Abstract

Digital currencies make transfers in digital markets, providing transaction participants with many advantages: easy access to markets, maintaining the identity of participants in transfer transactions, even their application is constantly expanding when buying new and innovative goods. Banks are an integral and significant part of this turnover, which gives them additional advantages and direct effects and exposes them to additional difficulties and dangers. The increased interest in them was noted mainly due to the continuous growth of their market rate and the additional growth of cryptocurrency extraction. Most transactions with them are based on the regulations of the applicable law. Still, the possibility of being the object of a crime has provoked a backlash from financial supervisors to protect the rights of other market participants and especially banks as the most accessible of all. Although it is a legal system in place to prevent banking institutions from being involved in money laundering operations, digital currencies are now a new opportunity with the specific advantages that ensure their smooth transfer to the network. The leading business companies such as TESLA have offered the opportunity to buy electric cars with digital currencies, with the growing demand for cryptocurrency services. Partly aided by the rising value of essential natural resources, important components for building information infrastructure, and the Covid-19 pandemic, significant financial institutions have permanently established themselves in digital markets such as JPMorgan, BNY Mellon, and Morgan Stanley, BlackRock and many others. Despite the targeted actions of state regulatory institutions, whose duty is to ensure the public good “cybersecurity”, the mass entry into these markets leaves consumers relatively unprotected. Money laundering or terrorist financing often provokes crises among regulatory institutions because they are usually accompanied by arms deals, drug trafficking, tax evasion, and others, as well as tax fraud, terrorism, and drug trafficking. A current application of digital currencies is their use to pay for services related to cyber attacks on financial institutions, objects of national security, etc. when the entire population suffers the damage. The new roles of financial institutions in the digital markets strengthen the notion of compliance as possible risk threats, realizing through compliance functions to automate and implement the integrated approach to all types of risk that accompanies the movement of digital financial assets. For some banking intermediaries, this has changed their cybersecurity strategy.

Keywords: Anti-Money Laundering, Digital Markets, Crypto Currencies, Blockchain, Compliance Functions.

JEL Classification: E42, E58, L51.

Cite as: Stavrova, E. (2021). Banks’ Digital Challenges. Business Ethics and Leadership, 5(3), 87-96. https://doi.org/10.21272/bel.5(3).87-96.2021

This work is licensed under a Creative Commons Attribution 4.0 International License

References

1. Brezoeva, B. (2020). Cryptocurrency − accounting challenges. Research papers UNSS, 03, 52-76. Available at: [Link]
2. Carlisle, D. (2017). Virtual Currencies and Financial Crime: Challenges and Opportunities. Royal United Services Institute. Available at: [Link]
3. Ciphter Trace (2021). Available at: [Link]
4. Dimitrov, P., Vasenska, Iv., Koyundzhiyska-Davidkova, Bl., Krastev, Vl., Durana, P., Poulaki, I. (2021). Financial Transactions Using FINTECH during the Covid-19 Crisis in Bulgaria. Risks, 9(3), 48. [Google Scholar] [CrossRef]
5. Donaldson, J., Piacentino, G., Thakor, An. (2018). Warehouse Banking. Journal of Financial Economics 129(2), 250-267. [Google Scholar]
6. FATF (2007). Guidance on the Risk-Based Approach to Combating Money Laundering and Terrorist Financing: High Level Principles and Procedures. Available at: [Link]
7. FATF (2012). The FATF Recommendations: International Standards on Combatting Money Laundering and the Financing of Terrorism & Proliferation. Available at: [Link] 
8. FATF (2020). Financial Action Task Force. Report 2019-2020, FATF/OECD, Paris. Available at: [Link]
9. Filipkowski, W. (2008). Cyber Laundering& An analysis of topology and techniques. IJCJS, 3(1), 15-27. [Google Scholar]
10. GGF (2021). Financial crime: five key trends from 2020 and how they played out. Partner Content on 22/02/2021. Available at: [Link]
11. Hanke, St.H. (2021). El Salvador’s Road to Currency Chaos and Economic Collapse. Available at: [Link]
12. Hayek, Fr. (1976). The Denationalization of Money, London: Institute of Economic Affairs, 71-74. Available at: [Link]
13. Lyeonov, S.V., Kuzmenko, O.V., Mynenko, S.V., Kwilinski, A.S., Lyulyov, O.V. (2020). Determining the Rating of Ukrainian Banks on the Risk of Legalization of Illegally Obtained Income. Механізм регулювання економіки [Mekhanism regulyuvannya economiky], 3, 31-45. [Google Scholar] [CrossRef]
14. Nenovsky, N., Chobanov, P. (2021). Digital currency Vs the crypto. Bloomberg Businessweek bg. July, 2021, 44-53. Available at: [Link]
15. Rhoda Weeks-Brown (2019). Cleaning Up. Countries are advancing efforts to stop criminals from laundering their trillions. Available at: [Link]
16. Stavrova, E. (2005). Systems for prevention of the access of dirty money to the financial and credit system. ISBN 954-680-374-X, Blagoevgrad, 48-53.
17. Thakor, R., Merton, R.C. (2019). Trust in Lending. Paper presented at the AFA Meeting, Atlanta. Available at: [Link]   
18. Thakor, A. (2019). The Purpose of Banking: Transforming Banking for Stability and Growth, Oxford. University Press. ISBN 0190919531, 9780190919535. 256 p. [Google Scholar]
19. Thakor, Anjan V. (2019). Fintech and banking: What do we know? Journal of Financial Intermediation, 41, 100833. [Google Scholar] [CrossRef]
20. Tommaso, F.D. (2020). The New Italian Legislation on Corporate Governance and Business Crisis. The Impact of Covid–19 on SMEs and the Recent Rules to Mitigate the Effects. Financial Markets, Institutions and Risks, 4(4), 91-108. [Google Scholar] [CrossRef]
21. Valkanov, N., Stavrova, E. (2019). Prevención de fraudes bancarios con seguro de función de cumplimiento eficiente [Banking fraud prevention with efficient compliance function insurance]. 100-Cs, Revista de humanidades [Journal of Humanities], 5(1), 60-71. Available at: [Link]
22. Vasilyeva, T., Sysoyeva, L., & Vysochyna, A. (2016). Formalization of factors that are affecting stability of Ukraine banking system. Risk governance & control: financial markets & institutions, 6(4), 7-11. [Google Scholar] [CrossRef]
23. Vasylieva, T.A., Lieonov, S.V., Letunovska, N.V. (2019). Financial, business and trust cycles: the issues of synchronization. Zbornik radova Ekonomskog fakulteta u Rijeci, 37(1), 113-138. [Google Scholar] [CrossRef]
24. Zolkover, A.O., Georgiev, M. (2020). Shadow Investment Activity as a Factor of Macroeconomic Instability. Financial Markets, Institutions and Risks, 4(4), 83-90. [Google Scholar] [CrossRef]
25. Zlateva, D., Stavrova, E., Vladov, R. (2017). Digital Bank Marketing in the Context of the Circular Economy. International Journal for Science and Arts − “IDEA”, 1(1), 31-38. Available at: [Link]