US Treasury Outlines Strategy to Counter Illicit Financing, Emphasizes Role of Tech and Digital Assets
Summary:
The US Treasury Department's biannual National Strategy aims to mitigate terrorist and other illicit financing, with a focus on the challenges posed by evolving finance technology and virtual assets. The plan includes filling regulatory gaps in Anti-Money Laundering and Countering the Financing of Terrorism, creating a focused supervisory framework, and assessing sectors yet to be subjected to comprehensive measures. The strategy also emphasizes the need to handle the rapid expansion of new payment channels, such as virtual asset service providers, suggesting improved cross-border payment systems and regulated money transfers. Artificial intelligence and digital identities are marked as vital tools for success.
The US Treasury Department published its twice-yearly National Strategy for Counteracting Terrorist and Other Illicit Financing recently. This comprises four principal suggestions that could potentially influence the utilization of virtual assets. The authorities are grappling to keep up with the evolution of financial technology, the strategy confirms. The Treasury's primary objectives are to address regulatory voids in Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) along with structuring a more concentrated and efficient supervisory system. The Treasury has slated for inspection sectors not yet subjected to comprehensive AML/CFT measures. Intensifying enforcement is also on the to-do list. The rapidly evolving landscape of new payment channels and financial service providers, notably virtual asset service providers (VASPs), has strained regulatory resources traditionally applied to orthodox money service businesses (MSBs), according to the strategy. Part of this plan concentrates on blockchain technology, with the FBI's Virtual Assets Unit featuring as an example, which equips agents with the necessary technology, blockchain analyses, virtual asset seizure training, and advanced training concerning virtual assets. Concurrently, the Treasury aims to "back responsible tech advancement and draw on technology to curtail illicit finance risks" through a variety of measures. The strategy proposes expanding inclusivity in the financial system and challenging derisking, a term used when all correspondent services are denied to small banks in regions prone to high illicit activity. High-risk areas suffer severe consequences of derisking as it coerces legitimate bank service users towards crypto-based payment alternatives independent of the banking realm. As part of the tactic, the implementation of improved cross-border payment systems and regulated money transfer options have also been suggested. The Treasury cites the G20 Roadmap and the domestic transfer system, FedNow, as worthy models. The strategy's success could be greatly influenced by artificial intelligence and digital identity: "We will render regulatory and policy assistance to dependable digital identity solutions and... enlarge the use of artificial intelligence (AI) and data analysis in governmental efforts to...propagate US tech leadership on payments reflecting US standards, practices, and values". AI can potentially be a tool enhancing government regulation and enforcement ventures, however, it can also be weaponized by illicit users of the financial sector, the strategy cautioned.
Published At
5/17/2024 9:26:22 PM
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