Trade Groups Call for Consistent AML Standards for Digital Activities

The Clearing House Association and Bank Policy Institute urged the U.S. Department of the Treasury to establish clear, consistent, and technology-neutral standards for digital assets under the Bank Secrecy Act ("BSA").

In a joint comment letter, responding to Treasury’s request for information on detecting illicit activity involving digital assets, the Associations emphasized that "same activity, same risk, same rules" should guide regulation of both traditional financial institutions and digital-asset companies. They argued that inconsistent supervisory expectations, unclear Know-Your-Customer ("KYC") obligations, and outdated model-risk management standards hinder banks from responsibly adopting innovative compliance tools. The Associations urged Treasury to promote regulatory clarity and balanced rules that prevent illicit finance while enabling responsible innovation.

The Associations recommended:

1. Regulatory Clarity and Consistency. The Associations urged Treasury to coordinate with federal banking agencies to define which digital-asset activities trigger KYC and AML obligations. They also asked Treasury to clarify when participants in DeFi ecosystems qualify as financial institutions or Digital Asset Service Providers under the BSA.
2. Technology and Innovation. The Associations recommended that Treasury encourage financial institutions to test and deploy new compliance technologies without requiring prolonged "parallel runs" with legacy systems. They supported risk-based adoption of artificial intelligence and machine learning to enhance transaction monitoring and detect complex illicit-finance patterns. The Associations also called for modernization of Model Risk Management guidance to create flexible, fit-for-purpose standards for financial-crime monitoring platforms.
3. Blockchain-Specific Risks. The Associations requested that Treasury provide sanctions safe harbors for inadvertent payments of blockchain "gas fees" to sanctioned validators. They advocated for a risk-based approach to tracing asset provenance rather than exhaustive chain-of-custody reviews. They also urged support for legislation allowing Treasury to restrict U.S. persons from using mixers, tumblers, or other obfuscation tools, primarily associated with illicit activity.
4. Digital Identity. The Associations urged Treasury to clarify how financial institutions can use emerging digital-identity solutions—such as mobile driver’s licenses—to meet Customer Identification Program and KYC requirements. They recommended enabling secure, privacy-protective access to authoritative data sources such as DMV and passport databases, and establishing national standards and liability protections for institutions that rely in good faith on state-issued digital credentials.
5. Information Sharing and Analytics. The Associations called for broader information-sharing safe harbors beyond Section 314(b) of the USA PATRIOT Act to improve collaboration in detecting financial crime. They also asked Treasury to define best practices and supervisory expectations for blockchain analytics, including appropriate assurance levels and due-diligence standards, to enhance the reliability of digital-asset compliance frameworks.