EMERGING CHALLENGES JANUARY/1 2019

Cryptocurrencies, terrorism and organised crime

The European Parliament has approved a Directive on the 14th of May 2018 concerning the link between cryptocurrencies and terrorism. With the Directive the European Council reinforces the EU rules aimed at preventing and fighting the money laundering and financing of terrorism. The changes, compared to the past, are the following:

  • greater access to information concerning the owners, in order to improve transparency on the ownership of companies and trusts;
  • attention to the risks associated with prepaid cards and virtual currencies;
  • cooperation between financial information units;
  • lastly, a better control on transactions involving high-risk third countries.

What the international community should consider is, besides the advantages of these currencies, the distorted use that criminals are making thanks to the protection given to illegal proceedings by the complexity of the transmission of electronic money. High levels of secrecy, offered by the use pseudonymous and anonymous accounts, can give way to the illegal use of these transfers.

The most famous of these currencies is certainly Bitcoin, still the most widespread one at global level. Bitcoin was founded in 2008, and its aim was to make payments faster, by eliminating financial intermediaries. Along with Bitcoin, there are more than 1.500 different cryptocurrencies in circulation, many of which were created in very recently for a net assessed value of around $450 billion.

Until now evidence of cryptocurrencies by terrorist groups is largely anecdotal [Ana Alexandre Report: Crypto Not Effective for Financing Terrorist Groups, in Cointelegraph, 11/09/2018 https://cointelegraph.com/news/report-crypto-not-effective-for-financing-terrorist-groups and Nikita Malik, How Criminals And Terrorists Use Cryptocurrency: And How To Stop It, in Forbes, 31/08/2018
[https://www.forbes.com/sites/nikitamalik/2018/08/31/how-criminals-and-terrorists-use-cryptocurrency-and-how-to-stop-it/#65ae8fb03990], but a Europol report in 2015 pointed out that 40% of criminal transactions were carried out using these financial instruments.

The European Parliament has presented in this regard a detailed legal study recommending the drafting of AMLD5 (Fifth Anti-Money Laundering Directive) in order to preserve the use of blockchain as a useful developing technology and to include effectively the illegal use of cryptocurrencies in anti-money laundering regulations.
[European Parliament, Cryptocurrencies and blockchain, Legal context and implications for financial crime, money laundering and tax evasion, June 2018
http://www.europarl.europa.eu/cmsdata/150761/TAX3Studyoncryptocurrenciesandblockchain.pdf]

More than the fight against terrorism, where the use of these means in still limited, the important priority is combating organised crime, a real threat against lives, legality and national economies.

Pietro Stilo