In accordance with the President’s March 9 Executive Order on Ensuring Responsible Development of Digital Assets, the Department of Justice today announced significant actions regarding digital assets, including the public release of its report on The Role of Law Enforcement in Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets; and the creation of the nationwide Digital Asset Coordinator (DAC) Network, in support of the department’s goals.
Attorney General Merrick B. Garland stated, “We must work in tandem with departments and agencies across government to prevent and disrupt the exploitation of these technologies to facilitate crime and undermine our national security as digital assets play a growing role in our international financial system.
The Justice Department and our law enforcement and regulatory partners are committed to advancing the responsible development of digital assets, safeguarding the public from criminal actors in this ecosystem, and addressing the particular challenges these technologies present. This commitment is reflected in the efforts announced today.
These initiatives are a part of a larger, coordinated effort among government agencies, as stated in the White House Fact Sheet, “to develop frameworks and policy recommendations that advance six key priorities identified in the EO: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.”
According to Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division, “developments in digital assets have created a new terrain for criminals to use innovation to advance major criminal and national security risks both domestically and abroad.”
The Illicit Division and the National Cryptocurrency Enforcement Team will continue to make sure that the Department and its prosecutors are best positioned to confront the constantly changing criminal uses of digital asset technology by establishing the DAC Network.
First, in response to the March 9 Executive Order, the department’s report discusses how criminals are using digital asset technologies, the difficulties that they present for criminal investigations, the initiatives that the department and law enforcement agencies have established as part of whole-of-government efforts to more effectively detect, investigate, prosecute, and otherwise disrupt these crimes, as well as suggested regulatory and legislative measures.
Second, the DAC has been established by the department’s Criminal Division. The National Cryptocurrency Enforcement Team (NCET) of the department is in charge of the department’s DAC Network, which consists of over 150 designated federal prosecutors from U.S. Attorneys’ Offices and other litigating divisions.
The DAC Network will be the department’s main forum for prosecutors to obtain and disseminate specialised training, technical expertise, and advice about the investigation and prosecution of digital asset crimes. On September 8, the inaugural gathering of the DAC Network was presided over by Eun Young Choi, director of the NCET.
Reports on Making Sure Digital Assets Are Developed Responsibly
The department’s report outlines the many ways that criminals have taken use of digital assets at the outset of its section on the role of law enforcement in spotting, looking into, and prosecuting criminal activity using them.
It distinguishes between three main sorts of unlawful uses: 1) using cryptocurrencies to fund or facilitate criminal activity; 2) using digital assets to hide illicit financial activity; and 3) crimes that involve or undermine the ecosystem for digital assets.
The report also discusses how new technology, particularly in the field of decentralised finance, or DeFi, has presented new difficulties for law enforcement; it provides examples of successful efforts by law enforcement to look into, prosecute, and otherwise stop crimes involving digital assets in spite of these difficulties; and it describes programmes that the department and other law enforcement agencies have established, such as the department’s launch of the DAC Network.
The study also responds to the Executive Order’s call for suggestions about the best course of legislative and regulatory action. It suggests measures to strengthen law enforcement’s capacity to compile evidence and bring legal action; to strengthen specific laws and penalty provisions that are crucial to the prosecution of digital asset crimes; to support regulations that would strengthen customer identification efforts and other anti-money-laundering requirements under the Bank Secrecy Act; and to make sure that law enforcement and regulatory agencies have enough funding to carry out the technologically sophisticated investigations.
Three recommendations are listed as priority in the report: 1) extending the prohibitions against financial institution employees informing suspects of ongoing investigations to virtual asset service providers; 2) making it more difficult to operate unlicensed money transmitting businesses; and 3) extending the statute of limitations for some statutes to take into account the complexity of digital asset investigations.
This report is a supplement to the department’s June 2022 report, How to Strengthen International Law Enforcement Cooperation for Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets, which describes the particular difficulties presented by cross-border digital asset investigations and offers suggestions on how to strengthen enforcement and enhance global cooperation in the area. Both reports are the result of coordinated efforts between the department, led by the NCET, and numerous federal agencies, including the Department of the Treasury, the Department of Homeland Security, and the Department of State. This is in line with the whole-of-government approach mandated in the Executive Order.
The Network of Digital Asset Coordinators
The department’s Criminal Division has introduced the national DAC Network to guarantee that the agency continues to face the challenge presented by the unlawful exploitation of digital assets. The DAC Network is made up of designated federal prosecutors from U.S. Attorneys’ Offices across the country and the department’s litigating components. It is overseen by the NCET and works closely with the Criminal Division’s Computer Crime and Intellectual Property Section and the Money Laundering and Asset Recovery Section’s Digital Currency Initiative. Each DAC will represent their office’s subject-matter expert on digital assets and operate as a primary source of knowledge and direction regarding legal and technical issues pertaining to these technologies.
Prosecutors who join the DAC Network will gain knowledge about how to use current laws and authorities to investigate crimes involving digital assets, as well as best practises for writing search and seizure warrants, restraining orders, criminal and civil forfeiture actions, indictments, and other pleadings. The usage of emerging digital asset concerns like DeFi, smart contracts, and token-based platforms in criminal activities will also be covered by the DAC Network as a source of knowledge and debate. The DAC Network will also increase knowledge of the special international concerns that the cryptocurrency ecosystem faces, such as the advantages of using international connections and the difficulties associated with conducting cross-border digital asset investigations.