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Monday, 24 June 2019 01:03

Warning: Cryptocurrencies attractive to criminals Featured

Warning: Cryptocurrencies attractive to criminals Image Stuart Miles,

Facebook’s announcement of its intention to launch a new virtual currency has prompted a warning from a Charles Sturt University expert that cryptocurrencies have a number of features that make them attractive to criminals.

“Facebook has flagged the launch of a new virtual currency called ‘Libra’, which it claims has the ability to address a range of social problems,” Dr Abdullah Al-Mamun, lecturer in fraud and financial crime in the Charles Sturt Australian Graduate School of Graduate Policing and Security in Canberra, said.

“These include, but are not limited to, the inclusion of hitherto excluded marginalised communities from mainstream financial services.

“While blockchains and cryptocurrencies already exist, they have yet to reach mainstream adoption because of their volatility and lack of scalability.

“Despite the benefits Facebook pointed to in their white paper, virtual currencies have a number of features that make them attractive to criminals.

“Money launderers, for instance, are attracted to the anonymity blockchain offers and the lack of clear regulations and settlement finality that accompanies virtual currency transactions.”

Dr Mamun said criminals, particularly money launderers, experienced hurdles internationally in sending money from one jurisdiction to another via the existing system.

“The ease of transferring virtual currencies such as bitcoin (and now the proposed Libra) across international borders has, to a certain extent, already minimised those hurdles once faced by criminal enterprises,” he said.

“This has and will continue to further attract money laundering and complicate anti-money laundering efforts globally.

“This is because, despite increasing evidence of misuse, anti-money laundering regulations are not comprehensively applied internationally to virtual currencies in the same way [they are applied to] transactions within the mainstream financial service sector.”

Dr Mamun said that like other countries, Australia was not spared from the vulnerability of money laundering, “a process whereby in order to use the proceeds of their crimes, criminals need to ‘clean’ or ‘launder’ this money to make it appear to have come from legitimate sources”.

He pointed to Australian Transaction Reports and Analysis Centre claims that serious and organised crime costs Australia an estimated $10 billion to $15 billion each year, and “thus criminal activities, especially money laundering, threaten Australia’s prosperity, undermine the integrity of our financial system, and foster other criminal activities which negatively impact safety and well-being in the community”.

“For these reasons, Australian intelligence assessments identify money laundering as a critical risk to Australia,” Dr Mamun said.

“While Facebook claims in their white paper that 1.7 billion people do not have access to a traditional banking system, according to the Department of Treasury 16% of the total population in Australia remains outside of the financial system.

“With the advent of Libra, unlike other virtual currencies, criminals will have more choices, easier access because of the name and fame of Facebook, and anonymity to launder money.

“Criminals in Australia might use it to transfer money for drug-dealing, human trafficking, kidnapping, arson, embezzlement, forgery, and so on.”

According to Dr Mamun, though Australia has established a pattern of proactive cryptocurrency regulation, “criminals are always forward thinkers and ahead of the authorities and watchdogs”.

“Given the threats noted, it is important that the Australian Government and its agencies proactively set down quite clearly what this proposed Facebook cryptocurrency must do before it can operate legally within Australia.

“A positive action would be to make any unregistered exchanges subject to criminal charges and financial penalties in Australia.

“Australian laws and regulators must make clear that virtual currencies that operate within Australia will have to register with the regulatory authority (AUSTRAC), identify and verify users, strictly maintain records, and comply with anti-money laundering reporting obligations as per the Anti-Money Laundering and Counter-Terrorism Financing Act 2006."


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Peter Dinham

Peter Dinham is a co-founder of iTWire and a 35-year veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).



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