Last week, the Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve invited comments on the proposed rule that would change the recordkeeping and travel rule regulations under the Bank Secrecy Act.
Under the current rules, financial situations must collect information related to funds transfers and transmittals of funds over $3,000. The information to be collected includes the name and address of the transmitter, the amount of the payment, its execution date, any payment instructions from the originator, and the beneficiary’s bank or recipient’s financial institution’s identity.
But as per the amendment, this limit is lowered to $250 for international transactions while the threshold for domestic transactions remains unchanged. This applies to transactions involving “convertible virtual currencies” (CVC) and “digital assets with legal tender status.” It further proposes to clarify the meaning of “money.”
The official report notices that “public use of CVCs has grown significantly in recent years.” Estimated transactions in Bitcoin alone were about $366 billion in 2019 and $312 billion in 2020 through August.
It further stated that malign actors have been using them for all sorts of illegal activities.
The proposed modifications will help them gain information in criminal, tax, or regulatory investigations and protect against international terrorism.
“FinCEN is aware that the CVC industry is working on developing systems and processes to achieve full compliance with the Travel Rule as applied to virtual currency transactions as a result of the distinctive characteristics of CVCs.”
They “welcome” comments on these efforts that will be accepted only for 30 days.
The US Financial Crimes Enforcement Network (FinCEN) has issued an advanced notice of proposed rulemaking (ANPRM) to amend its anti-money laundering (AML) guidelines, ensuring that all covered financial institutions maintain an efficient AML program.
This includes crypto entities that run under the Money Service Business (MSB) licenses, amongst other approvals, to offer this line of service to US residents.
According to the announcement on September 17, FinCEN is seeking feedback from stakeholders affected by changes to the AML requirements. This bureau of the US Department of the Treasury has since issued 60 days for interested stakeholders to have commented on prospectus regulatory amendments.
FinCEN noted that this move is particularly important in the combat of evolving illicit financial crime and will therefore set the stage for more solid AML practices,
“The regulatory amendments under consideration are intended to modernize the regulatory regime to address the evolving threats of illicit finance, and provide financial institutions with greater flexibility in the allocation of resources, resulting in the enhanced effectiveness and efficiency of anti-money laundering programs.”
Upon implementation, the prospectus changes will affect compliance and reporting by US domiciled financial institutions. FinCEN highlighted that the amendments are expected to be detailed enough, such that there is clear clarification on risk assessment methods, coupled with the consideration of oversight requirements under the US Bank Secrecy Act and AML priorities.
Crypto Businesses Amongst the Targets!
With a decade gone by since crypto made a debut, regulators appear to be paying more attention now that the trend is no longer a hype but a threat to traditional financial ecosystems. One of the areas that have proved incredibly difficult for oversight agencies is crypto in money-laundering and terror-financing activities.
It, therefore, comes as no surprise that FinCEN is joining its counterpart agencies like the IRS, which recently issued a $625,000 bounty for anyone who would crack Monero’s anonymous ecosystem. Going forward, more financial oversight authorities are likely to take a similar route as crypto gradually goes mainstream.
A crypto FinCEN regulated crypto exchange launched its own debit card with which digital asset holders can make payments for services and goods using their digital assets.
CoinZoom is based in Utah and made on Wednesday the announcement that it’s going to start onboarding new retail and institutional clients, also that it will provide a Visa debit card that converts crypto into US dollars instantly, making payments the same way.
CoinZoom is FinCEN Registered in the US
CoinZoom is a FinCEN registered business that offers money services. It’s regulated by the agency in most US territories and states, which means it has to respect the local laws, including the ones concerning know-you-customer (KYC) and consumer protection. More than this, it also has a money transmitter license in the same country and another one in Australia as a digital currency exchange.
CoinZoom supports the most important cryptocurrencies like the Bitcoin (BTC) and the Ether (ETH), which are paired with the US dollar and provide an asset class fiat gateway. Furthermore, its platform runs a selected proof-of-stake (PoS) coins staking facility that gives holders rewards.
