National Drug Intelligence
Drug traffickers will increasingly rely upon the digital currency industry to launder and move funds because it enables standardized international financial transactions and operates largely outside the regulatory requirements of the traditional banking system. The ability of individuals and businesses to conduct complex, immediate, and irreversible international transactions with very little financial transparency greatly benefits drug traffickers and other criminals.
U.S. regulatory action alone will not be sufficient to suppress the money laundering threat posed by digital currencies. Even if clear and consistent regulatory measures are imposed, digital currency services established in foreign and offshore jurisdictions--which are not subject to the Bank Secrecy Act (BSA)14--can be used to conduct transactions in the United States. Limited international oversight of this expanding financial service is possible through a recommendation of the Financial Action Task Force on Money Laundering (FATF).15 The FATF has publicly stated the need to monitor the growth of this industry and implement anti-money laundering controls; however, FATF recommendations will have little effect on nonmember countries. It would be nearly impossible to legislate regulatory controls that would allow the U.S. government to prevent completely foreign-based digital currencies from being used in the United States, because these services are available through the Internet.
Bank Secrecy Act (BSA) was designed to do the following: deter money
laundering and the use of secret foreign bank accounts; create an investigative
paper trail for large currency transactions by establishing regulatory reporting
standards and requirements; impose civil and criminal penalties for
noncompliance with its reporting requirements; and impose detection and
investigation of criminal, tax, and regulatory violations.
15. Founded in 1989, the Financial Action Task Force on Money Laundering (FATF) is an intergovernmental body that sets the international standard for combating money laundering and terrorist financing. The FATF issues recommendations and a list of noncooperative countries or territories (NCCTs). The FATF currently has 34 member countries, territories, and regional organizations.
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