Facebook’s proposed virtual currency triggers money laundering concerns

21 JUNE 2019

Facebook’s proposed virtual currency triggers money laundering concerns

Following this week’s announcement by Facebook of its intention to launch a new virtual currency, a Charles Sturt University expert warns that virtual currencies have a number of features that make them attractive to criminals.

  • Despite the benefits Facebook asserts for its proposed virtual currency (Libra) there are many associated problems, not least for law enforcement
  • Virtual currencies (cryptocurrencies) have a number of features that make them attractive to criminals
  • Australian Government regulates what the proposed Facebook cryptocurrency must do before it can operate legally within Australia

Following this week’s announcement by Facebook of its intention to launch a new virtual currency, a Charles Sturt University (Charles Sturt) expert warns that virtual currencies (also known as ‘cryptocurrencies’) have a number of features that make them attractive to criminals.

Dr Abdullah Al-Mamun (pictured left), lecturer in fraud and financial crime in the Charles Sturt Australian Graduate School of Graduate Policing and Security in Canberra, says that despite the benefits Facebook asserts in its white paper for its proposed virtual currency, there are also many associated problems.

“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 Al-Mamun 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 Al-Mamun, a specialist in anti-money laundering and counter terrorist financing, said criminals, particularly money launderers, experience hurdles internationally to dispatch money from one jurisdiction to another via the current conventional monetary 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,” Dr Al-Mamun 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 transactions within the mainstream financial service sector are.”

Dr Al-Mamun says that like other countries, Australia is 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.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) claims that serious and organised crime costs Australia an estimated $10-15 billion each year, and thus criminal activities, especially money laundering, threatens Australia’s prosperity, undermines the integrity of our financial system, and foster other criminal activities which negatively impact safety and wellbeing in the community.

“For these reasons, Australian intelligence assessments identify money laundering as a critical risk to Australia,” Dr Al-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 per cent 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.

“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,” Dr Al-Mamun said.


Media Note:

To arrange interviews with contact Bruce Andrews at Charles Sturt Media on mobile 0418 669 362 or via news@csu.edu.au

Dr Abdullah Al-Mamun is currently unavailable for comment due to travel. Charles Sturt’s Mr Douglas Allan is available for further comment.


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