US to strictly implement anti money laundering rules in cryptocurrencies: FinCEN Chief

The United States (US) government is set to enforce a strict rule necessitating cryptocurrency firms engaged in money service businesses such as digital asset exchanges and wallet service providers to share information about their clients according to Kenneth Blanco – Director of the Financial Crimes Enforcement Network (FinCEN).

The “travel rule” for “virtual asset service providers” or VASPs is part of requirements created by the US Treasury led Financial Action Task Force’s (FATF) compliance guidelines issued earlier this year.

The travel rule is a part of global anti-money laundering (AML) regulations that mandate that a digital currency trading platforms must verify their users’ identities. The new rule calls for companies to identify the senders and recipients of crypto transactions worth $3,000 or more. The personal details of the parties involved in these transfers must be sent to counterparties (if they exist).

The “travel rule” was introduced by FinCEN in 1996 as part of its AML standards, which now applies to all the financial institutions in the US. In March 2013, FinCEN announced the rule would also apply to digital currency exchanges. In May 2019, the US Treasury Department confirmed that FinCEN’s guidance would be applied to cryptocurrency trading platforms.

Cryptocurrency crimes have shot up into billions of dollars, with global investigators grappling with major money laundering hubs that are at the center of the virtual worlds resulting in the US government taking such a course of action. In a recent report released by Ciphertrace in August, cryptocurrency thefts, scams, and fraud are likely to exceed $4.3 billion this year.

FinCEN’s action is the outcome of release of guidelines by FATF – an inter-governmental organization that combats money laundering and terrorist financing activities. FATF directed crypto exchanges and regulators around the world to comply with the travel rule, giving them about year to do it from June this year.

When the FinCEN’s guidance on the travel rule was issued in May, the crypto industry was unsure of whether the rule would apply to their businesses.