US government plans strict enforcement of AML ‘travel rule’ for crypto firms
The US government has said it will enforce a rule which requires cryptocurrency firms with money, digital asset exchange and wallet services to share information about their customers, Reuters reports.
FinCEN says: “You will comply”
In a bid to anticipate and prevent money-laundering, the director of the Financial Crimes Enforcement Network (FinCEN), Kenneth Blanco, announced what he calls the “travel rule” at a conference hosted by Chainalysis, a New York-based blockchain analysis company.
The travel rule will not only require cryptocurrency exchanges to verify their customers’ identities, but will also require the firms to identify original parties and receivers of payments $3,000 or higher. When counterparties exist, they will also need a transmission of this information.
“[The travel rule] applies to convertible virtual currencies, and we expect that you will comply – period,” says Blanco. “That’s what our expectation is. You will comply. I don’t know what the shock is. This is nothing new.”
The “nothing new” sentiment refers to the fact that FinCEN introduced a travel rule back in 1996 for all US financial institutions, and amended it in 2013 to include all cryptocurrencies. The US Treasury unit affirmed that guidance in May this year.
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Guidelines were then released in June by the US Treasury led-Financial Action Task Force (FATF) to tackle money laundering and terrorism financing. All exchanges have until June 2020 to adjust and start complying.
Despite this, there is some debate over whether digital assets should have ever been considered as money, and hence whether the travel rule should even include them.
The anti-money laundering (AML) concern driving adherence to this rule is certainly not one just kept my US regulators when it comes to cryptocurrency. The UK’s Financial Conduct Authority (FCA) said its investigations into cryptocurrency businesses have increased by 74% since 2018.
Blanco concluded that FinCEN has been “conducting examinations that include compliance with the funds’ travel rule since 2014”, revealing it’s the most commonly cited violation with regard to money service businesses dealing in virtual currencies.
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AML and KYC must be basic procedures, if not, crimes connected with crypto will rise. Besides that, every exchange should know where the transferred money come from, it may turn out, that e.g. 20% funds are dirty money. Actually there are companies like Coinfirm which cooperates with Ripple or Binance. They check if cryptocurrencies passed through coin mixers and gain access to the crucial info about the potential risks by checking addresses.