Cypher
BlockchainCrypto AdoptionCryptocurrencyCryptocurrency RegulationDeFiNews

DeFi Doesn’t Comply With Anti-Money Laundering Rules – US Treasury

With the increasing rate of hacking and scamming incidents involving decentralized finance (DeFi) platforms, a shocking report has emerged about the risks of the technology. The US Department of Treasury revealed that DeFi platforms pose the most significant risks to the crypto industry based on illicit financial activities.

Treasury’s Risk Assessment Report

In its analysis of the hazard of DeFi, the Treasury Department’s report stated that scammers, thieves, and other entities are using the technology to launder their proceeds of crimes. The report specifically mentioned actors from the Democratic People’s Republic of Korea (DPRK) as some notorious state-backed entities using DeFi to move funds.

Based on its findings, the Treasury Department suggests an evaluation of a “possible enhancement” to the United States anti-money laundering (AML) requirements and guidelines for countering the financing of terrorism (CFT) be applied to the DeFi space. It also seeks feedback from the private sector to help shape its next move.

Cypher

According to the Treasury Undersecretary for Terrorism and Financial Intelligence, Brian Nelson, the agency cannot do it alone. During a Thursday webcast with the global organization for curbing financial crimes (ACAMS), Nelson said that the private sector needs to utilize risk assessment to design its risk prevention plan.

📰 Also read:  SEC Confirms Ethereum Not Security Amid Ethereum ETF Approval Process

Furthermore, the document, a 40-page risk assessment report, cautioned that current DeFi services do not comply with the AML/CFT guidelines, allowing illicit transactions to occur instantly and anonymously.

No AML/CFT Controls

The report cites numerous examples of DeFi projects which lacked AML/CFT compliance. Moreover, the document showed the 2021 transformation of ShapeShift into a decentralized entity, stating that the purpose is to stop collecting user information for AML/CFT use.

The report noted that when these firms failed to register with the regulator to establish their AML/CFT control status, they confirmed their compliance with the US federal government sanctions and its obligation on financial services providers to follow suit. As a result, criminal entities are more likely to exploit the loophole by evading US and United Nations sanctions, the report added.

The report recommends that the US government consider strengthening its AML/CFT regulatory requirements. In addition, the report recommends that government should provide guidelines for the private sector to ensure compliance checks for decentralized finance services.

Meanwhile, the assessment also adds some insights to President Joe Biden’s 2022 executive order on cryptocurrency, with Nelson commending the move by the US government.

📰 Also read:  XRP Vulnerable, As Ripple And SEC Resumes Tussle Over Penalties

Other financial watchdogs like the European Union keenly observe the trends of using DeFi to launder money. Nelson stressed that DeFi is always a challenging technology, given that it does not disclose the identity of individuals behind a particular transaction.


Tokenhell produces content exposure for over 5,000 crypto companies and you can be one of them too! Contact at info@tokenhell.com if you have any questions. Cryptocurrencies are highly volatile, conduct your own research before making any investment decisions. Some of the posts on this website are guest posts or paid posts that are not written by Tokenhell authors (namely Crypto Cable , Sponsored Articles and Press Release content) and the views expressed in these types of posts do not reflect the views of this website. Tokenhell is not responsible for the content, accuracy, quality, advertising, products or any other content or banners (ad space) posted on the site. Read full terms and conditions / disclaimer.

📰 Also read:  XRP Vulnerable, As Ripple And SEC Resumes Tussle Over Penalties

Cypher

Bradley Nelson

Bradley Nelson is a US based cryptocurrency news writer for Tokenhell, he helps readers stay up to date with the latest trends and news from the blockchain and crypto world. Bradley has been a crypto enthusiast since 2018.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button
Close
Skip to content