Cryptocurrencies Under Surveillance from AUSTRAC to Prevent Money Laundering and Terrorism
Originally published on: Cryptocurrencies Under Surveillance from AUSTRAC to Prevent Money Laundering and Terrorism
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April 13, 2018
Cryptocurrency exchange providers operating in Australia are now under AUSTRAC, the Australian financial intelligence agency’s watch. The enactment will help minimize the use of cryptocurrencies for illegal purposes like money-laundering and terrorism.
Digital currency exchange (DCE) entities must now register with AUSTRAC. They are required by law to meet the Anti-money Laundering and Counter-terrorism Financing (AML/CTF) compliance and reporting obligations. The law is effective immediately. The transition period is until 14 May, 2018, to allow time for DCE businesses to adapt to this change in regulation.
“It’s recognized that this reform will help protect their business operations from money laundering and terrorism financing,” said Nicole Rose, AUSTRAC’s CEO. “Regulation will also help strengthen public and consumer confidence in the sector.”
The Reform Initiative
The Anti-money Laundering and Counter-terrorism Financing (AML/CTF) laws require all regulated financial institutions to collect data on their customer’s identity and monitor transactions. The Act also stipulates that entities have to report suspicious activities such as transaction over A$10,000 ($7,755).
According to the Australian Broadcasting Corporation (ABC), there are approximately 100 DCEs businesses located in Australia. However, only 20 cryptocurrency exchanges have registered with AUSTRAC. The financial intelligence agency believes this reform will increase AML/CTF compliance of DCEs businesses.
The ABC also previously reported in October 2017 that with the new regime, it will also be an offense for an “unregistered person to provide digital currency exchange services.” The cryptocurrency exchanges would also need to “report threshold transaction and suspicious matters to AUSTRAC, and keep appropriate records.”
Serious crimes such as terrorism and money laundering are damaging to the economy, especially when the pseudo-anonymous characteristics of cryptocurrencies can complicate the matters further. The reform will, therefore, equip the AUSTRAC authorities with data that can be helpful and “have [an] immediate benefit in the fight against serious crime and terrorism financing,” said Rose.
Preventing Cryptocurrency-related Crime
According to the Australian Criminal Intelligence Commission’s (ACIC) report released in August, “Virtual currencies, such as bitcoin, are increasingly being used by serious and organized crime groups.”
The pseudo-anonymous nature of cryptocurrencies is seen by criminals as a convenient medium to facilitate illegal activities. “They are a form of currency that can be sold anonymously online, without reliance on a central bank or financial institution to facilitate transactions.”
Furthermore, the cryptocurrency industry is associated with underground marketplaces like Silk Road and Valhalla. The majority of activities on these marketplaces involve unlawful conducts such as trafficking of illicit drugs, child exploitation tools, and the selling of firearms. Online ransomware hackers also demanded cryptocurrency payments in the past to cover their tracks and avoid being caught by the authorities.
The Australian government believes the key is to have a full understanding of the landscape of digital currencies to prevent criminals from leveraging this technology. “AUSTRAC now has increased opportunities to facilitate the sharing of financial intelligence and information relating to the use of digital currencies,” said Rose.
The next phase of Australia’s crypto regulation involves extending legislation to lawyers, accountants, real estate agents and sellers of high-value goods.