The Open Legal Challenges of Pursuing AML/CFT Accountability within Privacy-Enhanced IoM Ecosystems

Abstract

This research paper focuses on the interconnections between traditional and cutting-edge technological features of virtual currencies and the EU legal framework to prevent the misuse of the financial system for money laundering and terrorist financing purposes. It highlights a set of Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) challenges brought about in the Internet of Money (IoM) landscape by the double-edged nature of Distributed Ledger Technologies (DLTs) as both transparency and privacy ori- ented. Special attention is paid to inferences from concepts such as pseudonymity and traceability; this contribution explores these notions by relating them to privacy enhanc- ing mechanisms and blockchain intelligence strategies, while heeding both core elements of the present AML/CFT obliged entities’ framework and possible new conceptualizations. Finally, it identifies key controversies and open questions as to the actual feasibility of ef- fectively applying the “active cooperation” AML/CFT approach to the crypto ecosystems.