Adapting confiscation and anti-money laundering laws to the digital economy: exploring the Australian interplay between proceeds and technology
| Date | 24 October 2023 |
| Pages | 472-488 |
| DOI | https://doi.org/10.1108/JMLC-09-2023-0142 |
| Published date | 24 October 2023 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Doron Goldbarsht |
Adapting confiscation and
anti-money laundering laws to the
digital economy: exploring the
Australian interplay between
proceeds and technology
Doron Goldbarsht
Law School, Macquarie University, Sydney, Australia
Abstract
Purpose –The rise of cryptocurrencies and other digital assets has triggered concerns about regulation and
security. Governments and regulatory bodies are challenged to create frameworks that protect consumers,
combat money laundering and address risks linked to digital assets. Conventional approaches to confiscation
and anti-money laundering are deemedinsufficient in this evolving landscape. The absence of a central authority
and the use of encryption hinder the identification of asset ownersan dthe tracking of illicit activities. Moreover,
the international and cross-border nature of digital assets complicates matters, demanding global coordination.
The purpose of this study is to highlight that the effective combat of money laundering, legislative action,
innovative investigative techniquesand public–private partnerships are crucial.
Design/methodology/approach –The focal point of this paper is Australia’s approach to law
enforcementin the realm of digital assets. It underscores the pivotal role of robustconfiscation mechanisms in
disruptingcriminal networks operating through digitalmeans. The paper firmly asserts that staying ahead of
the curve and maintaining an agile stance is paramount. Criminals are quick to embrace emerging
technologies,necessitating proactive measures from policymakersand law enforcement agencies.
Findings –It is argued that an agile and comprehensiveapproach is vital in countering money laundering,
as criminals adapt to new technologies.Policymakers and law enforcement agencies must remain proactively
ahead of these developments to efficiently identify, trace and seize digital assetsinvolved in illicit activities,
thereby safeguardingthe integrity of the global financial system.
Originality/value –This paper provides a distinctive perspective by examining Australia’s legal anti-
money laundering and counterterrorism financing framework, along with its law enforcement strategies
within the realmof the digital asset landscape. While there is a plethora of literatureon both asset confiscation
and digital assets, there is a noticeable absence of exploration into their interplay, especially within the
Australiancontext.
Keywords Digital assets, Confiscation, Regulation, Money laundering, Global coordination
Paper type Research paper
Introduction
The use of digital assets has seen significant growth and garnered widespread attention in
recent years. Digital assets,also known as cryptocurrencies or virtual currencies, are digital
representations of value that can be used as a medium of exchange or as a store of value.
The author wishes to thank Samuel Orchard for excellent research assistance.
The author would also like to acknowledge the Financial Integrity Hub (FIH) for its financial
assistance in conducting the research and preparing this article.
JMLC
27,3
472
Journalof Money Laundering
Control
Vol.27 No. 3, 2024
pp. 472-488
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-09-2023-0142
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
They operate on decentralised networks and typically use blockchain technology to ensure
the transparency, security and immutability of transactions. One of the key factorsdriving
the proliferation of digital assets is their potential for financial inclusion (Winn and de
Koker, 2013;Malady et al., 2014). Cryptocurrencies enable individuals who lack access to
traditional banking services to participate in the global financial system. With just a
smartphone and an internet connection, individuals can transact, save and invest in digital
assets, bypassing the need for traditional intermediaries. Moreover, digital assets offer
greater efficiency and convenience in cross-border transactions. Traditional cross-border
methods often involve lengthy processes, high fees and limited accessibility. In contrast,
digital assets facilitate near-instantaneous transfers with reduced costs, making them an
attractive alternative for individuals and businesses engaged in international trade and
remittances (Kaiser, 2016). The digitaleconomy is itself experiencing a transformation with
the integration of digital assets. Companies are increasingly accepting digital assets as a
form of payment, thereby expanding their customer base and streamlining transaction
processes (Goldbarsht, 2020). In addition, the rise of decentralised finance platforms has
enabled individuals to engage in a variety of financial activities –such as lending,
borrowing and earning interest –without the need for traditional financial intermediaries.
However, the increasing use of digital assets also raises regulatory and security concerns
(FATF, 2015b, pp. 20–21). Governments and regulatory bodies are grappling with the need
to develop frameworks to ensure consumer protection, prevent money laundering and
mitigate the risks associatedwith digital assets (FATF, 2006, pp. 6–8).
The importance of adapting confiscation and anti-money laundering (AML) laws to
address the challenges posed by digital assets cannot be overstated. With the rise of the
digital economy and the increasing use of cryptocurrencies and other digital assets,
traditional approachesto confiscation and AML have become inadequate. Legislativeaction
is crucial to ensuring effectiveregulation and the prevention and detection of illicit activities
in the digital space. It is essential to keep pace with technological advancements and
establish robust legalframeworks that can tackle money laundering and terroristfinancing.
However, the lack of a central authority and the use of encryption techniques impede the
identification of asset owners and the tracking of illicit transactions (Hett, 2008).The cross-
border nature of digital assets adds another layer of complexity, requiring international
cooperation and coordination (FATF, 2014, pp. 7–8; Brantly, 2014). Overcoming these
challenges necessitates the development of innovative investigative techniques,
technological solutions and international collaboration to identify, trace and seize digital
assets involved in illicit activities(Zerzan, 2009).
In the 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and
Psychotropic Substances (Illicit Trafficking Convention) [1], the global coordination
required to combat money laundering was recognised as a necessary consequence of the
transnational nature of the world economy.Today, the international best practices required
to curb global money laundering and terrorism financing activities are set forth by the
Financial Action Task Force (FATF).The FATF, through a system of 40 recommendations
and interpretative notes and guidance,has recognised that such measures should include, at
a minimum, domestic authorities that have the power to identify, trace and evaluate
property that is subject to confiscation and to prevent any dealing, transfer or disposal of
such property prior to the conclusion of any criminal investigation[2]. However, the value of
confiscated assets as a ratioof total criminal wealth remains minimal (less than 1% globally
in 2023) [3], due, in part, to inefficient identification and tracing efforts by regulators and a
sluggish responsefrom legislators.
Australian
interplay
473
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