The Rising Use of Cryptocurrency in Illicit Activities: US Treasury Warns

The US Treasury has published its 2024 National Risk Assessments, outlining the most impactful risks related to illicit finance currently facing the United States.

The US Treasury Department reports more criminals using crypto in 2024.

Source: miximages.com

The United States Department of the Treasury has recently released its 2024 National Risk Assessments on Money Laundering, Terrorist Financing, and Proliferation Financing. These reports shed light on the most significant threats facing the nation in terms of illicit finance. In particular, they highlight the increasing use of cryptocurrencies in illicit activities.

The Warning Signs

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The US Treasury Department’s reports emphasize the growing risks associated with illicit financing in the United States. Criminals, fraudsters, and other illicit entities are exploiting various channels, including cash and cryptocurrencies, to carry out fraud, drug trafficking, human smuggling, and corruption. Money laundering remains a critical concern, with illicit proceeds being moved through various techniques, including cybercrime, fraud, drug trafficking, human trafficking, and corruption.

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Terrorist financing threats persist both domestically and internationally, with foreign terrorist groups soliciting funds and domestic extremist movements posing challenges for law enforcement. Additionally, Russia and North Korea pose heightened risks in proliferation financing, with their involvement in illegal activities and exploitation of the digital economy.

The Growing Concern: Cryptocurrencies

The Treasury’s report highlights a significant shift among criminals and fraudsters towards virtual assets, particularly cryptocurrencies. These digital currencies are increasingly being used as conduits for money laundering associated with a range of illicit activities, including fraud, drug trafficking, human smuggling, and corruption. This shift towards cryptocurrencies is alarming, especially when compared to traditional cash-based methods commonly associated with drug trafficking proceeds.

The Treasury recognizes the need to address these concerns and plans to unveil a strategic plan in the coming weeks. This plan aims to provide recommendations to mitigate the risks highlighted in the reports and tackle the exploitation of virtual assets for illicit purposes.

Non-Compliance and Emerging Risks in Digital Finance

The Treasury’s assessment also points out the non-compliance issues among Virtual Asset Service Providers (VASPs), which are entities that facilitate exchanges between virtual assets and fiat currencies. Many VASPs either claim exemption from regulatory rules or fail to register adequately. This lack of compliance poses significant challenges in the fight against money laundering and terrorist financing.

Moreover, the report emphasizes the importance of Decentralized Finance (DeFi) services to adhere to Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regulations. Failure to do so allows illicit actors to exploit these platforms, further complicating the already complex regulatory landscape.

Another emerging threat highlighted in the assessment is the online gaming industry, which provides new avenues for money laundering due to its anonymity and vast scale. The Treasury acknowledges that the regulation of digital finance must address the complexities introduced by the online gaming environment.

Furthermore, terrorist networks are diversifying their financial channels and turning to virtual assets for money transfers. The demand for stablecoins among these groups indicates a strategic shift towards more stable digital currencies.

Looking Ahead: Addressing Vulnerabilities and Risks

In response to the findings of the assessments, the US Treasury Department is preparing to issue a strategic plan aimed at addressing the vulnerabilities and risks identified. This forthcoming plan is expected to offer detailed recommendations, showcasing a proactive stance towards preventing abuse within digital finance.

As the use of cryptocurrencies in illicit activities continues to rise, it is crucial for regulators and law enforcement agencies to stay vigilant and adopt effective measures to combat money laundering, terrorist financing, and other illicit financial activities.

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Q&A: What Readers May Want to Know

Q: How are cryptocurrencies being used for money laundering?

A: Cryptocurrencies provide a certain level of anonymity and can be easily transferred across borders, making them an appealing choice for money launderers. Criminals often convert their illicit funds into cryptocurrencies and use complex transactions to obfuscate the origin of the funds, making it difficult for law enforcement to trace the money back to its illegal source.

Q: Is the use of cryptocurrencies in illicit activities a new phenomenon?

A: While the use of cryptocurrencies for illicit activities has been a concern for several years, its prevalence has grown as the popularity and adoption of digital currencies increase. The inherently decentralized nature of cryptocurrencies makes them attractive to criminals seeking to evade traditional financial systems’ regulations and surveillance.

Q: What steps can regulators take to address the rising use of cryptocurrencies in illicit activities?

A: Regulators can implement stricter Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures for cryptocurrency exchanges and other virtual asset service providers. They can also collaborate with international organizations and law enforcement agencies to share information and coordinate efforts in combating illicit financial activities involving cryptocurrencies. Education and awareness campaigns can also help users understand the risks associated with cryptocurrencies and encourage responsible use.

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Looking ahead, it is vital for regulators, financial institutions, and individuals to remain vigilant in combating the illicit use of cryptocurrencies. By implementing effective regulatory frameworks, fostering cooperation among international entities, and raising awareness about the risks and challenges, we can create a safer and more secure digital financial ecosystem.

💻 Don’t forget to share this informative article on your social media platforms to spread the word!

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Reference List:

1. US Treasury Department Highlights Increasing Use of Crypto by Criminals in 2024 – AdobeStock / christianthiel.net
2. Hassan Shittu
3. Virtual Asset Service Providers (VASPs) – Google News

Article last updated: February 7, 2024

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