The Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve are set to introduce stricter rules in its Bank Secrecy Act. The new regulations apply to all financial firms including crypto firms. These rules aim to ensure crypto firms store a lot of information about their users in a database.
The proposed change requires financial firms to collect, retain, and transfer information on international transactions valued as low as $250. Currently, this threshold is $3,000. At this stage, however, the regulatory bodies are seeking industry input on the proposed changes.
The proposal will also require reporting on convertible virtual currency, as well as transactions involving digital assets with legal tender status.
Why Stricter Rules?
Primarily, the new regulation is to combat various criminal activities ranging from drug trafficking to terrorism. Officials believe that lowering the reporting threshold amount could help national security officials and law enforcement better analyze and combat these types of criminal activities.
FinCEN data involving 2,000 “suspicious activity reports” from 2016 to 2019 referenced 1.29 million underlying transfers of funds. Up to 99 percent of the transactions either begin or end in the US, a notice in the Federal Register reveals.
FinCEN and the Fed are also exploring ways of enforcing these new guidelines in other countries with ample “suspicious” cryptocurrency transactions.
However, the new policies are against what Bitcoin stands for. Bitcoin aims to keep users private and away from the limelight. The new regulations will force companies to gather information about their users. It is an unpopular path to go down on.
Although FinCEN and the Federal Reserve are working on reducing the threshold for international transfers, it remains $3,000 for domestic transactions.
How USTRWG Anticipated new regulations
Prior to this notice of these new regulations, the US Travel Rule Working Group (USTRWG), predicted the action.
USTRWG is a consortium of 25 companies dealing in virtual assets. They published a white paper earlier proposing how its members will comply with the Travel Rule. These include coping with anti-money laundering (AML) and combating the financing of terrorism rules (CFT).
Currently, firms are required to report specific information of both parties of a funds transfer. This includes the sender’s name, account number, address, name of the financial institution, date, and amount sent.
Logging this information is a bid to crack down on money laundering and combat other criminal activities.
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