The U.S. Department of the Treasury is intensifying its efforts to combat money laundering and other illicit financial activities, with a particular focus on the cryptocurrency sector. As part of the latest national illicit finance strategy, the Treasury aims to operationalize the country’s new beneficial ownership information database for law enforcement and finalize measures to curb real estate money laundering over the next two years. This broad strategy document, released on Thursday, outlines the United States’ priorities in addressing evolving illicit finance risks, including the proliferation of digital assets and ransomware attacks.
The Treasury’s new strategy comes in response to the changing landscape of illicit finance threats. Since the last strategy update in 2022, significant progress has been made, but new challenges have emerged. The current risk environment encompasses a variety of scams and frauds, potent ransomware attacks, the opioid-driven overdose epidemic, foreign terrorist attacks, and the criminal exploitation of technological advancements in payments and financial services. The strategy underscores the need for updated policies and enhanced collaboration between financial institutions, law enforcement, national security and intelligence agencies, and international partners.
A notable aspect of the strategy is its emphasis on closing regulatory gaps that expose the U.S. financial system to exploitation. The Treasury highlights the increasing exploitation of international financial systems by state-backed actors to launder funds and support terrorism. This includes the October 2023 Hamas attack in Israel and Russia’s ongoing war in Ukraine. In response, the U.S. has issued numerous sanctions against financiers of Hamas and individuals and entities linked to Russia’s war efforts, including financial institutions facilitating transactions for oligarchs and freezing billions of dollars in Russian assets.
To address emerging cryptocurrency threats, the Treasury plans to modernize its anti-money laundering (AML) policies and invest in training for analysts and regulators. This includes tackling “pig butchering scams,” a specific form of fraud that lures individuals into risky cryptocurrency investments through elaborate, fabricated stories. Additionally, the strategy calls for the development of new, secure platforms for financial transactions to prevent criminal exploitation.
The strategy also focuses on improving compliance guidance for financial institutions and enhancing collaboration between various stakeholders. One significant move is the implementation of the new beneficial ownership registry, launched by the Treasury’s financial crimes unit, FinCEN, in January. This registry aims to curb anonymous company ownership, which has been met with mixed reactions. While transparency advocates praise the effort, some Republican members of Congress criticize it for increasing bureaucracy for small businesses. The Treasury is taking a phased approach to provide law enforcement and national security officials access to the database, which is expected to help untangle opaque corporate structures and hold criminals accountable.
Another critical area identified in the strategy is the vulnerability of the residential real estate market to all-cash purchases made with suspicious funds. This method is popular among criminals and corrupt foreign officials for laundering money. In March, federal prosecutors sought to seize New York apartments purchased with illicit funds by former Mongolian Prime Minister Sükhbaataryn Batbold and Claudia Lemboumba Sassou Nguesso, the daughter of the Republic of Congo’s president. FinCEN has proposed a rule to expose bad actors who buy real estate in cash or through secretive legal entities, currently applicable only to residential properties but with plans to extend to commercial properties.
The strategy also targets investment advisers, who were previously not subject to AML obligations. FinCEN’s proposed rule would require some investment advisers to implement AML programs and report suspicious activity, similar to existing obligations for banks. Advocacy groups like Transparency International U.S. urge the Treasury to finalize these rules to prevent investment advisers from facilitating illicit investments.
As the Treasury continues to refine its approach to combating illicit finance, the focus on cryptocurrency and real estate money laundering highlights the evolving nature of financial crime. By modernizing regulations, enhancing collaboration, and leveraging new technologies, the U.S. aims to stay ahead of criminals exploiting the financial system.
