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Senator Cortez Masto Joins Bipartisan Effort to Enhance Anti-Money Laundering Measures for Digital Assets

Money LaunderingSenator Cortez Masto Joins Bipartisan Effort to Enhance Anti-Money Laundering Measures for Digital Assets

U.S. Senator Catherine Cortez Masto has joined a bipartisan group of senators in cosponsoring the Digital Asset Anti-Money Laundering Act, which aims to close loopholes in current law and bring cryptocurrency companies into greater compliance with anti-money laundering (AML) and countering the financing of terrorism (CFT) frameworks. The bill seeks to address the increasing use of digital assets, such as cryptocurrencies, for money laundering, drug trafficking, ransomware attacks, terrorist financing, and other illicit activities.

Key provisions of the Digital Asset Anti-Money Laundering Act include:

  1. Extending Bank Secrecy Act (BSA) responsibilities, including Know-Your-Customer (KYC) requirements, to digital asset wallet providers, miners, validators, and other network participants involved in digital asset transactions.
  2. Addressing the issue of “unhosted” digital wallets that allow individuals to bypass AML and sanctions checks by directing the Financial Crimes Enforcement Network (FinCEN) to implement its December 2020 proposed rule requiring verification, record-keeping, and reporting for certain digital asset transactions involving unhosted wallets.
  3. Issuing guidance to financial institutions on mitigating risks associated with digital assets that have been anonymized using digital asset mixers and other anonymity-enhancing technologies.
  4. Strengthening enforcement of BSA compliance by establishing AML/CFT compliance examination and review processes for money service businesses (MSBs), digital asset entities, and entities regulated by the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
  5. Extending BSA rules regarding reporting of foreign bank accounts to include digital assets, requiring U.S. persons engaged in digital asset transactions with a value greater than $10,000 through offshore accounts to file a Report of Foreign Bank and Financial Accounts (FBAR) with the Internal Revenue Service (IRS).
  6. Mitigating the illicit finance risks of digital asset ATMs by ensuring that digital asset ATM owners and administrators regularly submit and update the physical addresses of the kiosks they own or operate and verify customer and counterparty identity.

The bill has garnered bipartisan support and endorsements from various organizations, including the Bank Policy Institute, Transparency International U.S., Global Financial Integrity, National District Attorneys Association, Major County Sheriffs of America, AARP, National Consumer Law Center, and National Consumers League.

The legislation seeks to enhance oversight and regulation of digital asset transactions to prevent their use for illegal purposes and align cryptocurrency companies with the AML/CFT framework that governs much of the traditional financial system.

By FCCT Editorial Team

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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