Digital Asset Anti-Money Laundering Act of 2023

Bill: 118-s-2669
Sponsor: full_name: Sen. Warren, Elizabeth [D-MA]
Introduced: 2023-07-27
Policy area: Finance and Financial Sector
Subjects: Banking and financial institutions regulation

Business records

Computer security and identity theft

Computers and information technology

Consumer affairs

Currency

Digital media

Foreign and international banking

Fraud offenses and financial crimes

Right of privacy
Latest action: action_date: 2024-02-01
text: Committee on Banking, Housing, and Urban Affairs. Hearings held.

Summaries:
action_date: 2023-07-27
action_desc: Introduced in Senate
text: <p><strong>Digital Asset Anti-Money Laundering Act of 2023</strong></p><p>This bill applies existing anti-money laundering requirements to digital assets providers and facilitators. Specifically, the bill makes digital assets providers and facilitators <em>financial institutions</em> under the Bank Secrecy Act. Under the act, financial institutions must keep records, file disclosures, and report suspicious activity to federal regulators to aid in detecting money laundering and terrorist financing activities.</p><p>The bill also directs specified federal financial regulators to establish rules regarding digital assets. The Financial Crimes Enforcement Network (FinCEN) must require U.S. persons to report cryptocurrency transactions through foreign accounts of over $10,000. FinCEN must also require digital asset kiosk owners and administrators to submit and update every 90 days the physical addresses of the kiosks.</p><p>The Department of the Treasury must establish regulations to mitigate risks for financial institutions handling, using, or transacting business with (1) digital asset mixers, privacy coins, and other anonymity-enhancing technologies; and (2) digital assets that have been anonymized by these technologies.</p><p>Treasury, the Securities and Exchange Commission, and the Commodity Futures Trading Commission must establish risk examination and review processes for their respective anti-money laundering programs. &nbsp;</p><!--tinycomments|2.1|data:application/json;base64,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-->

tv_txt: II 118th CONGRESS 1st Session S. 2669 IN THE SENATE OF THE UNITED STATES July 27, 2023 Ms. Warren (for herself, Mr. Marshall , Mr. Manchin , and Mr. Graham ) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To require the Financial Crimes Enforcement Network to issue guidance on digital assets, and for other purposes.

