The U.S. Treasury Department happened to have delivered the 2023 DeFi Illicit Finance Risk Assessment. This happens to be the very first of its kind in the whole world ever. It was carried out on the topic of decentralized finance (DeFi). Risk assessment is useful in protecting the U.S. financial system and also enlightens people about illicit risks in financial environments. It speaks about the risk factors connected with the services provided by DeFi. There being no real definition of DeFi in the present times, the reference happens to be to virtual asset protocols and services with regard to some kind of automated peer-to-peer transactions. Most of the time, the help is taken from self-implementing code, also called smart contracts, which happens to be based on blockchain technology.
As in the case of countries like the Democratic People’s Republic of Korea, it happens to be the cybercriminals, as well as the ransomware attackers and scammers who are into the utilization of DeFi services, in order to be able to shift, as well as launder their illegal assets. They also happen to take full advantage of the weaknesses that are prevalent. It happens to be the reason that though the DeFi services are equipped with anti-money laundering and the financing of terrorism safeguards, they are, more often than not, ever executed adequately.
According to the Under Secretary of the Treasury for Terrorism and Financial Intelligence, Brian E Nelson, risk assessments happen to be the basis for the proper comprehension of the illegal finance risk scenario and, more so, in the proper safeguarding of the dignity of the U.S. financial system. In his opinion, one needs to be able to adequately address the lacunas that come with the DeFi services and rectify them as much as possible.
The main weaknesses that happen to be targeted by the fraudsters begin from the non-cooperation of the DeFi services with AML/CFT and sanctions responsibilities. The Defi services that happen to be involved in functioning that come under the Bank Secrecy Act happen to come with the AML/CFT responsibilities, irrespective of the fact of the services announcing that they happen to be on the verge of getting decentralized.
Risk assessments are carried out to be able to correctly comprehend the complexity of a situation. It also happens to involve the suggestions put forth by the U.S. government in ways and means of lessening the risk factors, such as the further enforcement of the AML/CFT regulatory supervision.
However, there happens to be a matter of making considerations for added help with regard to the private sector. Yet another way is by finding solutions for the lacunas in the AML/CFT regulations and their proper execution.