The “travel rule” requires that firms engaged in money service businesses to share information about their customers and verify identities of customers. First issued in 1996, the travel rule (a know-your-customer (KYC) regulation) was expanded by FinCEN to apply to cryptocurrency in May of this year. FATF released guidelines in June of this year directing crypto exchanges and regulators to comply with the travel rule, giving them a one year deadline for compliance. These new regulations for cryptocurrency anti-money laundering may help prevent a lot of crime.
Ciphertrace released a report in August stating that illegal cryptocurrency activites may exceed $4.3 billion this year. A dark-web drug trafficker was recently arrested after trying to launder more than $19 million worth of illegal gains through cryptocurrency. The first case against an unlicensed money remittance business operating a cryptocurrency ATM occurred this year.
Kenneth Blanco, director of FinCEN, stated that non-compliance with the travel rule is the most commonly cited violation with regard to money service businesses engaged in virtual currencies. Some crypto exchanges were initially puzzled by the travel rule, claiming that cryptocurrency isn’t classified as money and shouldn’t apply to them. Blanco responded to this confusion in a statement after clarifying that the travel rule does apply to virtual currencies. “That’s what our expectation is. You will comply. I don’t know what the shock is. This is nothing new,” Blanco told the audience at a cryptocurrency conference.
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