Virtual currencies as a quasi-payment tool: the case of frequent-flier programs and money laundering
| DOI | https://doi.org/10.1108/JMLC-11-2020-0127 |
| Published date | 01 April 2021 |
| Date | 01 April 2021 |
| Pages | 150-164 |
| Author | Doron Goldbarsht |
Virtual currencies as a
quasi-payment tool: the case of
frequent-flier programs and
money laundering
Doron Goldbarsht
Macquarie Law School, Macquarie University, Sydney, Australia
Abstract
Purpose –The purpose of this paperis to explore the various characteristics of frequent-flierprograms and
the threatsthey pose to the Australian anti-money launderingregime.
Design/methodology/approach –A thorough literature review was conducted on frequent-flier
programs and the associated money-laundering threats. Money laundering (ML) risks were identified in
relationto the three stages of ML and effective law enforcement.
Findings –The findings indicatethat as ML continues to gravitate towards the weaknessesin the financial
system, frequent-flier programs provide yet another avenue for criminals to exploit. The risk factors
associated with frequent-flier programs –specifically, anonymity, elusiveness, the rapidity of transactions
occurring in a digital environment,ambiguity regarding responsibility for compliance, the global network of
participants and members,difficulty in accessing records and an overall lack of oversight–were all integral
considerationsin establishing the ML risks of such programs.
Practical implications –The global environment in which individuals conduct financial transactions
continues to evolve rapidly, exacerbating ML risks for regulators and governments alike. Unless there are
globally unified efforts to heightenawareness, the threats posed by virtual currency will increase at a rapid
rate. With this in mind, the starting point of this paper is an attempt to analyse the ML risks pursuant to
frequent-flierprograms in Australia.
Originality/value –The findings from this study can be usedto gain greater insights into frequent-flier
programs and can have broaderapplication for evaluating other similarly structuredloyalty programs, both
in Australia and globally. Additionally, the findings from the study can enhance overall awareness of the
ever-increasingthreat to global financial integrity throughthe expansion of virtual currency.
Keywords Anti-money laundering, FATF, Frequent-flier programs, Loyalty programs,
Virtual currency
Paper type Research paper
Introduction
The past few years have brought significant changes to the landscape of commercial
transactions. One notable development is the expansion of virtual currencies, which poses
novel and unprecedentedrisks to the anti-money laundering (AML) regime.
According to the European Central Bank (ECB), some virtual currencies are deployed
within a closed system; generally, they cannot be obtained with –or exchanged for –legal
tender. Closed system virtual currencies primarily serve only the single purpose for which
The author wishes to thank Michael Tooma and Osnat Sarusi-Firstater for their assistance and
Vrinda Jain for excellent research. Financial support from the Optus Macquarie University Cyber
Security Hub, Clyde and Co. and Agmon and Co. is gratefully acknowledged.
JMLC
25,1
150
Journalof Money Laundering
Control
Vol.25 No. 1, 2022
pp. 150-164
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-11-2020-0127
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
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