Money Laundering with Cryptocurrency: Open Doors and the Regulatory Dialectic

Abstract

The purpose of this study is to describe the opportunities and limitations of cryptocurrencies as a tool for money laundering through six currently available “open doors” (exchange mechanisms). The authors link the regulatory dialectic paradigm to KYC (Know Your Customer) and AML (Anti-Money Laundering) evasion techniques, highlight six tactics to launder funds with virtual assets and investigate potential law enforcement and regulatory alternatives used to reduce the incidence of money laundering with digital coins.

Design/methodology/approach: The methodology used is the analysis of significant recent events, the availability of “fintech” crime-fighting tools, and a literature review focusing on the application of the Regulatory Dialectic to existing crypto-asset markets that make them compelling to money launderers.

Findings: We examine the illicit use of cryptocurrency through Kane’s Regulatory Dialectic paradigm, identify a number of avenues that are still available for those seeking to launder money using digitized coins, review recently “closed doors” and make recommendations regarding the regulation of crypto-related markets that may assist in making them less desirable for potential criminals.

Originality/value: To the authors’ knowledge, there are yet no broad overview regarding the feasibility of money laundering across crypto-related assets within the paradigm of the Regulatory Dialectic.