Evaluation of Potential Crypto-currency Development Ability in Terrorist Financing

THE SERIOUS LACK OF JUDICIAL SUPERVISION.
Although the IMF, FATF, and other international organizations have created a series of AML/CTF programs, the development of financial judicial supervision in different countries is uneven, and there is a problem of inconsistent supervision be- cause of the differences in the development of their financial systems. Ponsford (2015) pointed out that the laws and regulations on cryptocurrency in China, the USA, and Australia have inconsistent supervision. The inconsistency in the regulation of cryptocurrencies will hinder the crackdown on criminal acts that abuse the technology.
Teichmann and Falker (2020) believe that cryptocurrency is a very suitable tool for money laundering, terrorist financing, and corruption, but the current compliance efforts of various countries on cryptocurrency are ineffective. In July 2020, FATF announced a 1-year review of the guide to risk- based approaches for virtual assets and virtual asset service providers issued in June 2019.
The review found that 19 of the 54 reporting jurisdictions had not yet implemented the standards required by the guidelines in their domestic laws (FATF, 2020c). Globally, a number of countries have set up special departments to regulate crypto- currencies. However, most countries have yet to take any action against cryptocurrencies. These gaps in the global regulatory system provide huge loopholes for terrorists to abuse cryptocurrencies.
At present, regulatory oversight in the USA, Europe, and China makes it difficult to obtain Bitcoin anonymously in transactions. However, the current supervision is limited to a certain ex- tent. For countries with relatively weak financial systems and imperfect anti-terrorism financing systems, the supervision of cryptocurrency is lax.
In addition, even in countries with strict supervision, there is also the proliferation of terrorist financing due to the inconsistent regulatory requirements between countries or regions; in the USA, financial regulation does not cover non- exchange transactions, nor does it cover blockchain transactions outside the regulated entities.
Therefore, this leads to the exchange of cryptocurrencies, and terrorist organizations achieve their purpose of transferring funds.
Overall, the potential terrorist financing risk of cryptocurrency is not well understood in many countries, and many countries do not have the ability to identify the use of cryptocurrency for terrorist financing. This situation provides an opportunity for terrorist organizations to use cryptocurrencies. Some scholars have even pointed out that the cryptocurrency agreement runs counter to the existing concepts of AML and ATF. Therefore, the existing AML/CTF mechanism cannot yet handle such emerging technologies (Dostov and Shust, 2014).