The effect of bitcoin on money laundering law

Abstract

This thesis sets out to determine the influence of Bitcoin on the current Anti-Money Laundering law in Malta, which is largely derived from European Union Directives. The Directives in turn are based on the Financial Action Task Force Recommendations, and hence what shall be stated in this thesis may be, mutatis mutandis , applicable to other jurisdictions as well. Bitcoin is an innovative technological advancement in payment systems, with its most intriguing features being that it is completely virtual and lacks the oversight of a central authority. Perhaps the most worrying feature for legislators is that it is pseudonymous, thus hiding the identities of the persons transacting if there is no oversight. There have been a few incidents to date where Bitcoin and other Virtual Currencies were used with illicit intent. Therefore, with the advent of Bitcoin, it is imperative to ascertain whether the existing Anti- Money Laundering framework is enough to curb abuse through the utilisation of such a 'currency', or whether a revamped system is required. A comparative analysis is indispensable for this thesis, as currently there is no ad-hoc legislation on Bitcoin in Malta, and very few foreign legislative attempts on regulating Bitcoin for that matter. Moreover, a simplified technological overview of the workings of Bitcoin is important as well since it vastly differs from fiat currencies in some aspects. The thesis shall ultimately propose changes required both in the Bitcoin infrastructure itself as well as in the current Anti-Money Laundering framework in Malta, with the former requiring intervention from the Bitcoin community itself rather than a mere localised effort. Moreover, it is important to remember that notwithstanding copious amounts of research, both theoretical and practical, conducted before and during the writing of this thesis, ultimately the subject revolves around a technology which is still in its infancy, and may exhibit future features which would be hitherto unascertainable.