U.S. Treasury Department Releases A Risk Assessment Report Specifically Focused On Decentralized Finance (DeFi)
The world's first illicit finance risk assessment on decentralized finance (DeFi) was published by the U.S. Department of the Treasury today called the 2023 DeFi Illicit Finance Risk Assessment, which evaluates the risks associated with DeFi services.
Because Bitcoin
April 6, 2023
The U.S. Treasury Department released a statement and its first risk assessment report on decentralized finance (DeFi) on Thursday, which reveals that cybercriminals, scammers, and even North Korea are using DeFi services to transfer and launder their illicit proceeds, and highlights that DeFi services subject to the Bank Secrecy Act are not compliant with AML/CFT obligations, creating a loophole that is being exploited by illicit actors.
Source: U.S. Department of the Treasury
The report highlighted that DeFi services allow users to lend, borrow, and save without using banks, and their non-compliance with anti-money laundering and combating the financing of terrorism (AML/CFT) regulations creates vulnerabilities that illicit actors exploit.
The Treasury found that DeFi services subject to the Bank Secrecy Act fail to comply with AML/CFT obligations, and other vulnerabilities in the assessment included the potential for DeFi services to be out of scope for existing AML/CFT obligations, lack of implementation of international AML/CFT standards, and poor cybersecurity practices.
The report recommended strengthening AML/CFT supervision, considering additional guidance for the private sector on DeFi obligations, and addressing regulatory gaps related to these services.
The Treasury's Under Secretary for Terrorism and Financial Intelligence, Brian Nelson, stated that the private sector should use the assessment findings to inform their risk mitigation strategies and take necessary steps to prevent illicit actors from exploiting DeFi services.
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