U.S. Treasury Under Secretary for Terrorism and Financial Intelligence Brian Nelson gave a stark warning on the agency’s posture toward cryptocurrencies and their potential to serve illicit finance in a landmark session in front of the House Financial Services Committee.
Once given the opportunity to speak before the committee, Nelson gets right down to it in expressing gratitude for the chance to speak to the important issues for the Treasury Department’s Office of Terrorism & Financial Intelligence (TFI). Emphasizing how grave the challenge is, Nelson said that threats emanating from virtual assets include concerns about their exploitation for illicit financial activities.
At the core of Nelson’s testimony was the ten-year drive by the Treasury to come up with a sound Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) framework for digital currencies. He explained the department’s elaborate work in analyzing the risks that crypto-assets pose and detailing how diverse nefarious actors use them for their ill gain.
Much of their attention had to be given to ransomware cybercriminals, DPRK cyber actors, scammers, terrorist groups, and rogue users who exploit the key vulnerabilities existing in virtual assets. Nelson emphasized jurisdictional arbitrage and non-compliant financial institutions as critical in aiding such illicit activities.
Treasury’s Crackdown On Crypto Violations
Nelson did not mince words when it came to proactive steps by the Treasury against such threats. He cited landmark settlements with leading virtual asset service providers, including Binance, for violations of the Bank Secrecy Act and obligations under sanctions. He further explained new measures, such as the use of Section 311 of the USA PATRIOT Act to deal with virtual currency mixing.
Nelson said the proposed requirements for reporting transactions involving mixing would help to increase oversight, and the assistance provided to governments would help to boost transparency and disrupt such finance networks.
With that, Nelson underscored that these would still not be sufficient to fight illicit virtual asset finance in the virtual asset space. He went on to urge Congress to work with them in the necessary reforms to be enacted so as to deal with the evolving changes.
However, Nelson left no doubt about how important that issue was when he finished his testimony. The nexus between cryptocurrencies and illicit finance is some sort of maze where any kind of collective is very much in need of a proper solution.