Crypto AML/CFT Comes First at FinCEN

FinCEN AML Priority Crypto

On the 30th June 2021, the Financial Crimes Enforcement Network issued its first Anti-Money Laundering and Countering the Financing of Terrorism priority list, a list to be published every four years in accordance with the Anti-Money Laundering Act of 2020 (AMLA 2020).

Below are the priorities as they appear in the ‘Anti-Money Laundering and
Countering the Financing of Terrorism National Priorities’
document. Whilst crypto-assets are only listed on the second point, they touch every threat listed.

  1. Corruption;
  2. Cybercrime, including relevant cybersecurity and virtual currency considerations;
  3. Foreign and domestic terrorist financing;
  4. Fraud;
  5. Transnational criminal organization activity;
  6. Drug trafficking organization activity;
  7. Human trafficking and human smuggling; and
  8. Proliferation financing.

Within the section ‘Cybercrime, including relevant cybersecurity and virtual currency considerations’, FinCEN notes the recent JBS and Colonial Pipeline attacks, stating that “As evidenced by recent attacks on the nation’s fuel and food supplies, ransomware is a particularly acute concern, as criminals increasingly use sophisticated attacks to target various sectors, including government, finance, education, energy, and health care.”

Specifically noting that CVCs (FinCEN’s terminology for crypto-assets) are becoming a “currency of preference” for online illicit activities, FinCEN laid out the risks of crypto-assets being used “for buying ransomware tools and services, online child exploitation material, illicit drugs and other illicit goods online, and for paying ransoms to the perpetrators of ransomware attacks, CVCs often are used to layer transactions to hide the origin of money derived from illicit activity. Criminals use a number of techniques to obscure the source of illicit funds when conducting transactions involving CVCs, including the use of mixers and tumblers.25 CVCs have been used by some of the highest-priority threat actors to advance their illegal activities and nuclear weapons ambitions. For example, North Korea-linked cyber actors likely have stolen hundreds of millions of dollars’ worth of CVCs since 2019 through cyber operations against CVC service providers, laundered stolen CVC value through other CVC service providers and CVC wallets, and used the proceeds to help fund weapons of mass destruction and ballistic missile programs.”

“The publication of FinCen priorities is an important signal for VASPs. Regulated institutions are not required to take any immediate actions until relevant regulatory changes in the priorities areas are announced. However, what is already clear is they will need to show how they address the priority areas in their AML programs. It is important to note that the cryptocurrencies priority point is not the only one impacting VASPs. As obliged entities, VASPs will need to be able to demonstrate handling of all FinCEN priorities within their AML Program. Coinfirm’s tools and data are best-suited to support VASPs in showing increased scrutiny ahead of the regulatory changes. For example, in addressing the terrorist financing priority, we identified 55 blockchain services receiving terrorist funds, finding that they were not included in regulatory lists, ensuring that our clients are ahead of the market in terms of the information on TF risks.” – Barbara Hałasek, Coinfirm’s Head of Regulatory Affairs

Under the AMLA 2020, the final revised regulations will come out within the next 180 days.

To read the full FinCEN press release go here.