The Bank Secrecy Act still applies if you’re decentralized, guys.
All kinds of unwanted users — ransomware gangs, thieves, scammers, and North Korea — are merrily transacting in decentralized finance and even laundering funds,. That’s because DeFi doesn’t comply with anti-money laundering and anti-terrorism finance laws.
Poor compliance with anti-money laundering as well as poor cybersecurity put DeFi users at risk of theft and fraud, the Treasury says. In the US, the Bank Secrecy Act — and some other regulations — mean that financial institutions have to help the government detect money laundering. In this paper, the Treasury notes that a DeFi service might well be a financial institution under the BSA, even if it’s decentralized, and will have to comply with the law. Uh-oh! That sounds like a warning shot.
The report finds that “many” DeFi services don’t comply with the BSA, which is not exactly a surprise given, you know, the whole. In some cases, the paper notes, DeFi services purposefully decentralize what they’re doing to try to avoid anti-money laundering enforcement. Unfortunately, the Treasury says, that is not at all how the law works.
There’s a second warning shot in the paper: it recommends “stepping up engagements with foreign partners to push for stronger implementation” of anti-money laundering laws, which sounds an awful lot like the US leaning real hard on other countries where DeFi might be established.
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