Leveraging Artificial Intelligence to Combat Crypto Money Laundering: A Regulatory Perspective

Parele Shamase

doi:10.25159/2522-3062/21002

Authors

Parele Shamase University of Johannesburg https://orcid.org/0009-0008-5827-115X

DOI:

https://doi.org/10.25159/2522-3062/21002

Keywords:

artificial intelligence, anti-money laundering, crypto assets, principles-based regulation, risk-based compliance

Abstract

The emergence of multiple variations of crypto assets has the potential to enhance traditional monetary systems, reduce transaction costs, bolster data protection and promote financial inclusion. However, unique crypto features have also opened a modus operandi for cyberlaundering and weakened traditional anti-money laundering (AML) regulations. Malicious actors exploit the increased quasi-anonymity, cross-jurisdictional reach and decentralisation of crypto assets to facilitate money laundering. In 2022, crypto-asset service providers were declared accountable institutions in order to bring crypto assets under money laundering regulation and supervision in accordance with the Financial Intelligence Centre Act 38 of 2001. However, the current AML measures lack an innovative and forensic analysis angle to combat complex crypto money laundering strategies. Artificial intelligence (AI) technologies can transform the execution of AML compliance in the crypto economy with enormous speed and greater efficiency. However, innovative technologies can also reinforce human bias, undermine data protection and cause operational challenges for financial institutions. Therefore, the strategic use of AI in AML control must balance sophisticated financial crime control initiatives with competing ethical and policy considerations to promote the sustainable development of the crypto ecosystem. This article examines the principles-based integration of AI-driven mitigation and control typologies to enhance financial security in the crypto medium. It investigates how AI-driven mitigation strategies can thrive in criminogenic crypto finance under legal safeguards of a structured and normative regulatory environment.

Author Biography

Parele Shamase, University of Johannesburg

Parele Shamase is a legal scholar and tutor affiliated with the Faculty of Law at the University of Johannesburg, South Africa. He is associated with the Centre for Banking Law, a leading research hub in banking and finance law within the university’s Faculty of Law, which is recognised for producing influential legal scholarship in South Africa and beyond.

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