- The United States Treasury Department has released a report focussing on ways NFTs can be used in illicit financial activities
- Dubbed “Illicit Finance Risk Assessment of Non-Fungible Tokens,” it looks at NFTs’ place in terrorism financing and money laundering among other illicit activities
- The report, however, notes that most financial crimes still rely on established traditional methods
The U.S. Treasury has released the “Illicit Finance Risk Assessment of Non-Fungible Tokens” report that focuses on areas where NFTs can be used to power illicit financial activities. The report explores the use of NFTs in terrorism financing and money laundering among other areas. Apart from being used to move dirty money, the report noted that virtual collectibles are also a risk to investors because some NFTs are created by malicious teams who conduct rug pulls, an indication that collectors should be vigilant to avoid losing their money or help move illicit funds.
Emerging Risks in the NFT Sector
According to the Treasury, the report looks to monitor “emerging risks in the digital assets sector” and also help in implementing anti-money laundering rules and regulations to combat financial terrorism.
The report disclosed that criminals are turning to NFTs to launder money using tactics such as self-laundering and rapid sales. Criminals use collectibles to launder money because many NFT marketplaces “do not require customer information” thus making it hard for law enforcement agencies to track them.
Rug pulls, investment scams and market manipulation are other ways that malicious actors use to commit financial crimes in the digital collectibles world. The report also noted that collectibles are prone to theft, something that leads to illicit financial gains.
Terrorist using NFTs to Raise or Move Funds
Although the U.S. Treasury admitted that most terrorism financing activities still use traditional methods such as fiat currency, it noted that terrorist groups are turning to “NFTs to raise or move funds.”
The report further noted that NFTs’ cyber-related vulnerabilities, trademark protection and fluctuating pricing are among other areas “that can enable their misuse by illicit actors.”
With the Treasury’s report pointing to the possible use of NFTs in illicit activities, it’s to be seen whether U.S. regulators will go after NFT marketplaces as they have done with crypto exchanges.
