Federal: AFC Comment Letter on Treasury Request for Comment on Innovative Methods to Detect Illicit Activity Involving Digital Assets

October 15, 2025
Ms. Julie Lascar
Director
Office of Strategic Policy,
Terrorist Financing and Financial Crimes
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW  
Washington, D.C. 20220

Re: Request for Comment on Innovative Methods to Detect Illicit Activity

Involving Digital Assets

Dear Director Lascar,

On behalf of The American Fintech Council (AFC),  I am submitting this comment letter in response to the U.S. Department of the Treasury’s (Treasury) Request for Comment on Innovative Methods to Detect Illicit Activity Involving Digital Assets (Request for Comment).

AFC’s mission is to promote an innovative, transparent, inclusive, and customer-centric financial system by fostering responsible innovation in financial services and encouraging sound public policy. AFC members are at the forefront of fostering competition in consumer finance and pioneering ways to better serve underserved consumer segments and geographies. Our members are also improving access to financial services and increasing overall competition in the financial services industry by supporting the responsible growth of lending and lowering the cost of financial transactions, allowing them to help meet demand for high-quality, affordable financial products.

As with the broader financial services ecosystem, illicit finance risks and vulnerabilities continue to exist in the digital assets space. It is important to recognize that the aims of illicit actors remain the same regardless of if the illicit activities are carried out via traditional financial products and services or through digital assets. In response to the Request for Comment’s first question, several areas have been identified as posing significant risks for illicit finance activities in the digital asset ecosystem. Namely, the use of digital assets in facilitating

• sanctions evasion;

• terrorist financing;

• scams and fraud payments;

• ransomware attacks; and

• illicit drug sales.

While these risks areas are not unique to digital assets, the continued expansion of the digital asset market driven by consumer demand and increased regulatory certainty requires industry and government entities to dedicate specific resources to combatting illicit activities in this space. As will be evidenced further below, the ability to leverage consumer data both by industry participants and government agencies is fundamental to combatting illicit activities in the digital assets space.

AFC has consistently advocated for additional government and industry efforts to detect illicit activities broadly within financial services and specifically in the digital assets space. In an effort to improve both government and industry activities, AFC has put forward the observations and recommendations below in response to the questions posed by Treasury in the Request for Comment.

I. AFC Respectfully Recommends Treasury Pursue Efforts to Ensure the Seamless Movement of Data Used to Combat Illicit Activities in the Digital Assets Space

Much of the movement associated with consumer data rests upon the use of application program interfaces (APIs). While API development in the financial services ecosystem is ongoing, it is clear that consumer data, and its seamless movement through the financial services ecosystem via API calls, is at the heart of any effective strategy to combat illicit activities leveraging either traditional and digital assets. The efforts at innovative banks and fintech companies need continuous, unimpeded access to data to ensure that illicit activities can be identified in real- or near real-time. AFC has previously advocated that the prudential banking regulators and the Consumer Financial Protection Bureau (CFPB) ensure that innovative banks and their fintech partners maintain the full ability to access and use consumer data in a responsible manner without market or non-market impediments, especially when those activities are focused on combatting illicit activities. While the regulation of personal financial data rights continues at the federal level, AFC believes that it is important for Treasury to coordinate with relevant agencies to ensure that access to data by innovative banks and fintech companies that is used to combat illicit activities in both traditional and digital assets is not impeded upon due to changes in regulation. In so doing, Treasury can further facilitate effective, risk-based adoption of APIs used for detecting illicit finance involving digital assets.

Further, given the fact that an increasing number of state data privacy legislation has ceased including specific exemptions under the Gramm-Leach-Bliley Act (GLBA) for both the entities and the data covered therein, AFC has respectfully recommended that the prudential banking regulators issue a policy statement affirming that their regulations preempt state data privacy laws that do not contain GLBA exemptions for entities’ fraud detection activities and the data underpinning these activities.  Accordingly, AFC respectfully requests that Treasury use its convening authority via the Financial Stability Oversight Council to bring together the prudential banking regulators to discuss, and ultimately issue, an interagency statement affirming federal preemption of state data privacy laws that do not contain GLBA exemptions for entities’ fraud detection activities and the data underpinning these activities.

II. AFC Respectfully Recommends Treasury Pursue Collaborative Efforts and Incentive Structures to Encourage the Use of AI in Both Industry and Government to Combat Illicit Activities in the Digital Assets Space

In practice, to combat the activities of illicit actors, industry participants continue to invest heavily in regulatory technology (regtech) tools. Regtech tools, many of which are provided by AFC member companies, have proved instrumental in effectively leveraging data to identify and mitigate illicit activities that leverage digital assets. Innovative banks are particularly prevalent in their use of regtech tools in an effort to perform robust anti-money laundering (AML) efforts, as well as root out scams and fraud activities targeted towards their consumers.

