The US Treasury Department reported that despite the growing trend of illicit actors turning to cryptocurrencies to launder and fund money, cold foreign exchange remains their tool of choice.
In its 2024 National Risk Assessments for Money Laundering, Terrorist Financing, and Proliferation Financing, the Treasury Department highlighted various threats, vulnerabilities, and risks associated with illicit financing within the United States.
The threat to digital assets is on the rise
Treasury officials noted that although fiat currencies remain the dominant vehicle for money laundering and terrorist financing, the threat posed by digital assets is on the rise.
According to the 2024 National Money Laundering Risk Assessment, fraud, especially through investment schemes and health care fraud, remains the leading cause of money laundering activities. The report highlights an increase in fraud cases involving technological advances, such as telemedicine and frauds related to virtual asset investments.
Meanwhile, terrorist groups, including ISIS and Hamas, are increasingly turning to virtual assets for funding. This growing trend has raised concerns among lawmakers in recent months. A Wall Street Journal report in October noted that Hamas, among other militant groups, used cryptocurrencies as a financing tool before attacks in Israel.
The report also found that the most common financial interactions between individuals in the United States and foreign terrorist organizations involve direct solicitation of funds or attempts to transfer funds to these groups, similar to the trend in 2022. These transactions are conducted using cash, registered money service companies, and in some cases ,virtual assets.
DeFi and stablecoins are a growing concern
The Treasury Department also emphasized the challenges posed by decentralized finance (DeFi), specifically highlighting that these services, which are considered financial institutions under the Bank Secrecy Act (BSA), are required to comply with anti-money laundering (AML) and combating the financing of terrorism. (CFT) Regulations.
Despite these requirements, the Treasury Department has observed a significant lack of compliance among many of the DeFi services covered by the BSA, which are exploited by illicit actors.
The report highlights criminals' interest in exploiting emerging financial services, including DeFi platforms and online gaming, raising concerns about the anonymity provided by online gaming and the sheer size and rapid growth of the sector, creating unique money laundering risks. .
The Treasury Department also raised concerns about the increased use of stablecoins, a shift from the 2022 National Terrorist Financing Risk Assessment (NTFRA), where terrorist groups primarily requested donations in bitcoin.
Deputy Treasury Secretary Wally Adeyemo has previously expressed concerns about dollar-based stablecoins, especially those based outside the United States, highlighting the regulatory scrutiny surrounding these digital assets.
