US Treasury Report: North Korea and Scammers Using DeFi to Launder Dirty Money – Regulation Incoming?
The US Treasury has revealed that North Korean hackers and scammers exploit loopholes in the decentralized finance (DeFi) space to launder money and hide criminal activity.
In a Thursday report, the federal agency claimed that North Korean hackers and other groups engaged in illicit activity have benefited from the non-compliance of some DeFi platforms with certain Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) regulations.
The report added that weak or non-existent AML/CFT controls for DeFi services in other jurisdictions, as well as poor cybersecurity controls by DeFi services, lead to the theft of funds.
"The assessment finds that illicit actors, including ransomware cybercriminals, thieves, scammers, and Democratic People’s Republic of Korea (DPRK) cyber actors, are using DeFi services in the process of transferring and laundering their illicit proceeds."
The 40-page report further noted that “DeFi services at present often do not implement AML/CFT controls or other processes to identify customers, allowing layering of proceeds to take place instantaneously and pseudonymously.”
The report found that some DeFi projects intentionally lack AML/CFT controls as part of their decentralization goals.
However, the Treasury stated that "most money laundering, terrorist financing, and proliferation financing by volume and value of transactions" occur in fiat currency or outside the digital asset ecosystem.
Officials recommend increasing regulatory oversight of AML/CFT for DeFi platforms and addressing any regulatory gaps.
The latest report is in line with President Biden's executive order on digital assets, which was signed in March last year with the ultimate aim of promoting the responsible
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