Whether developed internally or provided via a third-party, regtech tools may leverage artificial intelligence (AI) as part of their activities to combat illicit activities. Based on conversations with our members, it is our understanding that the use of regtech tools, especially those that leverage AI, by regulated financial institutions has been met with mixed engagement by examination teams at the federal level. Given AI’s growth and potential long-term impact on the financial services industry, it is crucial that examiners understand the technology and properly assess its usage. The use of AI in regtech tools used to combat illicit activities in the digital assets space presents a unique challenge for examiners, because they are faced with the use of a complex technology that is being applied to efforts in an emerging, and equally complex, subsector of financial services.

In response to question 3 in the Request for Comment and to attain the Trump Administration’s priority of increasing the role of AI in financial services activities, such as AML and identifying illicit finance patterns,  AFC respectfully recommends Treasury collaborate with the prudential banking regulators to incentivize the use of AI in financial services. Also, AFC recommends additional collaboration with the prudential banking regulators and industry stakeholders to develop and administer resources that will improve examiners’ understanding of the risk profiles and use cases for AI in financial services. Thus, ensuring that examination teams are effectively overseeing the use of AI technologies in efforts to combat illicit activities in the digital assets space.

Similarly, as noted in the Request for Comment, the use of regtech tools by regulators—also referred to as supervisory technology or suptech tools—is important for combatting illicit activities in the digital assets space. Globally, suptech tools have been a key area of potential innovation for regulators. Both academic institutions, such as the University of Cambridge via its Suptech Lab, and international organizations such as the International Monetary Fund and the Bank for International Settlements have recognized the importance of improving regulatory activities through the use of suptech tools.  

According to the Bank for International Settlement’s Financial Stability Institute, when pursued with a distinct strategy by an agency, suptech tools have been extremely helpful for improving supervision of regulated entities within a number of jurisdictions.  Specifically, the report found that suptech tools have improved efficiencies in their regulatory engagements. Further, the report noted that “[s]ome suptech tools are now critical to supervisory processes “[s]uptech tools should have a natural place in supervisory processes and address specific pain points”.  

Given the preponderance of evidence regarding the importance of suptech tools, AFC believes that it is imperative FinCEN operate in a similar capacity as their international counterparts and engage in a concerted manner to adopt suptech tools. Therefore, AFC respectfully recommends that the Treasury pursue internal policies and practices that will continue to incentivize the development and use of suptech tools to improve their AML efforts. Further, FinCEN should, as a matter of practice, create positive feedback loops with industry participants who provide information to the agency regarding potential and identified illicit activities. By implementing suptech tools and crucial positive feedback loops with entities operating directly or indirectly in the digital assets space, AFC believes FinCEN can more efficiently and effectively combat illicit activities in the digital assets space.

* * *

AFC appreciates the opportunity to comment the Treasury’s Request for Comment . We welcome continued engagement with the Joint Agencies on this matter and thank you for your consideration of our views.

Sincerely,

Ian P. Moloney
SVP, Head of Policy and Regulatory Affairs
American Fintech Council

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[1] American Fintech Council’s (AFC) membership spans EWA providers, lenders, banks, payments providers, loan servicers, credit bureaus, and personal financial management companies.
[2] U.S. Department of the Treasury, “Request for Comment on Innovative Methods to Detect Illicit Activity Involving Digital Assets”, Fed. Reg. 90, no. 157 (Aug. 18, 2025): 10148.
[3] See, TRM Labs, “2025 Crypto Crime Report,” (last accessed: Oct. 1, 2025), available at https://www.trmlabs.com/reports-and-whitepapers/2025-crypto-crime-report and Chainalysis, “The 2025 Crypto Crime Report,” (Feb. 2025),  available at https://go.chainalysis.com/2025-Crypto-Crime-Report.html.
[4] American Fintech Council, “Federal: AFC Comment Letter on Interagency RFI to Address Payments Fraud,” (Sep. 18, 2025), available at https://www.fintechcouncil.org/advocacy/federal-afc-comment-letter-on-interagency-rfi-to-address-payments-fraud.
[5] The White House, Winning the Race: America’s AI Action Plan (Washington, DC: The White House, 2025), available at https://www.whitehouse.gov/wp-content/uploads/2025/07/Americas-AI-Action-Plan.pdf.
[6]See, the University of Cambridge’s Cambridge Suptech Lab, https://lab.ccaf.io/; BIS Innovation Hub, “BIS Innovation Hub expands suptech and regtech research to include monetary policy tech”, Last updated Mar. 21, 2024, https://www.bis.org/about/bisih/topics/suptech_regtech.htm; and Tobias Adrian, Financial Counsellor and Direct, Money and Capital Markets Department, IMF,  “AI and Regtech”, Speech, Virtual Workshop on AI & Finance, Oct. 29, 2021, available at https://www.imf.org/en/News/Articles/2021/10/29/sp102921-ai-and-regtech.
[7] Prenio, Jermy, Peering through the hype - assessing suptech tools' transition from experimentation to supervision, Bank for International Settlements, FSI Insights No. 58, (Jun. 14, 2024), available at https://www.bis.org/fsi/publ/insights58.pdf.
[8] Ibid, Pages 14-15.

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