Shadowy Figures: Tracking Illicit Financial Transactions in the Murky World of Digital Currencies, Peer-to-Peer Networks, and Mobile Device Payments

Executive Summary

The history of the movement of money is as complex and varied as the history of money itself, and includes ships laden with gold bullion, desert caravans carrying salt or cowry shells, armored trucks filled with banknotes, paper checks, and today, a large and quickly growing list of digital transfer methods. Secrecy and anonymity have always played roles in the movement of money, most commonly because they offer a strong measure of privacy and protection against being targeted by thieves, but also because the parties in financial transactions can have other reasons—some legitimate, some not—for keeping a low profile.

The combination of the enormous growth in social networks, the complexity of peer-to-peer systems and software, and the number of Internet and wirelessly connected devices is altering the landscape of financial transactions at a rate and to a degree that is unprecedented. Today, such transactions can be conducted not only using traditional, state-backed currencies, but also through purely digital currencies, virtual currencies, and virtual goods. In addition, mobile phone-based money transfer systems enabling traditional currencies to be moved in novel ways are experiencing rapid adoption, particularly in developing nations.

Almost no one would argue that governments do not have a right to track and trace digital financial transactions associated with activities such as terrorism and human trafficking. It is less clear, however, how governments can surmount the formidable technical and organizational challenges associated with detecting and monitoring these transactions. The solution will require a combination of self-regulation, government-industry collaboration, and change in both technology and culture within government agencies.

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