The current state of the international economy is vastly complex and reaching a critical, historic, turning point. The past few centuries have seen cataclysmic changes in the monitorazation, creation, and management of wealth.
From the industrial revolution, to the Great Depression, to the fall of the Soviet Union, the advancements in and evolution of the economy have had widespread effects on all facets of society. Today’s economy is one that is both highly productive and and highly stressed. The disparity of wealth between the rich and poor is hitting an all-time high, and technology has redefined the way we view and interact with currency.
Between 1988 and 2011, the incomes of the poorest 10 percent of the population grew by $65 per person, while the incomes of the richest 1 percent grew by $11,800 per person. This great divide has lead to crime, corruption, and immense amounts of greed. As income inequality has been rising, so has the rate of financial crime. Financial crimes have been defined as crimes arising within financial communities, both nationally and internationally in relation to fraud, theft, or embezzlement.
In addition to the income gap, the growth of a cyber economy, has added additional complexities to an already complex issue. In 2016, Cyber Economic crime represented 36% of all economic crimes, a 800 basis point increase from the year prior. As the problem is vast and the impacts are grave, it is the duty of the international community to provide solutions combatting both cyber and ‘analog’ financial crimes.The evolution of the Russian economy has been tumultuous since the end of the Cold War, and it serves as a prime example of how regulations are needed for the establishment, growth, and maintenance of healthy and safe economic communities.
The fall of the Soviet Union in 1991 plagued the Russian economy with the immense responsibility of settling all Soviet debts despite its population representing only half of the former USSR, leading to the contraction of the Russian GDP at a rate of -40%. The years that followed were strife with crises, inflation, and foreign lending as the Russian ministry had an extremely difficult time converting to a globally integrated market economy. In 2000, tides turned as the rise of Russian President Vladimir Putin came with invaluable effects on the Russian economy, bringing a GDP rate of +7% per year. With a new presidency, came new Russian economic policies, most notably the establishment of the Eurasian Economic Union in 2014.
This Union not only represented members’ global financial interests but also harbored a focus on helping strengthen suffering Post-Cold War economies. Despite evident improvement under Putin, a host of factors continue to impair Russian economic status, aside from the repercussions of the Soviet collapse. The Ruble’s collapse, sanctions increases, lack of trade, and decreasing oil and gas usages are a few of the many components that provoke a Russian search for new, innovative means of national income.
Their strategic decision to debase previous economic oil and gas reliance steered the nation toward digital and crypto means of stability. To this end, Russia has recently announced the implementation of its own answer to Bitcoin, the CryptoRuble. Russia sees the potential in this currency, noting that the mining of crypto could be 10 times more profitable than pumping oil. Putin sees the value in this, pushing for legislation that would help regulate and establish legal definitions for this new economy in addition to introducing policy that would levy a 13% tax against any crypto-holder who cannot explain where their funds came from. The Russian Federation’s current transition to a cashless economy has proven a sophisticated understanding of both the benefits of crypto advances as well as the grave need for reform and regulation.
The current state of global financial crimes is extensive and ever-changing, running the gamut from small, regional indiscretions to massive illegal international transactions. The Russian Federation is prepared to combat financial crimes with an approach that successfully addresses crimes relating to paper, crypto, and virtual currencies. The three payment methods all come with their own unique characteristics that make them attractive to both the legitimate and illegitimate economies. The Russian Federation understands that the mitigation of financial crimes lies in a future where cash transactions are limited, virtual payments are monitored, and crypto-currencies are properly regulated. Encouraging the end of large denomination bills is one effort that many countries have already taken in efforts to diminish their role in criminal activities, however it is still a valid solution with the help of the IMF through possible World Bank support in the form of infrastructural projects to see such idea through. Additionally, both limiting the amount of cash one can carry while traveling and restricting purchases in cash to a negotiated limit would be viable courses of action to take in efforts to decrease cash use and therefore the crimes committed with it. In addition to limiting cash transactions, the Russian Federation suggests the implementation of a tax in cases where citizens cannot prove the origins of money in their possession as previously suggested in Russia’s use of the CryptoRuble.
Another factor to be considered is the objective of a profitable global economy for the middle class, allowing hard working citizens to reach the goods and services they need in an open marked used by all, most effectively achieved by the promotion of the safe use of cryptocurrency. The Russian Federation views the creation of a global crypto app as a comprehensive and multifaceted tool in the global rollout of this economy. Such application would include a cryptocurrency wallet, storing not only different forms of cryptocurrency to make various methods more accessible but to translate individual virtual and crypto currencies managed by both recognized countries and private individuals with the goal of serving as a medium to exchange and integrate various economies, overall solving the issue of mobile payment methods unique to certain countries not being accepted abroad. Other facets of the application would include an identifier of all locations accepting cryptocurrencies to present the currency’s global presence in addition to providing informative user manuals which would explain the benefits of cryptocurrencies, outline protection measures associated with their use and advisory explanations targeted toward small business owners on how to build business infrastructure to support these payment types.
On that note, the application will incorporate a benefit associated with physical currency: the role ATMS play in monitoring suspicious activity. The application’s final function will thus introduce a tracking device with real-time, detailed behavior profiles for each device to be overseen by a UN committee, universally supervising illicit transactions and behavior, hence incorporating physical recording aspects into digital payment. Finally, it is important to note that in search for correct preventive measures, all such forms of modern trade must be addressed in targeted ways. As of late, current legislation and regulation to address financial crimes are too broad with not enough explicit impact. In order to begin to make substantial steps forward there must be a centralized focus on problems that can be directly impacted with policy, education, and cooperation particularly in state issued job training. Constant vigilance, dedicated resources, and an understanding of the ever-shifting digital landscape threat should be the foundation of policy expectations worldwide. Overall, suggested solutions point towards a future that is explicitly less cash-based with an increased focus on crypto infrastructure that is well regulated and internationally policed. The IMF will play a crucial role in this evolution, serving as a unifying body in which the private and public sector will work together to build a safer future in addition to serving as a consultancy for all nations seeking assistance in the help against economic crimes.
The road to this future is winding and riddled with complication, yet the solution lies with a targeted approach to all aspects of the problem and cooperation from the entire international economic community.