Author: Syedur Rahman
20 October 2023
2 min read
Syed Rahman outlines the United States’ move to tackle what it sees as money laundering and terrorism links to mixers.
Authorities in the United States are set to target the whole class of crypto mixers as being a money-laundering threat.
If the unprecedented move goes ahead and mixers are declared a primary money laundering concern, there could be major restrictions on how US financial firms interact with them.
The financial crimes branch of the US Department of the Treasury has stated that it intends to class crypto mixers as a primary money laundering concern as part of its attempt to tackle illicit crypto finance. In announcing its intention it emphasised how terrorist groups have benefited from anonymous crypto funds.
The Treasury's Financial Crimes Enforcement Network (FinCEN) has issued a notice of proposed rulemaking (NPRM), which will be open to public consultation for 90 days after its publication on the Federal Register. After this period, the agency will have to review that input before it can produce a final rule.
Citing the agency’s past actions against Tornado Cash and Blender.io, Deputy Secretary of the Treasury Wally Adeyemo, said the action “underscores Treasury’s commitment to combating the exploitation of Convertible Virtual Currency mixing by a broad range of illicit actors, including state-affiliated cyber actors, cyber criminals, and terrorist groups.” He added that the move is a "key part" of the ongoing effort to boost transparency in the crypto markets.
The Treasury Department has been under pressure from US lawmakers to take steps to prevent crypto being used to support terrorism. This intensified after reports that Hamas received crypto donations in advance of its attack this month on Israel.
FinCEN Director Andrea Gacki noted that this is the first time her agency’s power to target so-called primary money laundering concerns has been used on a whole class of transactions.
Parallels can be drawn between this move by FinCEN and the UK’s recently-adopted Travel Rule, as in force from 1 September 2023. This adoption requires UK-based cryptoasset businesses to collect, verify and share specific transaction information relating to transfers of cryptoassets. Whilst the methodology differs from that proposed in the US, it clearly highlights the unanimous desire to combat illicit activity occurring within the crypto markets.
If this US move becomes a reality, the Treasury Department will be able to impose restrictions on US financial firms' dealings with mixers. These will range from requiring additional due diligence and special attention regarding particular account transactions through to prohibiting the opening or maintenance of any correspondent or payable-through accounts.
Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.