Senate bill aims to crack down on crypto money laundering

A bipartisan group of senators proposed a bill that, if passed, would expand current Bank Secrecy Act rules to those involved in digital assets like cryptocurrencies, among other changes aimed at discouraging their use in money laundering.

Titled the Digital Asset Anti-Money Laundering Act — sponsored by U.S. Sens. Elizabeth Warren, D-Massachusetts, and Roger Marshall,. R-Kansas — would extend Bank Secrecy Act responsibilities, including "Know your customer" requirements, to digital asset wallet providers, miners, validators, and other network participants that may act to validate, secure, or facilitate digital asset transactions by directing the Financial Crimes Enforcement Network, or FinCEN, of the Treasury Department to designate these actors as money service businesses. These rules will also be extended to apply to U.S. persons engaged in a transaction with a value greater than $10,000 in digital assets through one or more offshore accounts; under the new rules, they too would have to file a Report of Foreign Bank and Financial Accounts, or FBAR, with the Internal Revenue Service.

In addition, banks and MSBs would have to verify customer and counterparty identities, keep records, and file reports in relation to certain digital asset transactions involving unhosted wallets or wallets hosted in non-BSA compliant jurisdictions. Furthermore, as an added measure, financial institutions would now allowed to use or transact with digital asset mixers and others that have been anonymized using these technologies.

The bill would also require the Treasury to establish an anti-money-laundering and anti-terrorist financing compliance examination and review process for MSBs, and direct the Securities and Exchange Commission and Commodity Futures Trading Commission to establish similar compliance examination and review processes for the entities it regulates. Finally, FinCEN would require digital asset ATM owners and administrators to regularly submit and update the physical addresses of the kiosks they own or operate and verify customer identities.

Sen. Warren said the bill is aimed at further severing the use of digital assets from the illicit world and bringing the sector even more into the traditional regulatory framework that currently oversees banks and other financial institutions.

"Rogue nations, oligarchs, drug lords, and human traffickers are using digital assets to launder billions in stolen funds, evade sanctions, and finance terrorism," said Warren. "The crypto industry should follow common-sense rules like banks, brokers, and Western Union, and this legislation would ensure the same standards apply across similar financial transactions. The bipartisan bill will help close crypto money laundering loopholes and strengthen enforcement to better safeguard U.S. national security."