The Treasury’s Comprehensive Approach to Mitigating Illicit Finance Risks
The Treasury’s latest initiative aims to strike a delicate balance between fostering responsible technological innovation and addressing the challenges posed by illicit financial activities. Through a multifaceted approach, the department seeks to harness the power of emerging technologies while ensuring that the financial system remains inclusive and secure.
One key aspect of the Treasury’s strategy is to combat the practice of “derisking” – the phenomenon where banks, in an effort to mitigate risks, deny correspondent banking services to smaller financial institutions operating in areas perceived as high-risk for illicit activities. This heavy-handed approach has had severe consequences for legitimate users of banking services, effectively pushing them towards alternative, crypto-based payment and remittance solutions that operate outside the traditional banking system.
By addressing derisking, the Treasury hopes to promote greater inclusivity in the financial system, ensuring that all users, regardless of their geographical location or the perceived risks associated with their activities, have access to essential banking services. This, in turn, can help steer individuals away from crypto-based solutions that may lack the robust regulatory oversight and safeguards of the traditional banking sector.
At the same time, the Treasury recognizes the potential of technological innovation to mitigate illicit finance risks. The department’s recommendations emphasize the need to support responsible innovation, harnessing the capabilities of emerging technologies to enhance the detection and prevention of financial crimes.
Through this comprehensive approach, the Treasury aims to strike a delicate balance – fostering a financial ecosystem that is both inclusive and secure, where responsible technological advancements can be leveraged to combat the scourge of illicit finance.