The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) proposed labeling crypto mixers as a “primary money laundering concern.” The move comes as part of FinCEN’s robust initiative to enhance transparency in cryptocurrency transactions, specifically those that can be exploited by terrorist groups and state-affiliated cybercriminals. Deputy Secretary of the Treasury Wally Adeyemo affirmed that this action exemplifies the Treasury’s ongoing commitment to halting the misuse of Convertible Virtual Currency (CVC) mixing by various illegal entities worldwide.
The rule aims for greater transparency
FinCEN’s notice of proposed rulemaking is currently open for public comment for a 90-day period. The agency cited its determination to address the usage of crypto mixers by illicit actors, specifically naming groups like Hamas, Palestinian Islamic Jihad, and the Democratic People’s Republic of Korea (DPRK). Once finalized, the rule would place several obligations on U.S. financial institutions, from enforcing additional due diligence to potentially prohibiting certain types of accounts.
Moreover, this action marks FinCEN Director Andrea Gacki’s “first-ever use” of the agency’s authority to target a broad class of transactions as primary money laundering concerns. This expansion of power signals a pivotal moment in the government’s approach to combating financial crimes in the digital age.
Additionally, the Treasury Department has been facing increased pressure from lawmakers to curb the exploitation of cryptocurrencies for terror financing. This scrutiny heightened following reports that Hamas received crypto donations in the lead-up to its recent attack in Israel. Consequently, these proposed measures are not isolated; they align with the Treasury’s broader strategy. This includes the sanctions announced earlier this week against entities and individuals connected to Hamas, which involved a Gaza-based business suspected of acting as a Bitcoin conduit for terrorism.
The proposed rule comes after multiple Treasury actions aimed at combating illicit finance involving crypto mixers. In February 2022, a National Money Laundering Risk Assessment identified an uptick in using anonymity-enhancing technologies, including crypto mixing. The Office of Foreign Assets Control (OFAC) also designated several mixing services, like Blender.io and Tornado Cash, accused of facilitating large-scale financial crimes.
The Treasury appears committed to staying ahead of the curve in identifying and mitigating risks associated with crypto transactions. This is particularly important as criminals continue to adapt, leveraging technologies like blockchain to obfuscate their financial activities.
