Sigal Mandelker, under secretary for terrorism and financial crimes at the U.S. Treasury Department, has told the Senate Banking Committee that the Financial Crimes Enforcement Network (FinCEN) is stepping up its battle against criminals using cryptocurrencies to launder money raised through illegal activity.
In a wide-ranging speech outlining the battle against criminal participation in the financial system, Mandelker said that “malign actors cannot operate without funding” and that reducing those actors access to financial services “requires calibrating our economic tools in strategic and complementary ways”.
Cryptocurrencies loomed large in the discussion. Platforms in the US are subject to strict anti-money laundering (AML) and Know Your Customer (KYC) laws and have to report any suspicious activity. In Manelker’s words, they “lead the world in mitigating the illicit finance risks of emerging technologies, such as the use of virtual currencies”.
Part of this is ensuring that everyone is aware of the relevant regulation. FinCEN has teamed up with the Internal Revenue Service (IRS) to offer recommendations to currency providers and exchanges so they may, “take certain actions to improve their compliance activities”. All such exchanges are required to register with FinCEN. About 100 have already done so.
Need for an International Approach
However, Mandelker claimed that there is a limit to how much the US can achieve on its own. Part of the U.S. strategy is persuading other countries to adopt a similar regulatory approach. “While we have regulatory authorities in place here in the United States and we do enforce those”, she said, “we need other countries to do the same”.
Japan, Australia and the US are currently “among the few countries regulating virtual currency payments/exchange activities”. Though she praised as a “significant step” the EU’s plans to require “members to regulate virtual currency exchangers”, Mandelker stated there was still a “major gap in regulating these entities globally”.
To try and close this gap the US Treasury was working closely with other countries to encourage them to step in line with international standards.
A reminder of the international nature of the challenge came this week when the Treasury department warned US citizens that they would be exposed to legal risk should they invest in the Venezuelan Petro as it seemed to be “an extension of credit to the Venezuelan government”.
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