Strengthening AML and sanctions controls in the digital assets era

This paper explores the anti-money laundering (AML) and sanctions regulatory environment for digital assets in the US, with particular emphasis on the emerging digital asset policy framework under the current presidential administration. The paper considers the principal illicit finance risks presented by digital asset activities and addresses key implications for AML and sanctions compliance controls for both digital asset firms and traditional financial institutions entering the digital asset ecosystem. Although US authorities have endorsed a more supportive approach to innovation and digital asset activities, regulators have simultaneously reaffirmed the importance of AML and sanctions compliance and risk management as key priorities. Among other topics, the paper discusses practical considerations and challenges related to leveraging blockchain analytics tools, structuring risk-based transaction monitoring procedures and addressing sanctions compliance obligations for digital asset transactions. The paper then addresses similar AML and sanctions control considerations from the perspective of traditional financial institutions that have dealings with digital asset firms or digital asset activities. For compliance teams and legal practitioners, this paper provides an actionable understanding of the AML and sanctions framework for digital assets and how to operationalise a compliance programme that appropriately addresses relevant risks and regulatory obligations. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/ business/.