Fighting financial crime in the age of electronic money: opportunities and limitations

Abstract

Purpose

The purpose of this paper is to stimulate some reflections on the potentially contradictory relationship between the adoption of innovative payment instruments and the prevention and fight against financial crime. The ideal addresses of the paper are regulators in these two fields (Central Banks; Financial Intelligence Units).

Design/methodology/approach

The paper is largely based on reflections coming from the author's background as a central banker with a long experience in the statistical analysis of financial data with an anti‐money laundering (AML) focus.

Findings

The paper takes the move from the present and prospective characteristics of the payment means and moves on to analyse briefly the possible implications of their evolution in the fight against money laundering and the financing of terrorism. The analysis shows how some factors that make innovative payment instruments desirable may, at the same time, represent elements of weakness in the prevention of financial crime.

Research limitations/implications

The paper addresses a number of theoretical and systemic issues but no specific data or calculations are provided to evaluate alternative regulatory scenarios. Further studies could offer a more quantitative approach, in an attempt, for instance, to estimate the costs and benefits of the evolution of the praxis and legislation in the field of payment system and AML.

Practical implications

The paper openly tackles the cross effects of regulation in the financial sector, specifically addressing the potential risk factor represented by loosely regulated innovations of the payment instruments. The argument is intended to highlight both the importance of technological evolution and the necessity of a proper supervision over potential loopholes and unguarded passages that could be exploited by financial criminals.

Originality/value

The paper addresses questions of particular relevance in the present, fast developing world of advanced technological payments and global financial crime. The author underlines explicitly how these two fields share some common features; an original argument is developed with reference to the possible risk of unwanted spillovers between these two areas of public interest.

Citation

Merlonghi, G. (2010), "Fighting financial crime in the age of electronic money: opportunities and limitations", Journal of Money Laundering Control, Vol. 13 No. 3, pp. 202-214. https://doi.org/10.1108/13685201011057118