1. Short title This Act may be cited as the Digital Asset Anti-Money Laundering Act of 2023 . 2. Definitions (1) Anonymity enhanced cryptocurrency The term anonymity enhanced cryptocurrency means a digital asset containing any feature that— (A) prevents tracing through distributed ledgers; or (B) conceals or obfuscates the origin, destination, and counterparties of digital asset transactions. (2) Digital assets The term digital asset means an asset that is issued or transferred using a cryptographically secured distributed ledger, blockchain technology, or any other similar technology. (3) Digital assets kiosk The term digital assets kiosk means a digital assets automated teller machine that facilitates the buying, selling, and exchange of digital assets. (4) Digital assets mixer The term digital assets mixer means a website, software, or other service with features that conceal or obfuscate the origin, destination, or counterparties of digital asset transactions. (5) Financial institution The term financial institution has the meaning given the term in section 5312(a) of title 31, United States Code. (6) Money services business The term money services business has the meaning given the term in section 1010.100 of title 31, Code of Federal Regulations. (7) Unhosted wallet The term unhosted wallet means software or hardware that facilitates the storage of public and private keys used to digitally sign and securely transact digital assets, such that the stored value is the property of the wallet owner and the wallet owner has total independent control over the value. (8) Validator The term validator means a person or entity that— (A) processes and validates, approves, or verifies transactions, or produces blocks of digital asset transactions to be recorded on a cryptographically secured distributed ledger or any similar technology, as specified by the Secretary of the Treasury; and (B) may perform other such services that may secure a digital assets kiosk network. 3. Digital asset requirements (a) Digital assets participants designation (1) Definition of financial institution (A) In general Section 5312(a)(2) of title 31, United States Code, as amended by section 6110(a)(1) of the Anti-Money Laundering Act of 2020 (division F of Public Law 116–283 ), is amended— (i) in subparagraph (Z), by striking or at the end; (ii) by redesignating subparagraph (AA) as subparagraph (BB); and (iii) by inserting after subparagraph (Z) the following: (AA) Unhosted wallet providers, digital asset miners, validators, or other nodes that may act to validate or secure third-party transactions, independent network participants (including maximal extractable value searchers), miner extractable value searchers, other validators or network participants with control over network protocols, or any other person facilitating or providing services related to the exchange, sale, custody, or lending of digital assets that the Secretary shall prescribe by regulation. . (B) Effective date The amendments made by subparagraph (A) shall take effect on the day after the effective date of the final rules issued by the Secretary of the Treasury pursuant to section 6110(b) of the Anti-Money Laundering Act of 2020 (division F of Public Law 116–283 ). (2) Regulations (A) In general Not later than 180 days after the date of enactment of this Act, the Secretary of the Treasury, through the Director of the Financial Crimes Enforcement Network, shall promulgate regulations imposing requirements under subchapter II of chapter 53 of title 31, United States Code, on financial institutions described in subparagraph (AA) of section 5312(a)(2) of title 31, United States Code, as added by paragraph (1)(A) of this subsection. (B) Exemption The Secretary of the Treasury, through the Director of the Financial Crimes Enforcement Network, should consider for exemption from the regulations issued under subparagraph (A) assets— (i) issued or transferred using a cryptographically secured distributed ledger, blockchain technology, or any other similar technology used solely for internal business applications; (ii) not offered for sale, traded, or otherwise converted to fiat currency or another digital asset; or (iii) otherwise deemed to pose little illicit finance risk. (C) Periodic reviews The Secretary of the Treasury, through the Director of the Financial Crimes Enforcement Network, shall periodic reviews of the classifications under paragraph (2). (b) Registration rules The Financial Crimes Enforcement Network has the authority to subject the entities described in subsection (a) to the registration rules under section 5330 of title 31, United States Code, and the foreign registration rules under section 1022.380(a)(2) of title 31, Code of Federal Regulations. (c) Implementation of proposed rule Not later than 1 year after the date of enactment of this Act, the Financial Crimes Enforcement Network shall finalize the proposed virtual currency rule (85 Fed. Reg. 83840; relating to requirements for certain transactions involving convertible virtual currency or digital assets). (d) Reporting requirements Not later than 18 months after the date of enactment of this Act, the Financial Crimes Enforcement Network shall promulgate regulations that require United States persons with greater than $10,000 in digital assets in 1 or more accounts outside of the United States to file a report described in section 1010.350 of title 31, Code of Federal Regulations, using the form described in that section, in accordance with section 5314 of title 31, United States Code. (e) Treasury regulations Not later than 18 months after the date of enactment of this Act, the Secretary of the Treasury shall promulgate regulations that require financial institutions to establish controls to mitigate illicit finance risks associated with— (1) handling, using, or transacting business with digital asset mixers, anonymity enhanced cryptocurrency, and other anonymity-enhancing technologies, as specified by the Secretary; and (2) handling, using, or transacting business with digital assets that have been anonymized by the technologies described in paragraph (1). 4. Examination and review process (a) Treasury Not later than 2 years after the date of enactment of this Act, the Secretary of the Treasury, in consultation with the Conference of State Bank Supervisors, shall establish a risk-focused examination and review process for digital assets participants designated as financial institutions and money services businesses to assess— (1) the adequacy of antimoney-laundering and countering-the-financing-of-terrorism programs and reporting obligations under subsections (g) and (h) of section 5318 of title 31, United States Code; and (2) compliance with antimoney laundering and countering-the-financing-of-terrorism requirements under subchapter II of chapter 53 of title 31, United States Code. (b) SEC Not later than 2 years after the date of enactment of this Act, the Securities and Exchange Commission, in consultation with the Secretary of the Treasury, shall establish a dedicated risk-focused examination and review process for entities regulated by the Commission to assess— (1) the adequacy of antimoney laundering and countering-the-financing-of-terrorism programs and reporting obligations under subsections (g) and (h) of section 5318 of title 31, United States Code; and (2) compliance with antimoney laundering and countering-the-financing-of-terrorism requirements under subchapter II of chapter 53 of title 31, United States Code. (c) CFTC Not later than 2 years after the date of enactment of this Act, the Commodity Futures Trading Commission, in consultation with the Secretary of the Treasury, shall establish a dedicated risk-focused examination and review process for entities regulated by the Commission to assess— (1) the adequacy of antimoney laundering and countering-the-financing-of-terrorism programs and reporting obligations under subsections (g) and (h) of section 5318 of title 31, United States Code; and (2) compliance with antimoney laundering and countering-the-financing-of-terrorism requirements under subchapter II of chapter 53 of title 31, United States Code. 5. Digital assets kiosks (a) In general Not later than 18 months after the date of enactment of this Act, the Financial Crimes Enforcement Network shall require digital asset kiosks owners and administrators to submit and update the physical addresses of the kiosks owned or operated by the owner or administrator every 90 days, as applicable. (b) Rulemaking Not later than 18 months after the date of enactment of this Act, the Financial Crimes Enforcement Network shall promulgate regulations requiring digital asset kiosk owners and administrators to— (1) verify the identity of each customer using a valid form of government-issued identification or other documentary method, as determined by the Secretary of the Treasury; and (2) collect the name and physical address of each counterparty to the transaction. (c) Reports (1) FinCEN Not later than 180 days after the date of enactment of this Act, the Financial Crimes Enforcement Network shall issue a report on digital assets kiosk networks operating as money services businesses that have not registered with the Financial Crimes Enforcement Network in violation of section 1022.380 of title 31, Code of Federal Regulations, that includes— (A) estimates of the number and locations of suspected unlicensed operators, as applicable; and (B) an assessment of any additional resources the Financial Crimes Enforcement Network determines to be necessary to investigate the unlicensed digital asset kiosk networks. (2) DEA Not later than 1 year after the date of enactment of this Act, the Drug Enforcement Administration shall, in consultation with other agencies as appropriate, issue a report identifying recommendations to reduce drug trafficking and money laundering associated with digital assets kiosks. 6. Authorization of appropriations There are authorized to be appropriated to the Secretary of the Treasury such sums as are necessary to carry out this Act.