May 14, 2026

What's Actually in CLARITY: A Section-by-Section Look at the AML and Law Enforcement Provisions

TRM Team

What's Actually in CLARITY: A Section-by-Section Look at the AML and Law Enforcement Provisions

Key takeaways

CLARITY's Title II creates formal BSA, SAR filing, and OFAC compliance obligations for digital commodity brokers, dealers, and exchanges — entities that have not previously been subject to a comprehensive AML program requirement under federal law.
A new temporary hold authority in Section 305 gives exchanges and stablecoin issuers the ability to pause a suspicious transaction for 30 days — extendable to 180 days on a qualified written request from law enforcement — with safe harbor protection from civil liability.
"Distributed ledger analytics tools" are explicitly mandated as a compliance requirement for certain DeFi services under Section 308 and for digital asset kiosks under Section 205, making blockchain intelligence a statutory obligation rather than an industry best practice.
The Blockchain Regulatory Certainty Act in Section 604 preserves the criminal carve-out under 18 USC § 1960(b)(1)(C), leaving intact the prosecutorial basis for Helix-type prosecutions of people who knowingly facilitate the transfer of criminal proceeds.
Next the bill will be merged with the CFTC-related provisions of the Senate Agriculture Committee version, a Senate floor vote, House-Senate conference to reconcile the two chamber texts, and presidential signature before it becomes law.

Overview

Yesterday, the Senate Banking Committee passed the Digital Asset Market Clarity Act — H.R. 3633, known as CLARITY — out of committee on a 15-9 bipartisan vote. The bill now moves toward the Senate floor. Most of the public discussion has focused on market structure: which assets are securities, which are commodities, and who regulates what. But embedded throughout the bill is a detailed set of anti-money laundering, sanctions compliance, and law enforcement provisions that will shape how investigators, compliance teams, and regulators interact with digital assets for years to come. This post walks through those provisions, section by section — just what the bill says and what it means for the people doing this work.

CLARITY is a comprehensive digital asset market structure bill. Title I addresses the SEC/CFTC jurisdictional split. Title II is dedicated entirely to illicit finance. Title III covers decentralized finance and includes several AML-relevant provisions. Title VI includes the Blockchain Regulatory Certainty Act. The provisions below come primarily from Titles II, III, and VI.

Title II: Protecting against illicit finance

Section 201 — BSA and sanctions compliance for digital commodity entities

Section 201 brings digital commodity brokers, dealers, and exchanges formally under the Bank Secrecy Act and OFAC sanctions compliance frameworks. Covered entities are required to establish and maintain AML/CFT programs with five components: a written risk assessment, internal policies and procedures, a designated compliance officer, ongoing employee training, and an independent audit function. They must also file Suspicious Activity Reports (SARs) and comply with OFAC's sanctions programs.

For compliance teams at exchanges and brokers, this requires building programs that mirror what banks and money services businesses already maintain. For law enforcement, it establishes a statutory basis for expecting SAR filings and AML infrastructure from a much broader set of digital asset entities.

Section 202 — Risk-based examination standards

Section 202 directs the relevant regulators to develop risk-based examination standards tailored to digital asset entities. Exams must assess the adequacy of an entity's AML/CFT program relative to its risk profile — size, transaction volume, customer base, and product mix. This is a standard supervisory tool applied to a new category of regulated entity.

Section 203 — Public-private information sharing pilot

Section 203 creates a five-year public-private information sharing pilot program modeled on the existing 314(b) framework. Covered federal agencies — including DOJ, FBI, DEA, Treasury, FinCEN, IRS-CI, OFAC, and DHS — may share information with up to 30 designated private sector entities. Participating entities receive liability protection for information shared in good faith. The pilot sunsets after five years unless reauthorized.

The goal of Section 203 is not to build something new — it is to certify and scale what already exists. The Beacon network has already demonstrated what real-time interdiction and seizure looks like in practice: law enforcement and private sector entities sharing live threat intelligence to stop illicit funds before they move and seize them before they disappear. Section 203 gives networks like Beacon a statutory home — a formal legal channel, explicit liability protection, and the ability to expand to 30 designated private sector entities. For compliance teams at those designated entities, it creates a mechanism to receive law enforcement-grade intelligence and a safe harbor for sharing information in return.

Section 204 — Independent financial technology working group

Section 204 establishes a four-year working group chaired by Treasury, with membership drawn from DOJ, FBI, DEA, DHS, Secret Service, State Department, ODNI, and the private sector — explicitly including blockchain intelligence companies. The mandate is to research and report annually on the illicit use of digital assets by terrorist organizations, foreign terrorist organizations, state sponsors of terrorism, and transnational criminal organizations.

