AFC CHALLENGES
Graphic 3 : Blender . io cryptocurrency mixing process
Cyber crime event
After a cyber event , a victim pays the cyber actor
Laundering process begins
Criminal actor receives the illicit proceeds
Source : Financial Crimes Enforcement Network 16
Blender . io mixes
Blender . io mixes criminal proceeds with the funds of other customers
Obfuscated proceeds
The mixed proceeds are obfuscated as a result of the mixing . The illicit proceeds are indistinguishable from the funds of other customers
4 . OFAC ’ s involvement : International footprint and global sanctions awareness .
It is important to note the impact of OFAC sanctions on the crime trends in this area . For example , approximately 43 % of 2022 ’ s illicit transaction volume ( from Graphic 1 ) can be attributable to sanctioned entities . 17 This transpired in a year when OFAC was especially proactive in issuing crypto sanctions , highlighting the ability of some entities to continue their operations despite sanctions .
5 . Coordination with LE : Cryptocurrency companies working with LE to lessen sanctions .
Two recent investigations prove to be good examples of two well-known companies working with agencies , leading to stronger AML control requirements . Recently , BAM Trading Services Inc . ( doing business as Binance . US ), was working on a deal with the SEC to avoid a total freeze of assets at the Miami-based cryptocurrency exchange , Bloomberg News reported . 18 Eventually , as of June 17 , the platform reached an agreement with the SEC to ensure that Binance . US customers are permitted to withdraw their assets from the platform . This level of coordination helps protect assets that remain on the platform through the resolution of the SEC ’ s pending litigation against Binance and its founder , Changpeng Zhao . 19
High-profile exchanges working with enforcement agencies could potentially lead to the widespread adoption of stronger AML controls in line with future regulation pronouncements . The need for these pronouncements / clarifications is pressing as it will give cases like this a baseline to ensure issues are remediated effectively .
Regulation
The regulatory action and guidance have primarily come from the SEC , the Commodity Futures Trading Commission , the Department of the Treasury via the Internal Revenue Service , the Office of the Comptroller of the Currency ( OCC ) and FinCEN . While regulators have had ample discussions on the topic , guidance relevant to U . S . bankers has been limited , specifically on the AML front .
These are a few formal examples of guidance that has been issued :
• 2013 FinCEN guidance and money services business definition 20
• November 2019 FinCEN director comments on stablecoin issuers / dealers within the definition of money transmitter 21
• The OCC ’ s Interpretive Letter 1179 22
Interagency guidance
On January 3 , 2023 , the Federal Deposit Insurance Corporation and the OCC issued a Joint Statement on Crypto- Asset Risks to Banking Organizations . 23 According to one specific statement , “ It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system .” 24 This statement suggests institutions to be cautious when performing riskbased assessments to consider which aspects of the cryptoasset companies and services to have exposure to within the products / services offered by a bank .
30 acamstoday . org