Combatting Money Laundering in an Age of Technological Innovation

Uche Anichebe – York University

The digital world has witnessed exponential growth and in most advanced countries, technology has dislodged the traditional means of transacting business, transferring funds, and storing wealth. In the past few years, there has been a boom in technology-enabled transactions and investments in digital currencies. It has been predicted that in the long run, digital currencies will replace cash, and this comes as no surprise because a large number of national and cross-border transactions are undertaken in digital currencies.

As a result, the financial regulators in many advanced countries are seeking pragmatic ways to bring digital currencies, as well as electronic payment platforms under their regulatory purview. Whilst the digitization of transactions and money has been lauded for the increased convenience and efficiency they provide, they have however exacerbated a number of financial issues, the most notable of which is money laundering.

Money laundering fuels corruption, terrorism and criminality, and has a devastating effect on national and global economies. With the aid of technology-driven payment platforms and digital currencies, the perpetrators of money laundering can cloak their identities and activities, making it increasingly difficult for law enforcement agencies to track their illegal activities.

In my recent paper, “Combating Money Laundering in an Age of Technology and Innovation, I examine the regulatory framework adopted by notable international bodies monitor and curb money laundering, that is, the Financial Action Task Fund, the Egmont Group and the Inter-Governmental Action Group against Money Laundering in West Africa. The essay also discusses the specific framework adopted by select nations (i.e.: The United States, The United Kingdom, Canada and Nigeria) to combat technology-enabled money laundering. In this regard, my paper discusses the prevailing fintech framework in each country, the extent to which digital currencies are acceptable or prohibited as a mean of doing business, making payment and saving wealth; as well as the legal and regulatory effort by each nation to curb money laundering enabled by digital technology.

The paper is divided into four parts, as follows: (i) how technology enables money laundering; (ii) international standards for the prevention of money laundering; (iii) national regulatory efforts to combat technology-based money laundering; and (iv) the way forward. In concluding, I make a number of salient recommendations to tackle money laundering enabled by technology.

The recommendations include an update of legal and regulatory systems by nations, to ensure that regulators stay abreast of disruptive innovations and develop tailored laws to address AML. As technology advances, the law needs to keep pace, to curtail the use of technology for illegalities. The paper also recommends the adoption of a digital and sophisticated approach in combatting money laundering, especially as it relates to digital currency transactions, as well as the provision of adequate sensitization and monitoring of financial and quasi financial institutions by national and international regulatory bodies.

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