UNITED STATES – Senators have taken aim at digital currencies, such as bitcoin and ethereum, with a new anti-money laundering (AML) bill.
Senators Chuck Grassley of Iowa and Dianne Feinstein of California introduced the bill titled “Combating Money Laundering, Terrorist Financing and Counterfeiting Act of 2017” on May 25. The bill is said to modernise the prohibitions against illegal money services businesses and entities used to send criminal proceeds and other funds abroad to facilitate criminal activity.
If passed, the bill would make digital currencies defined as “monetary instruments,” which would make them a target for regulatory oversight. The bill furthers clarifies that any “issuer, redeemer or cashier” of a digital currency is also included.
Digital Currency in Illicit Activities
Digital currency is favourable amongst criminal and terrorist activities as they provide anonymity and convenience of cross-border transfers without any government oversight. Senator John Cornyn said in a statement, “To protect our country and Americans, we must aggressively and proactively go after their funding streams, and by strengthening our money laundering laws, we can curb illegal flow of money to terrorist organisations, drug cartels, and criminal organisations that fund their illicit activity.”
The bill’s release comes shortly after US Representative Kathleen Rice of New York called for a study into virtual currency use for money laundering and terrorism financing amid a global wave of ransomware attacks which demands ransoms to be paid as much as US$300 in bitcoin per machine.
A section-by-section summary can be found here.
Digital currency allows greater anonymity due to its non-face-to-face customer relationships. The Financial Action Task Force (FATF) further clarifies that decentralised systems, such as the technology behind bitcoin and ethereum, deploys addresses which function as accounts that are not tied to customers. As such, there is no central oversight body, and no AML software currently available to monitor suspicious transactions patterns.
To overcome non-face-to-face customer due diligence during on-boarding, some providers of bitcoins or ethereum in Singapore requires customers to provide their identification documents, with some of the providers going as far as requesting for a self-portrait photograph of the customer holding their identification document and a written note on the current date.