The Treasury has made digital assets a key area of focus in its 2024 National Strategy for Combating Terrorist and Other Illicit Financing report.

The strategy outlined a comprehensive approach to mitigate illicit actors’ misuse of these technologies while promoting a transparent and secure financial system.

Closing regulatory gaps

The Treasury’s report highlighted the evolving threat environment, with criminal organizations increasingly leveraging crypto and other digital assets to facilitate illegal activities such as money laundering, terrorist financing, and cybercrime.

The 2024 Strategy aims to close regulatory gaps, enhance enforcement actions, and strengthen international cooperation to combat these threats effectively. The Treasury intends to implement comprehensive regulations for digital assets and virtual asset service providers (VASPs).

Additionally, the Treasury will propose rules to mandate anti-money laundering and countering the financing of terrorism (AML/CFT) programs for investment advisers and increased transparency in non-financed real estate transactions. It will also monitor and adapt rules for emerging technologies like DeFi to prevent criminals from exploiting them.

The report also said that enhancing the operational effectiveness of law enforcement and other government agencies remains crucial. The strategy includes initiatives to provide robust training, leverage advanced technologies like AI and blockchain analytics, and foster public-private partnerships to share vital information on illicit activities.

The Treasury emphasized the importance of international collaboration to tackle illicit finance, working with global partners to strengthen AML/CFT standards and share intelligence to disrupt cross-border criminal networks.

Responsible technological advancement

The Treasury will also prioritize supporting responsible technological advancements. The strategy advocated for developing secure digital identity solutions and promoted innovation in AML/CFT compliance technologies within the private sector.

The Treasury aims to finalize these regulations and continue addressing vulnerabilities in sectors not currently subject to comprehensive AML/CFT measures.

The report highlighted the critical need to remain vigilant and responsive to new threats. The ongoing modernization of the AML/CFT regime ensured that both the public and private sectors could effectively address the most significant illicit finance risks.

Despite significant advancements, the Treasury acknowledged ongoing challenges in combatting illicit activity. It added that the increasing sophistication of illicit actors, particularly in the virtual asset space, requires continuous adaptation and innovation in regulatory and enforcement frameworks.

The Treasury called for additional resources and legislative support to bolster its efforts in supervising and enforcing compliance among non-bank financial institutions and new market entrants.

The 2024 Strategy reaffirmed the US government’s commitment to maintaining a secure and transparent financial system. By addressing the risks associated with digital assets and fostering international collaboration, the Treasury aims to create a resilient environment that deters illicit activities and supports legitimate financial innovation.