12 U.S.C. § 5908: Anti-money laundering…

Summary

The Treasury must ask the public for input starting 30 days after July 18, 2025, and for the next 60 days, about new ways banks and other regulated firms can spot illegal activity with digital assets. Examples include APIs, artificial intelligence, digital ID checks, and blockchain monitoring. After the comment period, Treasury (through FinCEN) must study the ideas it receives. FinCEN will compare each idea to current methods and weigh things like how much better it is at finding crime, costs, the data collected and privacy risks, operational and cybersecurity issues, and overall effectiveness. As part of the national strategy against terrorist and other illicit financing required by law, Treasury must also consider where digital-asset crime comes from, gaps in current detection, how rules affect innovation, and foreign places that let people turn digital assets into cash. Within 3 years after July 18, 2025, FinCEN must issue public guidance and start rulemaking based on the research. That work must cover how to use new detection tools, standards for payment stablecoin issuers to identify and report crimes (like fraud, cybercrime, money laundering, terrorism financing, sanctions evasion, or insider trading), rules for monitoring blockchains and mixers, and risk rules for firms that use decentralized finance. Within 180 days after July 18, 2025, Treasury must send a report to the Senate Banking Committee and the House Financial Services Committee with proposals, the research results, steps to help banks adopt new tools, findings about mixers and ledgers, and recommendations on the term “digital asset service provider.” The report may include a classified annex. Treasury and federal stablecoin regulators may still use existing powers (like exemptions or no‑action letters) to encourage new tools before these reports are finished.

Title 12, §5908

Banks and Banking, Source: USLM XML via OLRC

(a)Public comment

Beginning on the date that is 30 days after July 18, 2025, and for a period of 60 days thereafter, the Secretary of the Treasury shall seek public comment to identify innovative or novel methods, techniques, or strategies that regulated financial institutions use, or have the potential to use, to detect illicit activity, such as money laundering, involving digital assets, including comments with respect to—

(1)application program interfaces;

(2)artificial intelligence;

(3)digital identify verification; and

(4)use of blockchain technology and monitoring.

(b)Treasury research

(1)In general

Upon completion of the public comment period described in subsection (a), the Secretary of the Treasury shall conduct research on the innovative or novel methods, techniques, or strategies that regulated financial institutions use, or have the potential to use, to detect illicit activity, such as money laundering, involving digital assets that were identified in such public comment period.

(2)Research factors

With respect to each innovative or novel method, technique, or strategy described in paragraph (1), the Financial Crimes Enforcement Network shall evaluate and consider the following factors against existing methods, techniques, or strategies:

(A)Improvements in the ability of financial institutions to detect illicit activity involving digital assets.

(B)Costs to regulated financial institutions.

(C)The amount and sensitivity of information that is collected or reviewed.

(D)Privacy risks associated with the information that is collected or reviewed.

(E)Operational challenges and efficiency considerations.

(F)Cybersecurity risks.

(G)Effectiveness of methods, techniques, or strategies at mitigating illicit finance.

(c)Treasury risk assessment

As part of the national strategy for combating terrorist and other illicit financing required under section 261 and 262 of the Countering America’s Adversaries Through Sanctions Act (Public Law 115–44; 131 Stat. 934), the Secretary of the Treasury shall consider—

(1)the source of illicit activity, such as money laundering and sanctions evasion involving digital assets;

(2)the effectiveness of and gaps in existing methods, techniques, and strategies used by regulated financial institutions in detecting illicit activity, such as money laundering, involving digital assets;

(3)the impact of existing regulatory frameworks on the use and development of innovative methods, techniques, or strategies by regulated financial institutions; and

(4)any foreign jurisdictions that pose a high risk of facilitating illicit activity through the use of digital assets to obtain fiat currency.

(d)FinCEN guidance or rulemaking

Not later than 3 years after July 18, 2025, the Financial Crimes Enforcement Network shall issue public guidance and notice and comment rulemaking, based on the results of the research and risk assessments required under this section, relating to the following:

(1)The implementation of innovative or novel methods, techniques, or strategies by regulated financial institutions to detect illicit activity involving digital assets.

(2)Standards for payment stablecoin issuers to identify and report illicit activity involving the payment stablecoin of a permitted payment stablecoin issuer, including, fraud, cybercrime, money laundering, financing of terrorism, sanctions evasion, or insider trading.

(3)Standards for payment stablecoin issuers’ systems and practices to monitor transactions on blockchains, digital asset mixing services, tumblers, or other similar services that mix payment stablecoins in such a way as to make such transaction or the identity of the transaction parties less identifiable.

(4)Tailored risk management standards for financial institutions interacting with decentralized finance protocols.

(e)Recommendations and report to Congress

(1)In general

Not later than 180 days after July 18, 2025, the Secretary of the Treasury shall submit to the chairs and ranking members of the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report on—

(A)legislative and regulatory proposals to allow regulated financial institutions to develop and implement novel and innovative methods, techniques, or strategies to detect illicit activity, such as money laundering and sanctions evasion, involving digital assets;

(B)the results of the research and risk assessments conducted pursuant to this section;

(C)efforts to support the ability of financial institutions to implement novel and innovative methods, techniques, or strategies to detect illicit activity, such as money laundering and sanctions evasion, involving digital assets;

(D)the extent to which transactions on distributed ledgers, digital asset mixing services, tumblers, or other similar services that mix payment stablecoins in such a way as to make such transaction or the identity of the transaction parties less identifiable may facilitate illicit activity; and

(E)legislative recommendations relating to the scope of the term “digital asset service provider” and the application of that term to decentralized finance.

(2)Classified annex

A report under this section may include a classified annex, if applicable.

(f)Rule of construction

Nothing in this section shall be construed to limit the existing authority of the Secretary of the Treasury or the primary Federal payment stablecoin regulators to, prior to the submission of a report required under this section, use existing exemptive authorities, the no-action letter process, or rulemaking authorities in a manner that encourages regulated financial institutions to adopt novel or innovative methods, techniques, or strategies to detect illicit activity, such as money laundering, involving digital assets.

Notes & Related Subsidiaries

Delayed

Effective Date

of SectionFor delayed

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of section, see

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note below.

Editorial Notes

References in Text

section 261 and 262 of the Countering America’s Adversaries Through Sanctions Act, referred in subsec. (c), are section 261 and 262 of Pub. L. 115–44, title II, Aug. 2, 2017, 131 Stat. 934, which are not classified to the Code.

Statutory Notes and Related Subsidiaries

Effective Date

Section effective on the earlier of the date that is 18 months after July 18, 2025, or the date that is 120 days after the date on which the primary Federal payment stablecoin regulators issue any final

Regulations

implementing Pub. L. 119–27, see section 20 of Pub. L. 119–27, set out as a note under section 5901 of this title.

§5908 Anti-money Laundering Innovation

Summary

Title 12, §5908

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Editorial Notes

References in Text

Statutory Notes and Related Subsidiaries

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Regulations

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