United States Senators Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.) propose the Digital Asset Anti-Money Laundering (AML) Act of 2022 to reduce the risks that cryptocurrencies and other digital assets pose to the national security of the US.
According to the senators, the bill will be “closing loopholes in the existing anti-money laundering and countering of the financing of terrorism (AML/CFT) framework and bring the digital asset ecosystem into greater compliance with the rules that govern the rest of the financial system.”
Senator Elizabeth Warren stated crypto businesses should follow the rules like banks, brokers, and Western Union, and this legislation will ensure the same rules should apply across similar financial transactions.
The bill will direct FinCEN to designate digital asset wallet providers, miners, validators, and others that may act to validate, secure, or facilitate digital asset transactions as money service businesses (MSBs), extending Bank Secrecy Act (BSA) obligations, including KYC requirements, to these actors.
The crypto AML bill would require FinCEN to supervise MSBs in order to verify the identities of customers and counterparties, maintain records, and submit reports in connection with specific digital asset transactions involving unhosted wallets or wallets hosted in non-BSA-compliant jurisdictions.
The Warren and Marshall bill asks to “Prohibit financial institutions from using or transacting with digital asset mixers and other anonymity-enhancing technologies and from handling, using, or transacting with digital assets that have been anonymized using these technologies.”
Senator Elizabeth Warren stated, “Rogue nations, oligarchs, drug lords, and human traffickers are using digital assets to launder billions in stolen funds, evade sanctions, and finance terrorism. The bipartisan bill will help close crypto money laundering loopholes and strengthen enforcement to better safeguard U.S. national security.”
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AML/CFT compliance examination and review mechanisms for MSBs are to be established by the Treasury Department, and the SEC and CFTC are to establish similar procedures for the entities they oversee, the senators say.
The senators added that the Internal Revenue Service (IRS) would require Americans who deal in digital assets worth more than $10,000 through one or more offshore accounts to file a Report of Foreign Bank and Financial Accounts (FBAR).
The crypto AML bill instructs FinCEN to make sure that operators of digital asset ATMs submit and update the physical locations of the kiosks they own or manage on a regular basis and that customers’ identities are verified.
The latest proposal by Warren and Marshall, which restricts financial privacy and labels miners and validators as MSBs, has obviously not been well received by the community. The crypto community claims that because foreign entities can easily obtain these records, government-mandated surveillance will only render the country weak.
Senator Roger Marshall stated, “Following the September 11, 2001, terrorist attacks, our government enacted meaningful reforms that helped the banks cut off bad actors’ from America’s financial system. Applying these similar policies to cryptocurrency exchanges will prevent digital assets from being abused to finance illegal activities without limiting law-abiding American citizens’ access.”
Meanwhile, Senator Cynthia Lummis is pushing her bipartisan bill titled ‘Responsible Financial Innovation Act’ in the wake of the FTX collapse and events that led to its demise. The Responsible Financial Innovation Act classifies the vast majority of digital assets as commodities, which would be regulated by the CFTC and not the SEC.
