Crypto’s Role In Illicit Finance: 2024 National Risk Assessments Unveiled

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Criminals are increasingly using cryptocurrencies to launder money for different illicit activities ranging from fraud to drug trafficking, as per the latest National Risk Assessment Reports released by the U.S. Department of the Treasury. But from this growing trend of using crypto funds in laundering, cash laundering is equally traditional in practice.

The 2024 National Risk Assessments on Money Laundering, Terrorist Financing, and Proliferation Financing released today identified the highest risks to the United States posed by illicit finance. These reports highlight important updates to the framework of anti-money laundering and countering the financing of terrorism and are indicative of a changing nature in the risk landscape of illicit finance. They identify such ongoing challenges as the fentanyl crisis, ransomware attacks, and the digitization of financial services.

This was the fourth edition of the money laundering and terrorist financing risk assessment and the third update of the proliferation financing risk assessment in just under a decade. The assessments will be leveraged by the public and private sectors in identifying the current operating environment on illicit finance and to use them as an evidence base for their risk mitigation strategies.

Under Secretary of the Treasury for Terrorism and Financial Intelligence, Brian E. Nelson said in the press statement:

Treasury, through our National Risk Assessments, is at the cutting edge of analyzing the global risk environment to protect the U.S. and international financial systems from abuse by illicit actors. We urge both the public and private sectors to engage with these reports, as well as our forthcoming National Strategy for Combatting Terrorist and Other Illicit Finance.

Growing Use of Cryptocurrencies In Money Laundering

Key findings from the assessments reveal that criminals are employing a mix of traditional and innovative techniques to launder money, with cryptocurrencies increasingly becoming a preferred choice. The United States continues to grapple with persistent and emerging money laundering risks, including the misuse of legal entities and weaknesses in compliance at regulated financial institutions. In terms of terrorist financing, the reports highlight a wide range of threats from both foreign and domestic actors. Notably, Hamas’s exploitation of the international financial system is underscored, including its solicitation of funds from donors worldwide.

Key findings arising from the assessments include the fact that criminals are laundering money with a mix of old-fashioned and more modern methodologies, with increasing usage of cryptocurrencies as the medium of exchange. The report also pointed out significant and emerging money laundering risks related to the abuse of legal entities and areas with compliance vulnerabilities in regulated financial institutions in the US. On the matter of terrorist finance, the reports raise a host of threats originating from both foreign and domestic contributors. Of chief concern is the exploitation of the international financial system by Hamas, as well as its solicitation of funds from contributors around the world.

Moreover, risks are increased for proliferation financing, specifically for both Russia and the Democratic People’s Republic of Korea (DPRK). The concerns have been highlighted through Russia’s activity to illicitly obtain goods for its war in Ukraine and DPRK’s exploitation of the digital economy.

According to the press statement, the assessment was done in coordination with the relevant agencies, regulators, and intelligence communities in the Treasury Office of Terrorist Financing and Financial Crimes. However, the 2024 National Strategy for Combating Terrorist and Other Illicit Finance, forthcoming later, will include strategic recommendations informed by these assessments aimed at strengthening the AML/CFT regime and addressing emerging illicit finance vulnerabilities.

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