lawmakers on Capitol Hill to the August recess, the clarity Act is exposing a critical fault line in the nation's capital, and that is how to balance crypto innovation with aggressive law enforcement guardrails at the same time regulators and investigators are confronting an even larger tech explosion now according to TRM labs, AI enables.
Scams surging a staggering 500% over the past year with illicit crypto flows hitting a record $15 billion while here to break all of this down is every head of global policy and government affairs at TRM labs.
A good morning.
Thank you so much for joining us.
Well, a lot is happening across the globe, but I do want to start out with Capitol.
Hill and the Clarity Act.
So there's a fierce debate over law enforcement provisions, specifically whether the Fed DOJ or state attorney general should enforce ethics violations.
So how does Congress actually legislate reasonable law enforcement oversight without handing regulators a weapon that actually pauses innovation here?
Yeah, it's a great question, Remy, and really has been a huge focus for policymakers on Capitol Hill, really over the last couple of years as clarity has been debated.
Um, I think what's missing from some of the conversation, uh, around the politics is really the policy that's already in the act.
I mean, there's 20 plus provisions, uh, on sort of law enforcement, illicit finance, national security that are in clarity today, um, starting out with.
You know, every crypto firm, cryptocurrency exchange now falls under the Bank Secrecy Act, uh, the US anti-money laundering statute.
There's an, there's provisions on real-time information sharing, interdiction and disruption, basically how the public sectors and private sectors can work together to stop bad actors and interdict funds.
Um, there's some new provisions in a draft that were circulate that has been circulating over the last.
Couple of days that um add the word reissue.
You and I have talked about this before, but essentially requiring stablecoin issuers, not just to burn or freeze illicit proceeds, but also to reissue them to the government or to victims of scams.
Um, there's restraints on the use of crypto, uh, ATMs.
Uh, there's the creation of a center to go after North Korea.
And other state actors.
So there are a, there is a lot of focus, and I think what we've seen from a politics perspective, what we've seen over the last few weeks is many law enforcement agencies or or organizations, um, really start to get on board and support the Clarity Act.
So look, law enforcement support is sort of one piece, but I would say that like the act today is very robust when it comes to, um, law enforcement, national security types of issues.
Yes, and Erin, I understand TRM Labs just released a report on AI governance as well as cryptocrime, and you and I have been talking about AI enabled scams.
So tell us what's actually happening below the surface when it comes to criminals actually weaponizing LLMs as well as deepfakes and what is the solution here?
Yeah, look, I mean, one of my favorite parts of your program is sort of that the AI, uh, review, um, in each show, because it really shows sort of the really cool ways that AI is being used by industry to build community um in healthcare.
Um, bad actors are also using AI at scale, um, to, uh, do ransomware attacks at scale, right?
You don't need affiliate ransomware affiliates anymore.
You can use agents, um.
Hammers, as you mentioned, are using it to the tune of 500% increase over the course of the last year.
They're using it for deep fakes.
Um, they're, they're much more targeted than ever before, right?
We're gone are the days of, of Nigerian princes and, and broken English, and now there're these very targeted attempts to steal your money directly.
Um, but, but, but good actors are also using it, right?
Defenders, and I think that.
That's why, you know, there's some provisions and clarity that are very critical here.
The House Financial Services Committee last week put out a report where their first recommendation was something that, you know, we've been talking about for a long time and testimony and elsewhere is we need to make sure that that defenders, that law enforcement, that national security agencies, that compliance teams also have access to cutting edge technology in order to go after these bad actors who are using it.
AI scales everything, right?
And bad actors are always trying to figure out ways to move faster and we, we need to respond accordingly.
Yes, and while I have you here, Ari, of course it is about defensive AI as well as assets being frozen.
But looking at regulation around the globe, you point out that governments are moving at totally different speeds.
So when it comes to international law enforcement, what can they actually do to crack down on cross-border AI financial crime?
Yeah, it's so interesting, you know, we talked a little bit about clarity and I feel like it's almost like the preview of what AI regulation legislation, uh, is gonna look like standards is gonna look like globally.
Um, the EU has really been the leader, uh, over the last couple of years, whether you like it or not in terms of their, um, their legislation, they actually have the first AI legislation that gets into sort of tier.
Risk, um, and I would encourage folks to give that a read, uh, but the US has a series of executive orders.
There's been some state action, um, but really the key is, like everything else, is going to try to figure out how do we ensure that lawful users can really use this transformative technology and yet stop bad actors from using it.
And to me that, that in large part is going.
After the bad actors who are using it rather than over regulating uh the legislation or, or rather, rather than over regulating the technology itself.
Um, but I think we are so early, you know, we think we're early on crypto, uh, we're so early in how to govern this space, um, we just have to make sure that we stay technology neutral and don't, don't target the technology, but target the bad actors who are using it.
Yes, and finally, Erin, we have about 60 seconds.
So what do you think is the single biggest blind spot today that US regulators must address?
I, I think from a, from an AI perspective, it is ensuring that, um, that this, that, that, that compliance teams, that users, that law enforcement have the clarity that they need to actually be using this technology.
Um, I think that we are, we would be really handcuffing ourselves if we are acknowledged that bad actors are using it.
You mentioned that 500% stat.
Um, we need to ensure that the technology gets into the hands, right?
That law.
Enforcement is using AI at scale and um and in terms of funding for, for, for training for tools uh to really ensure that law enforcement, the national security agencies are using this cutting edge technology is absolutely the key to everything.
And I do go back to that House Financial Services report, which I encourage your, your, your listeners to, uh, to read, really goes into some great recommendations on how we need to leverage technology for good.
Well Ari, always appreciate your time.
Thank you so much for joining us.
Of course those handcuffs do belong on the bad actors that are committing these financial crimes and not the other way around.
So appreciate your time, Ari.
Thank you so much for joining us.
Thanks, Remy.