CoinZoom Can Also Be Used as a Remittance Solution
CoinZoom’s CEO and founder, Todd Crosland, said the exchange already has an Apple iOS trading app available and can be used as a remittance solution. Here are his exact words on the Visa debit card news:
“CoinZoom is not only the first U.S. cryptocurrency exchange to provide a Visa card to its customers, but also offers … industry-first features like ZoomMe, CoinZoom’s free Peer-to-Peer crypto and fiat payment system.”
Coinbase Also Released Its Own Visa Debit Card
Let’s not forget that last year, Coinbase, the famous crypto exchange that’s also based in the US and registered with FinCEN and even MSB, has released its own Visa debit card too. However, only its users from the EU and the UK can use it. On Tuesday, Coinbase made the announcement that the same card is now integrated with Google Play.
US Financial Crimes Enforcement Network (FinCEN) is on track to releasing new requirements for the dynamic cryptocurrency space, Steve Mnuchin assured Congress.
Authorities need to follow funds to ensure they don’t end up for Money Laundering purposes
During a recent Senate Finance Committee hearing, Steve Mnuchin the U.S. Treasury Secretary called on the FinCEN, a U.S financial regulatory authority, to put in place new cryptocurrencies regulations and guidelines in a bid to reduce the money laundering, illicit trades and activities that cryptocurrencies purportedly enhance.
Mnuchin was in Congress answering Senator Maggie Hassan (D-N.H.), on how the budget increases Treasury plans to bolster monitoring and prosecution of terrorists and criminal rings that funnel funds using crypto. He didn’t give much details but he stated that they had zeroed in on cryptocurrencies, a topic they had given much thought after lengthy discussions with other agencies and watchdogs.
They would want technology to progress with caution by ensuring that digital assets aren’t simply being stashed for criminal enterprises. This would be made possible only if the authorities would be able to follow a trail ensuring that the funds weren’t for money laundering purposes.
“We want to make sure that cryptocurrencies aren’t used for the equivalent of old Swiss secret number bank accounts.”
In a previous White House briefing Mnuchin has argued that the cryptocurrencies in place have been breached by criminal fronts to facilitate illegal dealings such as ransomware, extortion and even in extreme cases Human and Narco trafficking. He added that the regulators wouldn’t stand by as crypto firms facilitate such with mentions of BTC and Libra.
“To be clear: FinCEN will hold any entity that transacts in Bitcoin, Libra, or any other cryptocurrency to its highest standards.”
FinCEN Tough Stance
FinCEN’s top brass has constantly reiterated their position on Crypto regulations. Previously Kenneth Blanco, director FinCEN has offered stern warning to crypto firms and start-ups that don’t follow BSA and AML regulations of dire consequences. The Securities and Exchange Commission(SEC), Commodity Futures Trading Commission (CTFC) and FinCEN recently released a joint press statement where they reminded actors in the crypto space to follow BSA and AML regulations set aside by regulatory authorities.
In a blog, the Monero Compliance Workgroup came to the conclusion that XMR is exempted from FinCEN Funds Travel Rule as it is not applicable to assets and cryptos like the XMR.
According to the blog, the rules set by the U.S. Financial Crimes and Enforcement Network (FinCEN) towards the Funds Travel Rule, are not applicable to XMR.
According to the Funds Travel Rule, financial firms when either sending or receiving money must keep and submit different types of information regarding the said transfer if the money in question is $3000 or more. However, FinCEN gave extra requirements in their May guidelines. The agency explained that when a transmission protocol fails to store such information, the person in question can provide the required details. Therefore, the interpretation is that there is no requirement to provide such information within the network.
According to the Monero Workgroup on compliance, it is the duty of crypto exchanges to provide such information and not cryptocurrencies. As a regulated exchange and one that adheres to both the AML and KYC requirements, it is required to store such transactional details and should pass that information to the relevant agencies. The blog concludes that Monero or any other crypto are not affected in any way by the Funds Travel Rule.