The inclusion of ODNI alongside law enforcement agencies and analytics firms reflects a treatment of digital asset threats as a national security issue. Annual reports to Congress create a public accountability mechanism and, over time, a body of unclassified threat intelligence that the broader community can reference.

Section 205 — Digital asset kiosks

Section 205 adds a new section to Title 31 — 31 USC § 5337 — governing digital asset kiosks. Requirements include: mandatory fraud disclosures at the point of transaction; wallet address pinning, which requires the operator to verify that the destination wallet matches the intended recipient; a mandate to use blockchain intelligence to screen for illicit activity; a 72-hour hold on transactions for new customers; a $3,500 per 24-hour cap for new customers during the interim period; a designated compliance officer; and a dedicated law enforcement contact at each operator.

Kiosks have been a documented vector for consumer fraud schemes — romance scams, government impersonation fraud, and elder fraud in particular — in part because operators have historically faced minimal AML program requirements.

Section 206 — Study on illicit use by foreign terrorist organizations and transnational criminal organizations

Section 206 directs Treasury to produce a report within one year on the illicit use of digital assets by foreign terrorist organizations and transnational criminal organizations. The report must assess current typologies and make recommendations to Congress.

Title III: DeFi and additional AML provisions

Section 303 — Special measures for jurisdictions and financial institutions of primary money laundering concern

Section 303 amends 31 USC § 5318A to add a new special measure authority specific to digital assets. Treasury may prohibit or condition fund transmittals involving foreign jurisdictions or financial institutions designated as being of primary money laundering concern in connection with digital asset activity. This extends a FinCEN authority — previously applied to correspondent banking relationships with sanctioned jurisdictions — to cover digital asset transmittals.

Section 305 — Temporary transaction hold authority

Section 305 gives digital asset service providers and stablecoin issuers the authority to place a 30-day temporary hold on a transaction where there is reason to believe it may involve illicit activity. A covered entity that receives a qualified written request from law enforcement may extend the hold an additional 150 days. Participation is voluntary, and entities that act in good faith receive safe harbor from private civil liability. The provision explicitly preserves all existing law enforcement authority and does not limit SAR filing obligations.

For investigators, this creates a formal legal basis for requesting that an exchange pause a transaction while additional information is gathered, without requiring a court order. For compliance officers, it provides a documented instrument and a safe harbor to act on suspicious activity in real time.

Section 307 — Digital assets as monetary instruments; self-hosted wallet risk assessment

Section 307 amends the monetary instrument definition at 31 USC § 5312(a)(3) to add digital assets. It also directs Treasury to conduct a risk assessment of self-hosted wallets and report findings to Congress, including an analysis of the extent to which self-hosted wallets are used for illicit finance.

Section 308 — Risk management standards for DeFi intermediaries

Section 308 applies to digital asset intermediaries that use decentralized finance protocols. Covered entities must conduct a risk analysis covering money laundering, sanctions evasion, fraud, and cybersecurity threats; disclose risks to customers; and maintain a risk-based capability to detect illicit activity — specifically through the use of blockchain intelligence tools. Transaction screening procedures are required.

The explicit mandate to use blockchain intelligence tools as a component of a compliance program is one of the few places in U.S. law where a specific category of compliance technology is referenced as a statutory requirement rather than a best practice.

Section 309 — Study on mixers and tumblers

Section 309 directs Treasury to study digital asset mixers and tumblers, defined in the bill as smart contracts that obscure the source or holder of assets by pooling and redistributing them. The study must assess typologies of illicit use, estimate the percentage of mixer volume attributable to illicit activity, identify non-illicit uses, and make regulatory recommendations within one year.

Title VI: The Blockchain Regulatory Certainty Act

Section 604 — BRCA

Section 604 provides that a "non-controlling developer or provider" shall not be treated as a money transmitting business solely because they create or publish distributed ledger software, provide self-custody hardware or software, or provide infrastructure support for a distributed ledger network.

The provision preserves the existing criminal carve-out under 18 USC § 1960(b)(1)(C), which applies to persons who act with specific intent to transfer funds they know to be derived from a criminal offense or intended for an unlawful purpose. This is the statutory basis under which the Helix mixer prosecution was brought. The BRCA does not affect that authority. The line the bill draws is between developing non-custodial software — which is not money transmission — and knowingly directing the movement of criminal proceeds through that software — which remains a federal crime.

What this means for law enforcement

Taken together, the provisions in CLARITY represent the most extensive set of statutory tools for digital asset law enforcement that Congress has considered in a single bill. Several of them fill gaps that investigators have been navigating around for years.

The SAR expansion under Section 201 is the most foundational change. The value of the SAR regime is cumulative — it depends on breadth of coverage — and the bill expands that coverage materially to include digital commodity brokers, dealers, and exchanges. More entities filing SARs means more leads, more financial intelligence, and more opportunities for FinCEN to identify patterns across the industry.

