Reported by André Beganski

Anti-money laundering (AML) rules are not a panacea for dealing with tax cheats and criminals who try to cover their tracks with crypto—but they’re a logical place to start, according to a paper published by the International Monetary Fund (IMF) on Wednesday.

The paper was authored by members of the IMF’s Fiscal Affairs Department: Katherine Baer, Ruud de Mooij, Shafik Hebous, and Michael Keen. It includes a disclosure that the views expressed by its authors do not necessarily reflect the views of the IMF.

From a taxation perspective, the paper’s primary concern is that digital assets provide a new and potent way for criminals and the rich to conduct transactions undetected. And its authors recognize tens of billions of dollars in potential tax revenue are at stake, with no consensus across the globe on how the issue should be approached.

The authors say plainly that they don’t intend to “provide policy prescriptions,” but also write that governments can look to regulations and laws present in the U.S. as a guide to stop financial crimes and illegal activity.

“Whether crypto withers or blossoms, the tax system still needs to deal with it,” the IMF authors said. “The first step for governments, nonetheless, is to apply AML rules and third-party reporting requirements where they can.”

In terms of AML rules, the paper references guidance released by the Financial Action Task Force in 2015—meant to serve as a global standard for combating money laundering—but acknowledges that not all jurisdictions fully comply.

The paper notes that centralized institutions like exchanges are in a unique position to help authorities gain information on digital asset ownership, often serving as the touch point where cash is exchanged for crypto, and capable of tracking activity beyond that.

The IMF paper estimates that a global 20% capital gains tax in 2021 might have raised around $300 billion from crypto-related transactions. Still, the authors said Know-Your-Customer (KYC) procedures—which help them remain compliant with anti-money laundering regulations—aren’t enough to paint the whole picture for tax authorities.

Read full report: https://decrypt.co/147562/bitcoin-tax-evasion-anti-money-laundering-imf?amp=1