FinCEN Proposes to Designate Crypto Mixers as Money Laundering Centers
The United States Treasury Department's Financial Crimes Enforcement Network, or FinCN, has proposed to designate cryptocurrency mixing as an area of ”major money laundering concern” following Hamas attacks on Israel.
In an Oct. 19 notice, FinCEN said it “reviewed the CVC percentage. [convertible virtual currencies] Transactions through CVC mixers originate from illegal sources.” FinCEN proposed that domestic financial institutions and agencies “implement certain recordkeeping and reporting requirements” for transactions involving crypto mixers.
“The FINCN intends to enact a law under Article 311 [of the U.S. Patriot Act] “It would provide minimal scope for addressing terrorist financing involving Hamas and ISIS and/or North Korea-sponsored and allied actors,” the advisory said. “However, FINCN has determined that such a narrow approach is insufficient to address relevant concerns.
According to Treasury Undersecretary Wally Adeyemo, the addition of cryptocurrency to US government sanctioned entities is aimed at combating the exploitation of digital assets by “state-linked cyber actors, cybercriminals and terrorist groups”. He cited Hamas — the group responsible for the October 7 attack on Israel — and Palestinian Islamic Jihad — which Israel blamed for the October 17 attack on a Gaza hospital — for illegally using crypto.
The announcement followed concerns raised by US lawmakers over alleged crypto-funded terrorist organizations. On October 17, more than 100 members of Congress called on US President Joe Biden's administration to “take swift and transparent action to meaningfully curb illegal crypto activity.” Treasury officials also added a Gaza-based crypto operator allegedly tied to Hamas to a list of specially designated nationals on October 18.
Related: Advocacy groups push back against Sen. Warren for linking crypto to terrorism
In the year In August 2022, the Treasury's Office of Foreign Assets Control effectively banned US residents from using Tornado Cash after adding several crypto addresses linked to the mixer to a specially designated list of citizens. The department's action prompted a lawsuit filed by six individuals backed by crypto exchange Coinbase. In the year In August 2023, a federal judge ruled on summary judgment that the Treasury Department had acted within its authority.
According to FinCEN, members of the public will have 90 days to comment on the crypto mixer proposal after it is published in the Federal Register. The State Department will review all feedback before considering implementing the proposed crypt mixer policy.
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