July 31, 2023

Manchin Introduces Legislation to Crack down on Crypto Use in Money Laundering, Drug Trafficking, and Terrorist Financing

Washington, DC –U.S. Senator Joe Manchin (D-WV), along with Senators Elizabeth Warren (D-MA), Roger Marshall (R-KS) and Lindsey Graham (R-SC), introduced the Digital Asset Anti-Money Laundering Act, legislation that would mitigate the risks that digital assets pose to our national security by closing loopholes and bringing the digital asset ecosystem into greater compliance with the anti-money laundering and countering the financing of terrorism (AML/CFT) frameworks governing the greater financial system.

“Without tougher controls, decentralized digital assets can pose a significant risk to our national security by facilitating the financing of illicit activities, such as drug trafficking or money laundering from terrorists and rogue state actors,” said Senator Joe Manchin. “Our bipartisan legislation would curtail these security risks and require cryptocurrency platforms to abide by the same anti-money-laundering rules that banks have to follow. I urge my colleagues on both sides of the aisle to support this commonsense legislation to protect Americans by preventing bad actors from using cryptocurrencies to finance their criminal activities.”  

This bill has been endorsed by the Bank Policy Institute, Transparency International U.S., Global Financial Integrity, the National District Attorneys Association, the Major County Sheriffs of America, AARP, the National Consumer Law Center (on behalf of its low-income clients), and National Consumers League.

The Digital Asset Anti-Money Laundering Act would: 

  • Extend Bank Secrecy Act (BSA) responsibilities, including Know-Your-Customer requirements, to digital asset wallet providers, miners, validators, and other network participants that may act to validate, secure, or facilitate digital asset transactions.
  • Address a major gap with respect to “unhosted” digital wallets – which allow individuals to bypass AML and sanctions checks – by directing FinCEN to finalize and implement its December 2020 proposed rule, which would require banks and money service businesses (MSBs) to verify customer and counterparty identities, keep records, and file reports in relation to certain digital asset transactions involving unhosted wallets or wallets hosted in non-BSA compliant jurisdictions.
  • Direct FinCEN to issue guidance to financial institutions on mitigating the risks of handling, using, or transacting with digital assets that have been anonymized using digital asset mixers and other anonymity-enhancing technologies. 
  • Strengthen enforcement of BSA compliance by directing the Treasury Department to establish an AML/CFT compliance examination and review process for MSBs and other digital asset entities with BSA obligations and directing the Securities and Exchange Commission and Commodity Futures Trading Commission to establish AML/CFT compliance examination and review processes for the entities they regulate. 
  • Extend BSA rules regarding reporting of foreign bank accounts to include digital assets by requiring United States persons engaged in a transaction with a value greater than $10,000 in digital assets through one or more offshore accounts to file a Report of Foreign Bank and Financial Accounts (FBAR) with the Internal Revenue Service. 
  • Mitigate the illicit finance risks of digital asset ATMs by directing FinCEN to ensure that digital asset ATM owners and administrators regularly submit and update the physical addresses of the kiosks they own or operate and verify customer and counterparty identity.

Bill text of the Digital Asset Anti-Money Laundering Act can be found here.

One pager on the Digital Asset Anti-Money Laundering Act can be found here.