DeFi services are being used for illegal remittances, US Treasury Department warns

North Korea, cybercriminals, ransomware attackers, thieves and scammers are using decentralized finance (DeFi) services to transfer and launder their illicit proceeds, the US Treasury Department warned Thursday.

So-called DeFi platforms allow users to lend, borrow and save, usually in cryptoassets and stablecoins, without using banks.

In a new illicit finance risk assessment on decentralized finance, the Treasury Department found illicit actors to exploit vulnerabilities in U.S. and foreign anti-money laundering and counter-terrorism financing (AML/CFT) regulation and enforcement, and the technology underlying the services. use.

DeFi services that fail to meet these anti-money laundering and anti-terrorist financing obligations pose the greatest risk of illicit funding in this space, according to the assessment.

“Our assessment shows that illegal actors, including criminals, scammers and North Korean cyber actors, are using DeFi services in laundering illicit funds,” Brian Nelson, the Treasury Department’s undersecretary for terrorism and financial intelligence, said in the statement.

Nelson added that the private sector should use the assessment’s findings to inform its risk mitigation strategies and take action to prevent illicit actors from using decentralized financial services.

Other vulnerabilities identified during the assessment were the potential for DeFi services to fall outside the scope of existing AML/CFT obligations, lack of implementation of international AML/CFT standards, and poor cybersecurity practices.

The assessment recommended strengthening U.S. AML/CFT oversight, considering additional guidance for the private sector on DeFi obligations, and addressing any regulatory gaps related to the services.

© Thomson Reuters 2023

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