Combating Digital Money Laundering: Criminal Law Perspectives on Blockchain-Based Financial Systems

Abstract

This essay is a critical review of the emerging trends in cyber money laundering in blockchain based financial systems and how the criminal statutes are carefully dealing with the challenges. It explains the dynamics of the illegal laundering schemes used by criminal groups to conceal the origin of funds through the cryptocurrencies and distributed ledgers and analyses the threats that the new technologies have on the financial regulatory system. It further explores how the same innovations can be used by responsible authorities to enhance the transparency of financial transactions of criminals and ensure that the battle against money laundering and financing of terrorism is enhanced by the pursuit of such innovations. The very premise of cryptocurrencies the engine of innovation and an opening that allows criminals to thrive demands a comprehensive review of both legal and technological responses to criminal activities to reduce the projected 20-billion dust of dirty money exchanged in 2023. This paper, therefore, argues that an integrated strategy, involving sophisticated blockchain analytics and responsive legal and regulatory frameworks, is crucial to combat the obfuscation techniques commonly used in cryptocurrency-based financial offences. This review outlines the complexities of this integrated approach, including the status and admissibility of electronic currencies as evidence in money laundering investigations and, especially, in jurisdictions grappling with the infancy of these crimes. In particular, the absence of specific regulatory considerations for cryptocurrencies as evidence in criminal procedure codes (including those dedicated to money laundering investigations and prosecutions) presents challenges for law enforcement and prosecution.