Money laundering using bitcoin a ‘significant’ risk, finds govt review

Bitcoin not currently covered by anti-money-laundering legislation

A government review of the federal anti-money-laundering regime has concluded that the use of digital currencies such as bitcoin to evade monetary controls poses a “significant” risk.

The review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 found that features of bitcoin and other digital currencies “make them attractive to individuals and businesses who wish to utilise them for both legitimate and illegitimate purposes”.

Currently the definition of money in the act includes ‘e-currency’; however, that definition does not capture cryptocurrencies. E-currencies are defined to include digital money backed either directly or indirectly by precious metal, bullion or a thing.

The review states that cryptocurrencies are “backed by an algorithm rather than a physical thing”.

“This means if a reporting entity was to sell over AUD10,000 worth of bullion in exchange for bitcoin there would be no obligation to submit a threshold transaction report,” the review states.

Currently the only oversight of digital currencies is when they are converted to or from fiat currencies.

The review concludes that bitcoin-style currencies should be brought under the aegis of the AML/CTF legislation.

One change would be to expand the definition of e-currency to money that is not backed by a thing. The new definition should not capture closed or non-convertible systems, however (although those systems should be monitored for further developments, the review adds).

Provision of certain services related to digital currencies should also be covered by the act, including converting them to and from other currencies (fiat or digital), providing wallet services, and providing ATM services.

The review sounds a note of caution, however, stating that regulations “must be proportionate to the risks faced and balanced with the potential benefits of digital currencies” or else service providers will simply move to jurisdictions with weaker rules.

The federal government announced earlier this year that it would make major changes to how bitcoin and similar currencies are treated in Australia by changing the rules governing taxation of digital currencies.

Currently, the GST treatment of bitcoin involves a form of ‘double taxation’, which bitcoin advocates have said acts as a fetter on the growth of local businesses based on the cryptocurrency.

In 2014 the Australian Crime Commission revealed it had staged an operation to monitor criminal use of bitcoin.

Read more: What makes ‘smart contracts’ smart?

The potential use of the currency for money laundering has been on the radar of AUSTRAC for quite some time.

The full review is available online (PDF).

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Rohan Pearce

Rohan Pearce

Computerworld
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