Financial Institution regulator FinCEN calls for feedback on proposed anti-money laundering regulation

By Pavithra R

The Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of the Treasury is seeking for feedback comments on proposed requirements for certain transactions involving convertible virtual currency (CVC) or digital assets with legal tender status (LTDA).

Under the Notice of Proposed Rulemaking (NPRM) submitted to the Federal Register, banks and money services businesses (MSBs) are required to submit reports, keep records, and verify the identity of customers concerning transactions above certain thresholds involving CVC/LTDA wallets not hosted by a financial institution (FI) (unhosted wallets) or CVC/LTDA wallets hosted by a FI in certain jurisdictions identified by FinCEN. Through this proposed rule, FinCEN is seeking to address the illicit finance threat created by one segment of the CVC market and the anticipated growth in LTDAs based on similar technological principles.

“This rule addresses substantial national security concerns in the CVC market and aims to close the gaps that malign actors seek to exploit in the recordkeeping and reporting regime. The rule, which applies to FIs and is consistent with existing requirements, is intended to protect national security, assist law enforcement, and increase transparency while minimizing the impact on responsible innovation,” said Secretary Steven T. Mnuchin.

The country welcomes responsible innovation, including new technologies that may bolster the efficiency of the financial system and expand access to financial services. The current action seeks to protect national security and aid law enforcement by enhancing the transparency in digital currencies and closing loopholes that fraudsters may exploit.

The proposed rule is in complement to the existing BSA requirements applicable to banks and MSBs by proposing to add reporting requirements for LTDA and CVC transactions exceeding $10,000 in value. According to the proposed rule, banks and MSBs will have fifteen days from the date on which a reportable transaction occurs to file a report with FinCEN. 

The various details that need to be collected include the following:

• The name and address of the financial institution’s customer;
• The type and amount of CVC or LTDA used in the transaction;
• The time of the transaction;
• The assessed value of the transaction based on the prevailing exchange rate at the time of the transaction, in U.S. Dollars;
• Any payment instructions received from the financial institution’s customer;
• The name and physical address of each counterparty to the transaction of the financial institution’s customer;
• Other counterparty information the Secretary may prescribe as mandatory on the reporting form for transactions subject to reporting pursuant to § 1010.316(b);
• Any other information that uniquely identifies the transaction, the accounts, and, to the extent reasonably available, the parties involved; and,
• Any form relating to the transaction that is completed or signed by the financial institution’s customer.

Written comments on this proposed rule may be submitted on or before January 4, 2021.

The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes.