Digital Assets and Illicit Finance: E.O. 14067 and Recent Anti-Money Laundering Developments

Digital Assets and Illicit Finance: E.O. 14067 and Recent Anti-Money Laundering Developments

INSIGHTi

Digital Assets and Illicit Finance: E.O. 14067
and Recent Anti-Money-Laundering
Developments
October 26, 2022
As part of an effort to shape a whole-of-government approach to address the evolving digital assets policy
landscape, President Biden issued Executive Order (E.O.) 14067, Ensuring Responsible Development of
Digital Assets, on March 9, 2022. Part of this approach is combating illicit finance enabled by digital
assets, including through anti-money-laundering (AML) and combating the financing of terrorism (CFT).
Congress could play a key role in the future establishment, funding, and oversight of what may follow
from the Administration’s emerging framework for digital asset governance and has demonstrated an
interest in digital assets broadly and their use in illicit finance specifically. (For example, the Senate
Committee on Banking, Housing, and Urban Affairs held a hearing in March on “Understanding the Role
of Digital Assets in Illicit Finance.”)
Illicit Finance and E.O. 14067
The Biden Administration’s view, as laid out in E.O. 14067, is that global advances in the development
and adoption of digital assets and related technologies are outpacing the international community’s ability
to mitigate the potential risks they may pose. To address this concern, President Biden’s executive order
establishes a set of “principal policy objectives” for digital assets and directs various federal agencies to
implement the President’s agenda—chiefly through conducting research on various policy issues related
to the proliferation of digital assets.
One principal policy objective in E.O. 14067 is to “mitigate the illicit finance and national security risks
posed by the misuse of digital assets.” With respect to this objective, the executive order notes various
risks that digital assets pose for facilitating money laundering, cybercrime, ransomware activity, fraud,
narcotics, human trafficking, corruption, terrorism, nuclear proliferation financing, and sanctions evasion.
The order further warns that, to the detriment of U.S. interests, illicit actors engage in “jurisdictional
arbitrage” and use foreign-based service providers where international AML/CFT standards for the
regulation and supervision of digital assets do not apply. Additionally, E.O. 14067 cautions that future
Congressional Research Service
https://crsreports.congress.gov
IN12039
CRS INSIGHT
Prepared for Members and
Committees of Congress

Congressional Research Service
2
growth in decentralized finance ecosystems, peer-to-peer payment activity, and obscured blockchain
ledgers could pose further market and national security risks.
E.O. 14067 Reports
Pursuant to E.O. 14067, the heads of various federal departments, offices, and agencies were required to
prepare more than a dozen reports, assessments, action plans, policy frameworks, legislative proposals,
and technical evaluations related to digital assets—the majority of which are now complete. The Biden
Administration asserts that the reports provide a “first-ever comprehensive framework for responsible
development of digital assets.” Some observers, reacting to the reports, characterized the Administration’s
digital assets framework as laying out a vision for incremental policy change, international cooperation,
and invigorated enforcement action rather than wholesale AML/CFT regulatory or legislative reform.
Among those reports that address illicit finance concerns, domestically and internationally, are the
following:
 The U.S. Department of the Treasury’s “Action Plan to Address Illicit Financing Risks of
Digital Assets” (September 2022), which built upon the Biden Administration’s May
2022 National Strategy for Combating Terrorist and Other Illicit Financing.
 Treasury’s “Framework for International Engagement on Digital Assets” (July 2022).
 Treasury’s report on “The Future of Money and Payments” (September 2022).
 The U.S. Department of Justice’s (DOJ’s) report on “The Role of Law Enforcement in
Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets”
(September 2022).
 DOJ’s report on “How to Strengthen International Law Enforcement Cooperation for
Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets”
(June 2022).
Policy Context and Next Steps
U.S. efforts to address illicit finance risks posed by digital assets began prior to the issuance of E.O.
14067. Since 2013, U.S. regulators have issued guidance on the application of AML/CFT requirements to
digital asset service providers (see also the 2019 joint statement and advisory on illicit activity involving
convertible virtual currency). In 2018, Treasury’s Office of Foreign Assets Control (OFAC) clarified that
sanctions compliance obligations apply to virtual asset transactions. OFAC has sanctioned Russian
cryptocurrency exchanges, the world’s largest darknet market, North Korea–linked mixers, and more than
150 cryptocurrency wallet addresses. High-profile enforcement actions have also netted billions in virtual
asset seizures—a trend anticipated to continue with DOJ’s National Cryptocurrency Enforcement Team
and Digital Asset Coordinator Network, among other enforcement initiatives.
While the E.O. seeks to further such efforts, implementation could take time or face congressional
consideration. For example, Treasury’s illicit finance Action Plan, noted above, highlights several funding
objectives for FY2023. They include resources for digital-asset-related foreign technical assistance and
other Treasury tools, such as OFAC sanctions and AML/CFT “special measures” to target problematic
digital asset service providers.
Meanwhile, the Biden Administration released a fact sheet in mid-September identifying several next
steps for addressing illicit finance concerns related to digital assets. These steps include:
1. Evaluating potential legislative proposals to amend the Bank Secrecy Act, anti-tip-off
laws, statutory penalties for unlicensed money transmitters, and applicability of laws
against unlicensed money transmitting to digital asset service providers, as well as to

Congressional Research Service
3
2. authorize DOJ to prosecute digital asset crimes in any jurisdiction where a victim of those
crimes is located.
3. Identifying gaps in the U.S. AML/CFT regime for digital assets through the completion
of two illicit finance risk assessments, one on decentralized finance (by the end of
February 2023) and a second on non-fungible tokens (by July 2023). This may also
include making decisions to finalize pending virtual-asset-related proposed rulemakings.
4. Enhancing dialogue with the private sector on the illicit financing risk associated with
digital assets and encouraging the use of emerging technologies to comply with
AML/CFT obligations. (Treasury already published in September 2022 a request for
comment “to seek feedback from the American people on the illicit finance and national
security risks posed by digital assets.”)
5. Continuing to “expose and disrupt” illicit actors who misuse digital assets and “hold
cybercriminals and other malign actors responsible for their illicit activity” through law
enforcement action and analysis of “nodes” in the digital assets ecosystem that pose
national security risks.

Author Information

Rena S. Miller
Liana W. Rosen
Specialist in Financial Economics
Specialist in International Crime and Narcotics

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

IN12039 · VERSION 1 · NEW