls, Feds SayBitcoin is a four-year-old virtual currency that isn’t regulated or backed by a central bank, but you can’t just grab it from your wallet to pay for stuff.

Its value has soared in recent days to the $600 level. Welcome to the murky world of virtual money, which is now assuming a veneer of legitimacy with Congressional hearings on the dangers of its online existence.

In testimony prepared for a hearing Monday before the Senate Homeland Security and Government Affairs Committee, federal law-enforcement agencies said that the decentralized nature of some virtual currencies can pave the way for more widespread money laundering and fraud.

Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network of the U.S. Treasury, noted the reasons why a fraudster would decide to go virtual, instead of opting for traditional currency.

Specifically, she said an “illicit actor” may choose virtually currency because it:

  • Enables the user to remain relatively anonymous;
  • Is relatively simple for the user to navigate;
  • May have low fees;
  • Is accessible across the globe with a simple Internet connection;
  • Can be used both to store value and make international transfers of value;
  • Does not typically have transaction limits;
  • Is generally secure;
  • Features irrevocable transactions;
  • Depending on the system, may have been created with the intent (and added features) to facilitate money laundering;
  • If it is decentralized, has no administrator to maintain information on users and report suspicious activity to governmental authorities;
  • Can exploit weaknesses in the anti-money laundering/counter terrorist financing (AML/CFT) regimes of various jurisdictions, including international disparities in, and a general lack of, regulations needed to effectively support the prevention and detection of money laundering and terrorist financing.

“Virtual currency is not different from other financial products and services in this regard,” said Shasky Calvery. “What is important is that financial institutions that deal in virtual currency put effective AML/CFT (anti-money laundering/counter-terrorist financing) controls in place to harden themselves from becoming the targets of illicit actors that would exploit any identified vulnerabilities.”

 

 

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