The United States Treasury Department has published its biannual National Strategy for Combatting Terrorist and Other Illicit Financing, outlining four key recommendations that could impact virtual assets in various ways.
Recognizing the challenges faced by law enforcement in keeping up with evolving financial technology, the Treasury’s first two priorities are 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 mentioned the possibility of taking further action on sectors that are not currently subject to comprehensive AML/CFT measures.
The strategy also emphasizes the need for increased enforcement. As part of this, the Federal Bureau of Investigation’s Virtual Assets Unit is highlighted for providing technological equipment, blockchain analysis, virtual asset seizure training, and other advanced training for FBI personnel.
Furthermore, the Treasury aims to promote responsible technological innovation and leverage technology to mitigate illicit finance risks. It suggests measures to enhance inclusivity in the financial system and combat derisking, which negatively impacts legitimate bank users and drives the adoption of crypto-based payment and remittance solutions that do not rely on traditional banking services.
The strategy also emphasizes the importance of improving cross-border payment systems and regulated money transfer options, citing the G20 Roadmap and the FedNow domestic transfer system as successful examples.
Artificial intelligence and digital identity are identified as potential key factors 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, the strategy warns.
In a related development, the FBI’s recent arrest of Virgil Griffith for violating sanctions serves as a firsthand example of the enforcement efforts outlined in the strategy.