The US House of Representatives recently passed a bill that “directs” the Government Accountability Office (GAO) to report on the use of cryptocurrencies and “online marketplaces in sex and drug trafficking.”
Formulating Preventive Measures
Referred to as the Fight Illicit Networks and Detect ( FIND ) Trafficking Act of 2019 (H.R. 502), the bipartisan bill (passed 412-13 on January 28th) requires that the GAO study and prepare a detailed report on “how illicit proceeds are transferred into the US banking system” through the use of cryptocurrencies. The GAO must also determine whether “state and non-state actors” are “participating in such activity.”
Additionally, the GAO has been instructed to look into “preventative efforts from federal and state agencies” that may have been taken to prohibit the use of cryptocurrencies in facilitating sex and drug trafficking. Specifically, the GAO must examine “the extent to which the unique characteristics of [cryptocurrencies] can contribute to the tracking and prosecution of illicit funding.”
Final Report To Be Submitted To Committee On Banking
Representative Juan Vargas had first proposed the FIND bill in June 2018 - as part of an effort to “impede the use of [cryptocurrencies] and online marketplaces” in acquiring controlled substances and/or facilitating human trafficking. If approved and signed into law, the bipartisan bill would require the Comptroller General of the US to work with the appropriate departments to take measures (as outlined above) to prevent “virtual currencies” (cryptocurrencies) from being used to finance illicit activities.
The Comptroller will have one year (from when the bill is signed into law) to prepare a report which consists of recommendations on how to prevent cryptocurrencies from being used to facilitate illegal activities. The report should be submitted to the Committee on Banking, Housing, and Urban Affairs and the Committee on Financial Services.
"Crafting Effective Regulatory And Legislative Solutions"
Based on the findings of the report, the H.R. 502 bill also requires taking appropriate regulatory and legislative actions to prevent cryptocurrencies from being used for illegal purposes. In his appeal to the House, Vargas stated :
If we are to craft effective regulatory and legislative solutions to combat these transnational criminal organizations, we need to fully study and analyze how virtual currencies (cryptocurrencies) and online marketplaces are used to facilitate sex and drug trafficking, to determine how best to eliminate their use.
In an official press release (published on January 28th), Vargas noted that “while evidence points to the growth of [cryptocurrencies] as a payment method for illicit sex and drug trafficking, the true scope of the problem and potential solutions are still unknown.”
Lawmakers have also agreed to pass H.R. 56, which requires allocating funding for programs that would help curb the use of cryptocurrencies in financing unlawful activities. The H.R. 56 would also recommend the creation of an interagency task force (supervised by the Secretary of Treasury), in order to investigate the use of financial technology in exploitative activities.