US Treasury Department's National Money Laundering Risk Assessment Report

Blockchain Crime Update: Treasury Department's National Money Laundering Risk Assessment Report notes that law enforcement agencies have detected an increase in the use of virtual assets for money laundering, drug trafficking, fraud, and cybercrime, including ransomware attacks and sanctions evasion. 

The digital assets landscape in the United States is constantly evolving, with new technologies and financial innovations reshaping the way we view and use digital currencies. This blog post summarizes the key findings of a recent report, shedding light on the state of digital assets in the US and the associated risks.

 

The report touched on the use of digital assets to facilitate money laundering crimes:

  1. Digital assets encompass a broad range of technologies, including digital currencies, stablecoins, and other industry-specific terms. Depending on the context, digital assets can be classified as securities, commodities, derivatives, or something else.

  2. Virtual assets and Virtual Asset Service Providers (VASPs) are terms used in this report, aligned with the terminology defined by the Financial Action Task Force (FATF).

  3. Virtual assets in this report include non-sovereign-administered digital assets, such as convertible virtual currencies (CVCs) like Bitcoin and stablecoins, but exclude central bank-issued digital currencies (CBDCs).

  4. The number of users and market capitalization of virtual assets have risen sharply since the 2018 NMLRA, with increasing incorporation into services provided by the traditional financial sector.

  5. Law enforcement agencies have detected an increase in the use of virtual assets for money laundering, drug trafficking, fraud, and cybercrime, including ransomware attacks and sanctions evasion.

  6. Many VASPs operating abroad have substantially deficient Anti-Money Laundering (AML) programs, particularly in jurisdictions where international AML/CFT standards for VASPs are not effectively implemented.

  7. Peer-to-peer (P2P) transactions are increasingly being used to evade AML/CFT controls, with "unhosted" or "self-hosted" wallets allowing users to transact without the involvement of a regulated financial institution.

  8. Decentralized finance (DeFi) refers to a class of virtual asset protocols and platforms, which enable automated P2P transactions without the need for an account or custodial relationship, often through the use of smart contracts.

The recent report highlights the growing importance of digital assets in the US financial landscape, but also raises concerns about the potential risks associated with their use. It underscores the need for effective regulation and oversight to ensure the safety and stability of the digital asset ecosystem.

This blog post was prepared with the assistance of ChatGPT-4 AI. Nothing in this post should be considered legal advice or the creation of an attorney-client relationship. This blog is strictly for informational purposes only.