US Treasury investigating risk of DeFi being used for illicit finance


Investigating money laundering risks in DeFi

Elizabeth Rosenberg, assistant secretary of the Treasury Department’s Office of Terrorism Financing and Financial Crimes, said Wednesday she was investigating the risks of DeFi being misused.

Rosenberg spoke at a banking event in Australia about tackling illicit finance such as money laundering and terrorism financing. In it, he also mentioned crypto assets (virtual currency).

First, he said that the rapid development of the cryptocurrency sector has been phenomenal, and that the industry often falls behind in regulatory and financial crime-related legal compliance.

Governments should be careful not to stifle innovation, but they also have a duty to support financial health and protect people and the financial system from fraudsters and criminals, he said. Specifically, talking about DeFi:

I am interested in the possibility of using DeFi legally. However, fraudsters are always looking for ways to hide their criminal activities and launder criminal proceeds, which also poses a threat to DeFi and the rest of the cryptocurrency ecosystem.

So my team is working on a risk assessment of illicit financial activity in DeFi. The results will be officially announced soon.

What is DeFi (decentralized finance)?

Refers to financial services or systems that utilize blockchain and are performed in the absence of a central administrator. Abbreviation for “Decentralized Finance.” DeFi financial services include stablecoin issuance, currency lending, and cryptocurrency exchanges. Many platforms use the Ethereum blockchain.

Cryptocurrency Glossary

North Korean cyber attack

Rosenberg also mentioned ransomware attacks by North Korea. North Korean officials allegedly stole hundreds of millions of dollars worth of cryptocurrency through ransomware attacks and laundered the funds, including through mixing services that anonymize transactions, to fund illegal nuclear and ballistic missile programs. speaking.

Lazarus is a well-known hacker group that is said to be backed by the North Korean government. He is believed to have been involved in various cryptocurrency fraud incidents.

In October 2022, Japan’s Financial Services Agency also issued a warning to domestic virtual currency exchange operators, saying that attacks believed to be from Lazarus have been confirmed. It is said that he was trying to approach company employees with phishing emails and fake SNS accounts.

connection: Financial Services Agency and others warn of the possibility of virtual currency cyber attacks from North Korean hackers

In November 2010, the U.S. Treasury Department designated the mixing service “Tornado Cash” as sanctions related to North Korea. By acting as a means of laundering money, it is said that it is actually supporting cyber attacks from outside the United States, and measures such as freezing assets on Tornado Cash have been taken.

connection: US Treasury Department designates Tornado Cash as sanctions related to North Korea

What is ransomware

Malware that demands money in exchange for restoring the original state after hacking. Also known as ransomware. Once infected, it encrypts other people’s important documents and photo files without permission, locks the PC to restrict its use, and demands money.

Cryptocurrency Glossary

FATF Recommendations

Mr. Rosenberg has played a role in combating financial fraud such as money laundering, as well as in dealing with economic sanctions imposed by the United States. He also cited the economic sanctions associated with Russia’s invasion of Ukraine as a current challenge.

Rosenberg said one of the key ways to combat financial fraud is transparency for corporate beneficiaries, as advocated by the international regulator FATF (Financial Action Task Force). .

The FATF encourages countries to keep accurate information on the beneficiaries and control of legal entities to prevent their misuse for money laundering and terrorist financing.

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