The biannual National Strategy for Combatting Terrorist and Other Illicit Financing has been released by the United States Treasury Department. This strategy includes four priority recommendations that could have various impacts on virtual assets.
Recognizing the challenges faced by law enforcement in keeping up with evolving financial technology, the Treasury has identified two main priorities. The first is to address regulatory gaps in Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) and establish a more focused and effective supervisory framework. The Treasury also plans to evaluate the need for further action in sectors that are not currently subject to comprehensive AML/CFT measures.
Enforcement will be a major focus as well. The strategy highlights the establishment of the Federal Bureau of Investigation’s Virtual Assets Unit, which provides technological equipment, blockchain analysis, virtual asset seizure training, and advanced virtual asset training for FBI personnel.
The strategy also emphasizes the importance of embracing blockchain technology. In order to achieve this, the Treasury recommends supporting responsible technological innovation and utilizing technology to mitigate illicit finance risks. It suggests promoting inclusivity in the financial system and addressing the issue of derisking, which often leads legitimate bank users to turn to crypto-based payment and remittance solutions that do not rely on traditional banking services.
The strategy also emphasizes the need for better cross-border payment systems and regulated money transfer options. It cites the G20 Roadmap and the FedNow domestic transfer system as successful examples of this approach.
Artificial intelligence and digital identity are identified as potential game-changers in the strategy’s effectiveness. While AI can enhance government regulatory and enforcement efforts, it can also be exploited by illicit users of the financial system, according to the strategy.
In a related development, the FBI’s recent arrest of Virgil Griffith for violating sanctions serves as a firsthand example of the strategy in action.
Overall, the National Strategy for Combatting Terrorist and Other Illicit Financing aims to address the challenges posed by evolving financial technology and enhance the effectiveness of regulatory and enforcement efforts in combating illicit financing.