Compliance risks for crowdfunding. A neglected aspect of money laundering, terrorist financing and fraud
| Date | 25 July 2022 |
| Pages | 575-582 |
| DOI | https://doi.org/10.1108/JFC-05-2022-0116 |
| Published date | 25 July 2022 |
| Author | Fabian Teichmann,Sonia Ruxandra Boticiu,Bruno S. Sergi |
Compliance risks for
crowdfunding. A neglected aspect
of money laundering, terrorist
financing and fraud
Fabian Teichmann and Sonia Ruxandra Boticiu
Teichmann International (Schweiz) AG,
St. Gallen, Switzerland, and
Bruno S. Sergi
Harvard University, Cambridge, Massachusetts, USA and
University of Messina, Messina, Italy
Abstract
Purpose –This study aims to highlightthe risks and threats posed by crowdfunding. It alsolooks at the
new EuropeanUnion regulation on crowdfunding, which is intended to give participantsconfidence that there
will be specific minimum regulatory standards to protect parties against mis-selling issues affecting some
platforms.
Design/methodology/approach –This paper is basedupon a thorough literature review.
Findings –Crowdfundingis an essential alternative for financing commercial and non-commercialprojects.
Although it is a fast-growingdigital financial tool, it can also be consideredextremely risky. It can be an ideal
platformfor money laundering and can facilitate thefinancing of terrorism and fraud.
Originality/value –Crowdfundingis still in its infancy, so the literature has not yet sufficiently addressed
the compliancerisks of crowdfunding. As a result, thereis a significant research gap. Thus, this study aims to
analyse and propose suggestions to mitigate the risks that all crowdfunding stakeholders may face when
decidingto participate in a crowdfunding activityor when they want to set one up.
Keywords Crowdfunding, Compliance risks, Money laundering, Terrorist financing, Fraud,
The EU crowdfunding regulation
Paper type Research paper
Introduction
The willingness of the banking sectors to lend was considerablyreduced in 2008 because of
the global financial crisis. At the same time, confidence in banks deteriorated (Kuti and
Madar
asz, 2014). Thus, crowdfunding was introduced to address the needs of existing
small- and medium-sized enterprises (SMEs) and start-ups seeking investment capital.
Crowdfunding is a method offunding usually via the internet, allowing individual founders
of for-profit projects to solicit funding from multiple people, often in exchange for future
products or actions (Mollick (2014). Online crowdfunding platforms (CFPs) facilitate the
exchange of money, services or goods between funders and fundraisers. Primarily,
crowdfunding takes place on internet-based CFP to fund a particularcampaign by multiple
funders (Belleflammeet al.,2015).
Crowdfunding sites are relatively new, and the legal landscape is still developing.
For this reason, they do not yet have advanced due diligence practices or anti-fraud
Compliance
risks for
crowdfunding
575
Journalof Financial Crime
Vol.31 No. 3, 2024
pp. 575-582
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-05-2022-0116
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
Get this document and AI-powered insights with a free trial of vLex and Vincent AI
Get Started for FreeStart Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting