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.
“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.