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Him Das, acting director of the Financial Crimes Enforcement Network (FinCEN), believes that protecting the U.S. financial system has to be a shared effort between fintechs and his agency. FinCEN is actively engaging with the industry to understand the potential exploitation of the technology.
Speaking at the DC Fintech Week, Das stressed that fintechs and the financial services community have a shared responsibility to protect the integrity of the U.S. and global financial system. FinCEN cannot achieve its statutory mandate without collaborating with the fintech community and innovators. The agency is now actively engaging with the private sector to better understand new technologies and products, Das added.
It is doing so as part of efforts to implement the Anti-Money Laundering Act (AMLA) of 2020, which expanded FinCEN’s mission.
The AMLA places the protection of U.S. national security at the core of FinCEN’s mission as a statutory mandate, along with protecting the U.S. financial system from criminal abuse, Das explained.
It puts a premium on information sharing with all stakeholders, private and public, both domestic and international. The legislation also urges FinCEN to encourage technological innovation and the adoption of new technologies to achieve these goals.
With that in mind, FinCEN is engaging with market participants and is working with innovators to better understand the new products and technologies.
In addition to the implementation of the AMLA, FinCEN’s other focus is on combating ransomware attacks. Recently, this took the shape of the publication of financial trends analysis, in which FinCEN identified ransomware patterns and trends based on Bank Secrecy Act (BSA) data.
Virtual Currency Improving Risk Management
Das said there have been significant improvements from the private sector in addressing the risks associated with the technology of virtual currencies. According to Das, FinCEN recognizes that the private sector has invested in dynamic and innovative processes that are contributing to the safety and stability of the marketplace.
The agency has also seen an increasing number of registrations and reporting from virtual currency businesses, which shows that compliance is improving in the sector.
However, he also pointed to several challenges.
Of particular concern are entities that offer anonymizing features or mixing and tumbling services that obfuscate the source of a transaction.
FinCEN is also concerned about jurisdictional arbitrage whereby criminals can abuse gaps in various jurisdictions’ regulations to exploit the system.
FinCEN currently has two pending regulations that would establish reporting requirements concerning certain transactions involving convertible virtual currency.
“It’s not technological innovation that keeps me up at night … . It is really the criminals, terrorists and ransomware actors that exploit the elements of technology,” Das said.
Although FinCEN encourages innovation, Das pointed out that engagement with fintechs is crucial for the agency to understand the potential of the exploitation of technology.
