Are you ready for a little time travelling, looking at the darker side of the economy?

We will be diving into the history, current and future state of Anti-Money-Laundering-Legislation. Why? Because not just in the legal markets “everything” is changing due to digitalisation.

In the good old days, this is what the situation “white market” vs. “black market” used to look like:

All the proceeds from illicit or criminal activities used to be trapped in an enclosed system that could be referred to as the black market[1]. Within this market these proceeds could be used to acquire a multitude of “goods” typically available in a black market. However, when the beneficiaries of these proceeds aimed to acquire goods from the legal financial system (i.e. real estate, cars, legal financial products, shares) they had to find a way “in”[2] which legislators have “always” tried to make as complicated as possible. Of course, this has never stopped money laundering, but it has made it exceedingly expensive. When introducing funds from the black market into the legal financial system a loss between 20 – 50% of these funds (due to “costs”) could probably be considered as average.[3]

It is clear, therefore, that there has been a great interest to find a more cost-effective way to launder money. Such a novel way may have been found in the vehicle of cryptocurrencies. Particularly since cryptocurrencies – so far – have been dodging under regulation when- and wherever possible.

Additionally cryptocurrencies allegedly grant anonymity.[4] Certainly, when cryptocurrencies are used to buy goods or certain services a verification of the purchaser is inevitable,[5] however, this did not always lead to an identification of the purchaser.[6]

So why is everybody talking about cryptocurrencies now? Well, as long as cryptocurrencies themselves constituted  a – more or less – enclosed system, this hardly mattered. However, the more and more cryptocurrencies were accepted for regular transaction within the legal financial system (i.e. for simple things as ordering pizza[7] or even a new pricy watch[8]) this problem has become more apparent:

Because of the cryptocurrencies there is not only a “single tunnel” leading into the legal financial system but a rather wide area of direct purchases that can also be made with illicit money through cryptocurrencies into the legal financial system. Ergo, new strategies had to be found.

Read the article to find out what these strategies are and if they could actually work!

[1] “ illegal trading of goods that are not allowed to be bought and sold, or that there are not enough of for everyone who wants them” – Cambrigde Dictionary

[2] https://www.pbs.org/wgbh/pages/frontline/shows/drugs/special/blackpeso.html (last visited on 21 April 2019) or Frontline: Black Money by PBS by Oriana Zill de Granados Lowell Bergman (video documentary); https://www.independent.co.uk/news/business/analysis-and-features/criminals-target-property-university-towns-money-laundering-eatate-agents-a8537931.html (last visited on 21 April 2019)

[3] https://www.pbs.org/wgbh/pages/frontline/shows/drugs/special/blackpeso.html (last visited on 21 April 2019) or Frontline: Black Money by PBS by Oriana Zill de Granados Lowell Bergman (video documentary) and https://www.ft.com/content/73de228c-e098-11e8-8e70-5e22a430c1ad (last visited on 21 April 2019) – a great deal will depend on the level of organisation and the total sum that is being laundered

[4] Birnbach, Ri 02/2017, 77 (78)

[5] Otto, Ri 02/2017, 86 (88)

[6] Otto, Ri 02/2017, 86 (89)

[7] https://www.businessinsider.de/bitcoin-pizza-10000-100-million-2017-11?r=UK&IR=T last visited on 9 October 2018

[8] https://www.reeds.com/bitcoin.html last visited on 9 October 2018 

Über die Autorin

Mirjam Steinfeld führt ihre Strafverteidigerkanzlei SteinfeldRecht mit Schwerpunkt im Wirtschaftsstrafrecht und berät zudem in Sachen Compliance mit besonderem Fokus auf Betrugs- und Geldwäscheprävention. Sie hat in Mainz und Dijon studiert (Mag.iur.), ist Fachanwältin für Strafrecht und studiert aktuell an der Steinbeis-Hochschule Wirtschaftskriminalität und Compliance (MBA). Zudem ist sie Lehrbeauftragte für Strafrecht an der Hochschule-Rhein-Main (Wiesbaden). Ihr persönlicher Fokus liegt auf dem Verhältnis zwischen Kryptowährungen und Strafrecht.

Titelbild: © Photobank via Adobe Stock, #47764047