The Effectiveness of Regulatory Regimes in Combating Virtual Currencies’ Money Laundering Activities

Thesis (M.A.) , 2019 , 50 Pages , Grade: 68% (UK) 3.88 (USA)

Law - Civil / Private, Trade, Anti Trust Law, Business Law

The purpose of this paper is to evaluate the existing national and international regulatory approaches in detecting and preventing money laundering activities through virtual currencies. The objective of this evaluation is to determine if these current regulatory approaches require modifications to enhance their effectiveness. The evaluation of these different approaches will also be used to determine the most suitable regulatory approach for virtual currencies that acts as an effective Anti-Money Laundering (AML) regime. As stated previously, virtual currency regulation is a developing area of law. Hence, the majority of regulations discussed in this paper has not come into effect. As a result, the evaluation on the effectiveness of these regulations is only a projection based on academic sources. The recent reform on this area also means that there is a limited number of academics that evaluated these regulations.

The development of technology in these past years has created a new financial medium known as the virtual currency market1. The use of virtual currencies has become wide-spread, due to the development of this financial market2. As a result, virtual currencies are in the process of becoming an international financial instrument that may hold significant economic value to the global financial market in the future. Regulations have only started responding to virtual currencies, due to their novelty. The instant growth of this financial instrument and its virtual element is bound to create unique regulatory challenges3. For this reason, this paper intends to study the different approaches regulating virtual currencies. These different regulatory approaches will be evaluated to ensure their effectiveness as Anti-Money Laundering (AML) regimes. Money laundering activities without the virtual element are already considered a global economic concern4. Virtual currencies have the ability of amplifying this issue, because they pose a serious threat to functioning of financial markets if they are employed in money laundering activities5. Jurisdictions only recently have comprehended the implications of this issue, which resulted in developing this new area of law that regulates virtual currencies. The emergence of virtual currency regulations provides a conducive field of study, that is relevant to the current changes undergoing the financial system.

Inhaltsverzeichnis (Table of Contents)

• Abstract
• Introduction
• Chapter 1: An overview on Money Laundering and Virtual Currencies.
  • Introduction
  • The definition of money laundering
  • The economic and social effects of money laundering
  • The use of virtual currencies in money laundering activities
  • The effect of virtual currencies on the financial system
  • Conclusion
• Chapter 2: An Evaluation on the FATF.
  • Introduction
  • An overview on the FATF
  • A critique on the FATF's regulatory approach
  • An evaluation on the FATF's enforcement mechanism
    • The process of black-listing
    • The effectiveness and the economic implications of black-listing
    • The limitations of black-listing
  • The FATF and the regulation of virtual currencies
  • An evaluation on the Virtual Assets and Virtual Asset Service Providers Guidance Paper 2019
    • The limitations of the guidance paper
    • The advantages of the guidance paper
  • Conclusion
• Chapter 3: An Evaluation on Different Regulatory Approaches.
  • Introduction
  • The banning approach
    • An overview on the banning process
    • The effectiveness of the banning process
    • The implications of banning virtual currencies
  • The 'wait and see' approach
  • An action-based regulatory approach
    • An evaluation on the EU's action-based regulatory approach
  • Conclusion
• Chapter 4: Recommendations to Effectively Regulate Virtual Currencies
  • Introduction
  • The incorporation regulatory collaboration into the AML regime
    • The effectiveness of a hybrid regulatory approach
    • A solution to regulating decentralised virtual currencies
    • The effectiveness of regulatory sandboxes in enhancing the AML regime
  • The creation of national virtual currencies
  • The FATF's standards as the only viable AML regime for virtual currencies
  • Conclusion
• Conclusion
• Bibliography

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This paper aims to evaluate the effectiveness of different virtual currency regulatory approaches in combating money laundering activities. It seeks to identify the most suitable Anti-Money Laundering (AML) regime for virtual currencies and suggest modifications to enhance their effectiveness. The paper also considers the limitations of existing regulations and proposes solutions to overcome these weaknesses.

• The effectiveness of different regulatory approaches in combating money laundering activities through virtual currencies.
• The identification of the most suitable AML regime for virtual currencies.
• The limitations of existing regulatory approaches and the need for modifications.
• The potential for regulatory collaboration with virtual currency platforms to enhance the AML regime.
• The importance of international harmonization in the regulation of virtual currencies.

Zusammenfassung der Kapitel (Chapter Summaries)

Chapter 1 provides an overview of money laundering and its effects, and introduces the use of virtual currencies in money laundering activities. It discusses the impact of virtual currencies on the financial system and the regulatory challenges they pose.

Chapter 2 evaluates the effectiveness of the Financial Action Task Force on Money Laundering (FATF) as a regulatory body. It examines the FATF's regulatory approach, enforcement mechanisms, and its efforts to regulate virtual currencies.

Chapter 3 explores different regulatory approaches to virtual currencies, including banning, the 'wait and see' approach, and action-based regulation. It examines the strengths and weaknesses of each approach and evaluates their effectiveness in combating money laundering activities.

Schlüsselwörter (Keywords)

This work focuses on the effectiveness of regulatory regimes in combating money laundering activities through virtual currencies. Key themes include the evolution of the virtual currency market, regulatory challenges, the FATF's role, different regulatory approaches, international harmonization, and the need for regulatory collaboration with virtual currency platforms. Important concepts include Anti-Money Laundering (AML) regimes, blacklisting, regulatory sandboxes, and decentralised virtual currencies.

• College: Northumbria University (Northumbria University Law school)
• Course: International Trade Laws Masters
• Grade: 68% (UK) 3.88 (USA)
• Author: Sara Aljufaili (Author)
• Publication Year: 2019
• Pages: 50
• Catalog Number: V508693
• ISBN (eBook): 9783346086747
• ISBN (Book): 9783346086754
• Language: English
• Tags: virtual currencies, FATF, Money Laundering, International, Bitcoins, Crypto-currencies