Cryptocurrencies and financial crime: solutions from Liechtenstein
| DOI | https://doi.org/10.1108/JMLC-05-2020-0060 |
| Published date | 27 June 2020 |
| Date | 27 June 2020 |
| Pages | 775-788 |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Fabian Maximilian Johannes Teichmann,Marie-Christin Falker |
Cryptocurrencies and financial
crime: solutions from
Liechtenstein
Fabian Maximilian Johannes Teichmann and Marie-Christin Falker
Teichmann International (Schweiz) AG, St. Gallen, Switzerland
Abstract
Purpose –The purpose of this paper is to illustratehow cryptocurrencies are being used as a vehicle for
financial crime (such as money laundering,terrorist financing and corruption) and propose a more effective
internationalstandard for regulation that uses the Liechtenstein blockchainact as a benchmark.
Design/methodology/approach –This paper investigates how cryptocurrencies facilitate financial
crime through a qualitative study consisting of interviews with 10 presumed providers of illegal financial
servicesand 18 internationalcompliance experts.
Findings –This study shows that cryptocurrencies are a highly suitable vehicle for money laundering,
terrorist financing and corruption and that current compliance efforts in the cryptocurrency sector are
ineffective.
Research limitations/implications –The presentedfindings illustrate that for a more effectivecombat
of financial crimevia cryptocurrency, an international standard for blockchainand cryptocurrency regulation
must be created.This paper suggests that Liechtenstein’sinnovative and comprehensive blockchain act could
be used as a basis for said standard. Practitioners should also consider cooperating transnationally when
prosecutingfinancial crime via cryptocurrency.
Originality/value –The fact that cryptocurrencies facilitate financial crime is widely known. However,
this study combines the perspectives of both compliance experts and presumed criminals to gain a
comprehensiveunderstanding of the techniquesthat money launderers, terrorist financiersand corrupt public
officials use. This paper examines the potential for the innovative Liechtenstein blockchain act, which has,
thus, far not receivedempirical attention, to set the benchmark for internationalregulations.
Keywords Corruption, Money laundering, Terrorist financing, Bitcoin, Blockchain, Corruption,
Financial crime, Liechtenstein blockchain act, Cryptocurrency
Paper type Research paper
1. Introduction
As the launch of Bitcoin in 2008, cryptocurrencies have been criticized for allegedly
facilitating financial crime. This claim has been substantiated by various studies and
hard data such as trading volumes (Choo, 2015;Mabunda, 2018;Teichmann and Falker,
2020). Cryptocurrencies are not managed or overseen by a trusted third party and
permit high anonymity. An additional challenge of innovative technologies is that they
frequently evolve quicker than the appropriate legal framework that regulates them,
meaning that it does not only take a long time to introduce adequate regulations but
also that these regulations are in danger of becoming outdated soon after entering into
force. For instance, Facebook’s announced stablecoin Libra uses technologies that are
highly different from Bitcoin (van Valkenburgh, 2019). When regulators create legal
frameworks that relate to cryptocurrencies such as Bitcoin, by the time these
legislations enter into force, new projects such as Libra may have emerged, which
might require novel regulations.
Financial
crime
775
Journalof Money Laundering
Control
Vol.24 No. 4, 2021
pp. 775-788
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-05-2020-0060
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