The temporary hold authority in Section 305 addresses one of the most operationally significant challenges in crypto investigations: the speed of transactions. Under current law, investigators who identify a suspicious transaction in real time have limited options to pause it without a court order. Section 305 creates a formal mechanism: a qualified written request can trigger a 30-day hold, extendable to 180 days. The safe harbor removes the civil liability risk that has historically made exchanges reluctant to freeze assets voluntarily, even when they had reason to believe a transaction was illicit.

The public-private information sharing pilot in Section 203 formalizes something that has existed informally for years — intelligence sharing between federal investigators and blockchain intelligence firms and exchanges. The Beacon network has shown what becomes possible when that barrier is removed — real-time interdiction of illicit transactions, driven by live information sharing between law enforcement and private sector entities. The Section 203 pilot creates a statutory channel with explicit liability protection that can formalize and scale that model, opening the door to sharing wallet clusters, transaction pattern typologies, and threat actor attribution in a way that both sides can document and rely on.

The working group in Section 204 is an intelligence coordination function. The inclusion of ODNI alongside DOJ, DEA, DHS, Secret Service, and blockchain intelligence companies signals that digital asset threats — particularly from terrorist organizations and state-sponsored actors — are being treated as a national security issue. Annual reporting creates a public accountability mechanism and a body of unclassified threat intelligence over time.

The kiosk provisions in Section 205 address a documented fraud vector. The requirement for a dedicated law enforcement contact at each operator gives investigators a direct point of contact when they need information quickly, rather than navigating a general customer service queue.

On Section 604: the preservation of the 18 USC § 1960(b)(1)(C) carve-out means that the investigative and prosecutorial tools used against knowing facilitators of criminal proceeds remain fully intact. The BRCA limits liability for non-custodial software developers who are not directing or controlling the movement of funds. It does not limit liability for anyone who knows they are facilitating the transfer of criminal proceeds.

What this means for compliance teams

The compliance obligations created by CLARITY extend to categories of entities that have not historically maintained formal AML programs, and they go significantly deeper than prior frameworks that applied to digital asset businesses.

The most immediate obligation falls on digital commodity brokers, dealers, and exchanges under Section 201. The five-component AML/CFT program requirement mirrors the structure of BSA compliance programs at banks and money services businesses. The SAR filing obligation creates a direct reporting relationship with FinCEN, which has implications for how compliance teams document suspicious activity, maintain records, and respond to law enforcement requests.

Risk-based examination under Section 202 means compliance programs will be evaluated against the entity's actual risk profile. Examiners will look at transaction volumes, customer base, product types, and geographic exposure. Compliance teams need to build programs that are defensible relative to their specific risk profile, not just programs that check minimum boxes.

The blockchain intelligence mandate in Section 308 is one of the most significant technology-specific requirements in the bill. For digital asset intermediaries that interface with DeFi protocols, blockchain intelligence is a statutory compliance requirement. Compliance teams at these entities need a documented capability to detect illicit activity through blockchain intelligence, with transaction screening procedures integrated into their operations. The Section 205 kiosk requirements impose the same analytics mandate on kiosk operators.

The temporary hold mechanism in Section 305 gives compliance teams an instrument they currently lack: the ability to pause a suspicious transaction and investigate without immediately having to choose between releasing the funds and risking a civil lawsuit. Compliance officers should develop internal procedures for evaluating and responding to qualified written requests from law enforcement, and for documenting good-faith holds in a way that preserves the safe harbor.

The self-hosted wallet risk assessment mandated by Section 307 will produce Treasury guidance that compliance teams should track. Its findings will likely inform future regulatory expectations around how exchanges treat transactions involving self-hosted wallet counterparties — an area where current practice is inconsistent across the industry.

The mixer and tumbler study in Section 309 is a precursor to potential regulatory action. Treasury is required to assess typologies, estimate illicit use percentages, and make regulatory recommendations within one year. Exchanges and certain DeFi services that receive transactions from mixing services should treat this as a signal that enhanced scrutiny of mixer-linked transactions will be a regulatory expectation in the near term.

The special measures authority in Section 303 requires compliance teams to be operationally ready to implement Treasury designations quickly. When Treasury designates a foreign jurisdiction or financial institution as being of primary money laundering concern in connection with digital assets, covered entities will need to prohibit or condition fund transmittals involving those parties. The operational model already exists from OFAC sanctions programs; this extends that model to a digital-asset-specific context.

What comes next for CLARITY

The Senate Banking Committee vote is one step in a process that has several stages remaining before CLARITY becomes law — but the path is clearer now than it has been at any prior point in the debate over digital asset legislation.