The statement continues to say that it is misplaced for any crypto to state that it is adherent to the Funds Travel Rule as it is meant for regulated entities and not the assets which these entities deal with.
However, as Cointelegraph reports, the statement may have been released a little bit late as various exchanges have gone ahead and removed Monero from its tradable assets. This has also affected other privacy coins as the exchanges are trying to evade any frictions with the regulators.
Kenneth Blanco, the Financial Crimes Enforcement Network (FinCEN) director, said on November 15th that the US government will enforce a ‘travel rule’ requiring crypto companies providing wallet services and trading digital assets to provide information on their customers.
The new rule is meant to prevent money laundering and requires crypto exchanges to verify the identity of their customers, also to identify parties involved in transfers up to $3,000 and higher. The information on the transfers needs to be transmitted to counterparties if these exist.
Kenneth Blanco Says the News Shouldn’t Come as a Shock. At a New York conference hosted by the blockchain analysis company Chainalysis, Blanco said:
“It (travel rule) applies to CVCs (convertible virtual currencies) and we expect that you will comply period. That’s what our expectation is. You will comply. I don’t know what the shock is. This is nothing new.”
The US government has decided to make a move seeing the crime in cryptocurrency is now using billions of dollars. Investigators all over the world have their eye on money laundering hubs activating in the virtual world. In August, Ciphertrace reported that fraud, scams and thefts in the cryptocurrency space have exceeded $4.3 billion, just in 2019.
The Rule Complies to Anti-Money Laundering Standards
This ‘travel rule’ was issued back in 1996 by FinCEN. It complies to the standards that apply to all financial institutions based in the US. Its coverage was extended in 2014 so that it applies to crypto exchanges too. In June 2019, the global and inter-governmental organization that fights terrorism financing and money laundering US Treasury led-Financial Action Task Force (FATF) has released some guidelines on how money laundering in the crypto environment is taking place.
FATF also informed crypto exchanges they need to comply with the ‘travel rule’ in a year from June. Blanco continued by saying:
“FinCEN…has been conducting examinations that include compliance with the funds’ travel rule since 2014,”
He also added that money laundering is the most common violation of businesses trading in virtual currencies.
At an Anti-Money Laundering Conference in Las Vegas, the director of the Financial Crimes Enforcement Network (FinCEN) asked the casinos to comply with the agency’s guidelines in regards to suspicious convertible virtual currency (CVC) activity.
Convertible virtual currency is an unregulated digital currency that can be used as a substitute for real and legally recognized currency. It usually has measurable value in real money, but what makes it convertible lies in its ability to be interchangeable.
In his speech, he mentioned that the two areas where CVC and Casins intersect are mostly online casinos. Even physical casinos and card clubs are increasingly becoming more vulnerable. He reminded about the gap in reporting about the suspicious activities in these areas, saying:
“I encourage casinos to closely review both documents on FinCEN’s website to see how we are addressing this industry and its interactions with others in the financial sector. Casinos should be filing SARs when they encounter suspicious CVC activity and any cyber events that affect, facilitate, or conduct transactions. We know that casinos are targets for cyber and cyber-enabled criminal activity such as ransomware attacks and business e-mail compromise schemes.”
FinCEN was founded in 1990 with the goal of fighting money-related crime. The agency analyzes financial transaction information with the goal of combating terrorism financing, money laundering, and other financial crimes. Blanco has held the position since November 2017. In May 2019, the firm issued new guidance that contains its financial regulation policies concerning Decentralized Applications.
Last year BitcoinExchangeGuide had reported about Blanco explaining the agency’s stance on crypto. He was overall positive about cryptocurrencies and blockchain technology. He began his speech discussing how crypto can be used to optimize businesses and conduct more efficient international transactions. Although, even then, Blanco had claimed crypto can be used for criminal activities and that his agency’s goal was to facilitate a healthy, crime-free cryptocurrency ecosystem.