Financial Crimes Enforcement Network (FinCEN) Director Kenneth A. Blanco said on Friday (Nov. 15) that anti-money laundering (AML) laws will be strictly enforced in the world of cryptocurrencies.
Speaking at the Chainalysis Blockchain Symposium, Blanco said that an increased number of cryptocurrency businesses are reporting suspicious transactions to the government. FinCEN, a bureau of the U.S. Department of the Treasury, has received more than 10,000 suspicious activity reports related to virtual currencies since its advisory went live in May.
“Having a clear and frank dialogue between the public and private sectors is important in creating financial transparency and inclusion,” Blanco said in his remarks at the symposium.
He noted that it is also important, as future payment systems are developed, to “identify, track and stop criminals and other bad actors … from co-opting innovation and technology in order to use and abuse our financial system.”
Blanco also reminded companies that compliance – especially by financial institutions – is often the first line of defense when it comes to protecting people against fraud.
Part of AML regulations, the “travel rule” requires cryptocurrency exchanges to verify the identity of customers, original parties and beneficiaries of transfers $3,000 or higher. FinCEN first issued the travel rule in 1996 as part of the AML standards that apply to all U.S. financial institutions. The rule’s coverage expanded in March 2013 to apply to crypto exchanges as well.
In June, the Financial Action Task Force (FATF) released guidelines requiring regulators and virtual asset service providers (VASPs) to collect and share personal data of transactions. The recommendation imposes the same standards on the cryptocurrency sector as those that are normally shouldered by the banking industry. The Paris-based task force operates as a global regulatory firm.
Dave Jevans, chief executive officer of the blockchain forensics company CipherTrace, told Reuters in an earlier interview that since digital currencies have never been classified as money, people in the crypto industry didn’t think the travel rule applied to them.
Despite its promises of security, cryptocurrency is not immune to fraud and theft. Indeed, analysts estimate that more than $1.2 billion has been lost in cryptocurrency scams and fraud in the first quarter of 2019 alone.