WASHINGTON – For decades, the government has leaned on banks to help crack down on illicit finance, requiring them to comply with a bevy of anti-money-laundering rules. But as cryptocurrencies enter the mainstream, policymakers are increasingly looking at how to expand the federal AML regime to include digital assets.
The Financial Crimes Enforcement Network has been building up its resources to address cryptocurrency risks, such as hiring Michele Korver, a former Department of Justice official, as the agency’s first ever chief digital currency advisor. Congress also passed legislation last year that was partly aimed at helping improve Fincen’s technology resources.
But that is just a drop in the bucket compared to what observers say is needed to track suspicious activities among the more than one million cryptocurrency transactions completed every day. Some suggest lawmakers could mull broader reforms to apply Bank Secrecy Act requirements to cryptocurrency exchanges and other digital-asset firms.
“Congress has viewed cryptocurrency as a gap in the protection of the US financial system from illicit funds,” aid Ben Hutten, an attorney at Buckley. “The nature of illicit finance is that when one area becomes more heavily regulated, illicit financiers will look to the next. It’s always going to be a little bit of a game of cat and mouse. “
Potential reforms include extending customer identification program requirements – now imposed on banks – to crypto firms, scrutinizing the activities of cryptocurrency companies more closely and conducting routine examinations. Policymakers can also ensure that Fincen has the technology to track illicit blockchain activities.
“I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers, they’ve been a tool to finance terrorism,” Treasury Secretary Janet Yellen said earlier this year.
To some extent, the ambition of certain nonbanks to gain full-fledged bank powers will automatically subject them to AML requirements. Just Monday, Circle announced its intent to apply to the Office of the Comptroller of the Currency for a charter.