The Senate Banking Committee passed its version on May 12, 2026, covering the banking, FinCEN, Treasury, and AML-related provisions. The Senate Agriculture Committee — which has oversight jurisdiction over the CFTC — has separately passed the companion bill covering the CFTC-related provisions. Those two committee-passed texts are now being combined into a single unified Senate bill. That combination process involves coordination between the two committees and Senate leadership to resolve any conflicts between the two texts and produce a legislative vehicle ready for a floor vote.

Once the unified bill is assembled, it goes to the Senate floor for a full chamber vote. Floor consideration brings its own variables — amendment votes, potential holds, and the cloture process, which typically requires 60 votes to move a bill to final passage. The bipartisan margins out of both committees are relevant context, but floor dynamics are distinct from committee dynamics, and the path through the full Senate will require sustained support from members who were not at the markup table.

If the Senate passes the bill, it goes to the House for a conference. The House passed its own version of CLARITY — H.R. 3633 — and the two chambers have produced different legislative texts. A conference committee, composed of members from both chambers, will negotiate a unified text that resolves the differences between the Senate and House versions. The AML and law enforcement provisions described in this post come primarily from the Senate text; the conference process will determine which provisions, and which versions of provisions, survive into the final bill.

After the conference committee produces a unified text, both chambers vote on the conference report — an up-or-down vote with no amendments. If both chambers pass it, the bill goes to the President for signature.

For compliance teams and investigators, the period between now and final enactment is a window to engage: to review the provisions, assess operational readiness, and communicate with the relevant committees and agencies about how specific provisions would work in practice. Several of the provisions described above — including the public-private pilot, the kiosk requirements, and the blockchain intelligence mandate in Section 308 — will require implementing regulations and agency guidance before they take full effect. That rulemaking process is another opportunity for the people who will live under these rules to shape how they are written.

Frequently asked questions (FAQs)

1. Does CLARITY weaken law enforcement's ability to investigate and prosecute crypto crimes?

The bill's Section 604 — the Blockchain Regulatory Certainty Act — narrows the circumstances under which a non-custodial software developer can be treated as a money transmitting business. But the provision explicitly preserves the criminal carve-out under 18 USC § 1960(b)(1)(C), which makes it a federal crime to knowingly transfer funds derived from a criminal offense or intended for an unlawful purpose. This is the statutory basis for the Helix mixer prosecution and similar cases. Investigators and prosecutors retain the tools they have used in those cases. What changes is that developing non-custodial software alone, without direction or control over funds and without knowledge of criminal proceeds, is no longer a basis for money transmission liability.

2. What new compliance obligations does CLARITY create for crypto exchanges?

Section 201 requires digital commodity brokers, dealers, and exchanges to establish and maintain five-component AML/CFT programs covering risk assessment, policies and procedures, a compliance officer, employee training, and an independent audit. SAR filing obligations and OFAC sanctions compliance become statutory requirements. Section 308 requires certain DeFi services to use blockchain intelligence tools as part of their compliance programs. Section 305 creates a voluntary temporary hold mechanism with a civil liability safe harbor. Section 202 subjects these programs to risk-based examination by regulators.

3. What is the temporary hold authority and how does it work operationally?

Section 305 allows a digital asset service provider or stablecoin issuer to place a 30-day hold on a transaction where there is reason to believe the transaction may involve illicit activity. If the entity receives a qualified written request — such as from law enforcement — the hold can be extended an additional 150 days, for a total of up to 180 days. Participation is voluntary, and the entity receives safe harbor from private civil liability for a hold made in good faith. The provision does not create a seizure authority; it is a pause mechanism that preserves the option of seeking a court-ordered seizure while assets remain accessible. All existing law enforcement authority and SAR obligations are explicitly preserved.

4. What does the self-hosted wallet risk assessment in Section 307 mean for exchanges?

Section 307 directs Treasury to conduct a risk assessment of self-hosted wallets — wallets where users hold their own private keys — and report findings to Congress, including an assessment of the extent to which self-hosted wallets are used for illicit finance. The risk assessment itself does not impose new obligations on exchanges, but its findings will almost certainly inform future regulatory guidance on how exchanges are expected to treat transactions involving self-hosted wallet counterparties. Exchanges that currently apply inconsistent or informal approaches to self-hosted wallet exposure should treat this as a signal that the issue will receive more formal regulatory attention.

5. When could CLARITY become law, and what are the remaining steps?

As of May 2026, both the Senate Banking Committee and the Senate Agriculture Committee have passed their respective portions of the bill. The two committee texts are now being combined into a unified Senate bill. From there, the remaining steps are: Senate floor vote; House-Senate conference to reconcile the unified Senate text with the House-passed version of H.R. 3633; passage of the conference report by both chambers; and presidential signature.