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Exploring the links between AML, digital currencies and blockchain technology

Mohammed Ahmad Naheem (Mayfair Compliance, Frankfurt, Germany)

Journal of Money Laundering Control

ISSN: 1368-5201

Article publication date: 2 July 2019

Abstract

Purpose

This paper aims to explore the implications of the 2014 Financial Action Task Force (FATF) publication and guidelines on virtual currency definitions and the overall impact of blockchain technology on anti-money laundering (AML) compliance and regulation. The report cites three case study examples, which the FATF paper uses and which this paper questions as to their relevance, especially to the formal banking sector.

Design/methodology/approach

The paper has provided a critical analysis of a FATF publication and guideline document. Additional secondary data has been used on blockchain technology and to analyse the relevance and implications of the case studies used in the FATF document.

Findings

The main findings are that virtual currency technology has the potential to support AML frameworks within banking when and if they are better understood. However, generic case examples of virtual currency legal cases are not necessarily useful when developing AML risk assessment frameworks within the banking sector.

Practical implications

The implications from the research affect any financial organisation undertaking AML risk analysis or compliance especially for virtual currencies. It applies to the banking, insurance and auditing professions and is of interest to academics working on virtual and digital currencies.

Social implications

The social implications are that virtual currency technology can be used to add protection to banking transactions and could also be considered for client identity information such as beneficial ownership.

Originality/value

The originality of this paper is the topic of blockchain technology being considered in AML frameworks and the critical analysis of the FATF cases.

Keywords

Acknowledgements

The author acknowledges being the recipient of a research grant awarded by Princess Ālae as part of Seven Foundation’s “2020 Banking Vision – building banks of the future” and he thanks her for the continued support and motivation both to himself and other students who benefit through her generosity.

Please note that this paper was composed and submitted for review to this journal in November 2015. All the content was current at that point in time (November 2015). The crypto currency industry, governmental policy-making, alongside the banking and regulation industries have evolved greatly since then, with new material from academic research emerging. These points need to be taken into consideration when reading this paper. This current paper is part of a series of papers that explore the implications and future use of blockchain and virtual currency technologies within the financial services sector.

The author is a specialist researcher and practitioner in the fields of Trade-Based Money Laundering and Crypto Currencies contracted to Mayfair Compliance. (www.mayfaircompliance.com).

Citation

Naheem, M.A. (2019), "Exploring the links between AML, digital currencies and blockchain technology", Journal of Money Laundering Control, Vol. 22 No. 3, pp. 515-526. https://doi.org/10.1108/JMLC-11-2015-0050

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited