Crypto Anti-Money Laundering Bill Hits US Senate The Register

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A bipartisan bill introduced in the US Senate could finally bring the cryptocurrency industry to heel, among other things by extending existing banking regulations to cover digital currencies and designating cryptocash sellers as money services businesses.

The Digital Assets Anti-Money Laundering Act (DAAML) [PDF] was introduced yesterday by Senators Elizabeth Warren (D-MA) and Roger Marshall (R-KS) with the stated aim of killing the use of cryptocurrencies as a way to launder money and finance terrorism.

“The crypto industry should follow common sense rules like banks, brokers and Western Union, and this legislation would ensure that the same standards apply to similar financial transactions,” Warren said.

Without directly saying that the arrest of disgraced former FTX CEO Sam Bankman-Fried was the impetus for the bill, Warren told CNN that the bankruptcy of a “major crypto platform and the lawsuits of its CEO meant that digital assets came under increasing scrutiny across the political world. spectrum. What better time to act than when crypto crimes are front and center, she said.

Crime

“Rogue nations, oligarchs, drug lords and human traffickers use digital assets to launder billions in stolen funds, evade sanctions and fund terrorism,” Warren said.

You don’t have to look hard to find support for this claim: in 2020, a Bulgarian man who ran a crypto exchange was found guilty of using it to launder money for other criminals, and last year, a $150 million crypto laundering ring in Hong Kong was busted by the Chinese government.

Two men from Estonia were arrested and charged last month with stealing and laundering $575 million in crypto via a Ponzi scheme, and FTX’s Bankman-Fried has also been charged with laundering digital money, among other things.

That said, many people use cryptocurrency for non-criminal purposes: spending, trading, etc.

The bill gives authority over the creation and enforcement of its proposed rules to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) by directing it to extend the requirements of the Bank Secrecy Act (BSA), as know-your-customer rules, cryptocurrencies.

BSA requirements in DAAML include requiring U.S. citizens transacting more than $10,000 of digital assets stored in an offshore account to report it through the IRS-enforced Foreign Banking and Financial Accounts Rules .

The BSA also requires that “digital asset wallet providers, miners, validators and other network participants who may act to validate, secure or facilitate transactions in digital assets” be classified and regulated as money services businesses (MSBs).

As part of designating crypto players as ESMs, the bill also requires FinCEN to create an Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Task Force compliance process for MSBs.

As an additional means of preventing the anonymous exchange of crypto assets, the bill would also prohibit financial institutions from “using or transacting with digital asset mixers” that aggregate cryptocurrencies and then redistribute them to help obfuscate users and hide the origins and destination of funds.

DAAML is also taking action against cryptocurrency ATMs by requiring the owner of the machines to regularly update kiosk location maps and verify customer identities.

What about offline crypto wallets?

In a summary of the bill, Senator Marshall’s office said that non-hosted crypto wallets, meaning those controlled by an individual, such as cold storage on a USB drive or in an offline wallet, constitute a serious regulatory gap that must be filled.

These wallets “allow individuals to circumvent AML controls and sanctions,” the pair said in the summary, and the bill takes steps to ensure these wallets are not black holes for regulators.

DAAML directs FinCEN to implement proposed 2020 rules “that would require banks and MSBs to verify customer and counterparty identities, maintain records, and file reports regarding certain digital asset transactions involving non-hosted wallets or wallets hosted in non-BSA compliant jurisdictions”.

In other words, if this bill passes the Senate as well as the House, the illusion that cryptocurrency is automatically and simply anonymous will eventually, and perhaps permanently, be dispelled.

Don’t expect that to happen quickly, though: given that it’s already mid-December, the bill is unlikely to be heard before Congress adjourns for the year on December 21. . In this case, DAAML should be reintroduced when the 118th Congress meets in early January.

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