“Today’s action underscores Treasury’s commitment to combatting the exploitation of Convertible Virtual Currency mixing by a broad range of illicit actors, including state-affiliated cyber actors, cyber criminals, and terrorist groups,” said Deputy Secretary of the Treasury Wally Adeyemo, in a statement. “More broadly, the Treasury Department is aggressively combatting illicit use of all aspects of the CVC ecosystem by terrorist groups, including Hamas and Palestinian Islamic Jihad.”
In addition to issuing a Notice of Proposed Rule Making, FinCEN also issued a formal alert in order to help financial institutions identify funding streams for terrorist organizations used in support of illicit activities.
From X (formerly Twitter)
"FinCEN says that crypto mixing is of primary money laundering concern, yet it also admits that there are legitimate reasons to mix. Given this admission, why doesn't it set a threshold, say $5k, below which mixing is exempt, rather than declaring all mixing to be of concern? https://pbs.twimg.com/media/F81ywOrWQAA7S5Y?format=png&name=small"
Cryptocurrency mixing services blend a variety of digital assets in order to “obfuscate the origins and owners of the funds,” explains blockchain analytics firm Chainalysis. The mixers collect and pool digital assets like cryptocurrency and then “pseudo-randomly shuffle” them, allowing unassociated addresses to trade and take custody of like amounts of the assets.
“CVC mixing offers a critical service that allows players in the ransomware ecosystem, rogue state actors, and other criminals to fund their unlawful activities and obfuscate the flow of ill-gotten gains,” said FinCEN Director Andrea Gacki. “This is FinCEN’s first ever use of the Section 311 authority to target a class of transactions of primary money laundering concern, and, just as with our efforts in the traditional financial system, Treasury will work to identify and root out the illicit use and abuse of the CVC ecosystem.”
From X (formerly Twitter)
Replying to @TheCryptoDetect
"Crypto Mixers, also known as Tumblers, offer transactional privacy by mixing coins from different users into a pool The mixer then proceeds to redistribute the coins from the pool to different addresses, making it difficult to trace the original source of the assets"
Among the organizations targeted by FinCEN, in addition to Hamas, include the Palestinian Islamic Jihad and the Democratic People’s Republic of Korea as well as any other organizations engaging in violence against civilians, using ransomware to target critical infrastructure and groups looking to evade sanctions.
The new rules would require certain financial institutions to report information regarding transactions they “know, suspect, or have reason to suspect” involves the use of these mixing services. The action follows prior efforts by the Department of the Treasury to combat the improper use of digital assets, including the development of the 2022 National Money Laundering Risk Assessment, which identified a spike in the use of “anonymity-enhancing technologies” to hide the origin of illicitly obtained funds.
To read the Notice of Proposed Rule Making as it was submitted, visit here.