Civil society representatives working in the field of combating human trafficking object to Article 604 in the Clarity Act bill being discussed in the USA. The focus of criticism is the statement stating that software developers who do not control user assets will not be considered money transfer organizations. It is argued that this regulation could lead some crypto platform developers to avoid liability when their technologies are used in crime.
Article 604 is at the center of the objection
Alliance to End Human Trafficking Executive Director Katie Boller Gosewisch said the organization’s main concern is precisely this definition. According to Gosewisch, the statement could open the door for third-party platform developers to avoid legal liability even if their software is used for trafficking-related payments.
Alliance to End Human Trafficking argues that the statement that developers who do not control user funds will not be considered money transfer organizations can be used as a basis for some actors to avoid liability.
The Alliance to End Human Trafficking and Catholic Charities sent a letter containing these concerns to Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer. The organizations want the text of the law to be re-evaluated and possible gaps to be narrowed.
Crypto legal circles disagree
Speaking in the CoinDesk broadcast, Rebecca Rettig argues that Article 604 does not create a new protection shield, but clarifies the US approach to combating money laundering that has been implemented for a long time. Rettig stated that not accepting developers who do not have control over customer assets as money transfer providers is compatible with the current Bank Secrecy Act and FinCEN guidelines.
FinCEN is known as the U.S. Treasury Department’s Financial Crimes Enforcement Network and provides guidance on areas such as money laundering and sanctions violations.
Mini glossary: FinCEN is the U.S. Financial Crimes Enforcement Network. The Bank Secrecy Act creates the basic federal framework for monitoring financial transactions and reporting suspicious activity.
Rettig emphasizes that the bill protects liability for parties that actually control user funds, and does not eliminate risks under other criminal provisions.
Rettig also noted that prosecutors could use existing money laundering provisions against developers who knowingly facilitate criminal activity. In this context, it was noted that federal regulations such as 18 USC § 1956 remain in effect.
Debate extends to how to address future risks
The main distinction between the parties boils down to the question of whether the law should be shaped according to today’s technology or according to abuse scenarios that may arise in the future. Gosewisch suggested that even if today’s intent is different, sophisticated criminal networks could use the clause in the future to create reasonable suspicion in criminal cases.
Gosewisch, who made it clear that he is not a lawyer, nevertheless said that Congress should take into account how malicious actors may take advantage of the legal language over time. He likened that approach to broader duty-of-care debates in some civil cases against hotels.
The common point was the call for a stronger fight against human trafficking
Despite differences of opinion, both sides are united in the importance of more effective enforcement and investigation mechanisms against human trafficking. Gosewisch listed strengthening human trafficking coordination at the federal level and increasing financial crime investigations focusing on this area as positive steps.
Rettig said that blockchain transactions have become an important investigation tool for law enforcement because they leave traces on open ledgers. While the debate on the Clarity Act continues, it is reported that legal evaluations regarding the liability of people who develop decentralized crypto protocols continue in the courts.
