October 28, 2022

CRS Reviews Digital Asset AML/CFT Policy Developments

In a report prepared for members and committees, the Congressional Research Service ("CRS") reviewed the development of an AML/CFT policy framework for digital assets.

CRS reviewed President Biden's March 9, 2022, Executive Order (E.O.) 14067 ("Ensuring Responsible Development of Digital Assets") and the reports by various agencies prepared pursuant to it. CRS also highlighted previously issued regulatory guidance, significant enforcement actions and Treasury's illicit finance Action Plan, which includes funding objectives for fiscal year 2023.

In September 2022, the White House published a Fact Sheet outlining next steps for addressing the illicit concerns of digital finance. Those steps included:

  • evaluating potential legislation to amend (i) the Bank Secrecy Act, (ii) anti-tip-off laws, (iii) statutory penalties for unlicensed money transmitters and (iv) applicability of laws against unlicensed money transmitting to digital asset service providers;

  • authorizing the DOJ to prosecute digital asset crimes in any jurisdiction where a victim of those crimes is located;

  • identifying gaps in the U.S. digital asset AML/CFT regime through the completion of two illicit finance risk assessments, one on decentralized finance and another on non-fungible tokens;

  • enhancing dialogue with the private sector on the illicit financing risk associated with digital assets and encouraging the use of emerging technologies to comply with AML/CFT obligations; and

  • continuing to enforce the law against illicit actors who misuse digital assets.

CRS said that the implementation of these steps "could take time or face congressional consideration."

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