The U.S. Department of the Treasury has released its biannual National Strategy for Combating Terrorism and Other Illicit Financing, which outlines four priority recommendations that could impact virtual assets across various domains.
Acknowledging the challenges faced by law enforcement agencies in keeping pace with advancements in financial technology, the Treasury's top priorities include addressing regulatory gaps in anti-money laundering (AML) and countering the financing of terrorism (CFT). It aims to create a more targeted and effective regulatory framework, emphasizing the need to evaluate whether additional actions are necessary in sectors lacking comprehensive AML/CFT measures.
The strategy underscores the importance of strengthening law enforcement efforts, particularly in light of the proliferation of new payment channels and financial services providers, including virtual asset service providers (VASPs). This expansion has strained regulatory resources traditionally applied to more conventional money services businesses (MSBs).
Emphasizing a new focus on blockchain technology, the strategy highlights initiatives such as the FBI's Virtual Asset Unit, which provides technical equipment, blockchain analysis, and training to enhance the agency's capabilities in combating illicit financial activities involving virtual assets.
Furthermore, the Treasury aims to promote responsible technological innovation and leverage technology to mitigate risks associated with illicit finance. This involves measures to enhance the inclusivity of the financial system, combat de-risking practices, and support the development of cross-border payment systems and remittance options under regulation, mirroring initiatives like the G20 Roadmap and the FedNow Domestic Transfer System.
Lastly, the strategy underscores the role of artificial intelligence (AI) and digital identity in advancing its objectives. While recognizing the potential of AI and data analytics to strengthen regulatory and enforcement efforts, it also highlights the risks of exploitation by illegitimate users. The Treasury aims to provide regulatory and policy support for reliable digital identity solutions and expand the use of AI to uphold U.S. standards, practices, and values in combating illicit financial activities.
