The US Federal Reserve Board and Fincen are seeking feedback on their proposal to lower the threshold at which financial institutions must collect and retain information on fund transfers. In their joint communication on the proposed rule change, the two US agencies want a new threshold for international transactions to be set at $ 250 compared to the current $ 3,000. The rule for internal transactions remains unchanged.
Agencies want cryptocurrencies to be defined as money
In a press release, the two agencies are also seeking comment on the proposal to broaden the definition of money to include transactions related to cryptocurrencies. The current rules only apply to the transfer of funds involving banks. The document explains:
The agencies also propose clarifying the meaning of the money used in these same rules to ensure that the rules apply to domestic and cross-border transactions involving virtual convertible currency (CVC).
While the agencies recognize that cryptocurrencies are not legal tender, in the proposed rule change they want these digital currencies to be treated as money since so-called CVCs already act as “a medium of exchange that has equivalent value as a currency or acts as a currency substitute. “
According to the agencies, the proposed rule “makes it explicitly clear that both payment orders and transmission orders include any instruction from the sender to transmit CVCs or any digital assets having legal tender status to a recipient.”
This means that, if approved, the proposed rule “would replace the current definition of money for the purposes of the registration and travel rules”.
Low dollar transactions used to evade authorities
Meanwhile, in their justification for lowering the threshold to $ 250, the two agencies explain how they have observed increased transaction volumes involving lower values and how this could threaten US national security.
“The agencies have considered suspicious activity reports (SARs) submitted by money transmitters, which indicate that a substantial volume of potentially illicit funds transfers and fund transmissions occur below the $ 3,000 threshold,” they said. agencies.
Specifically, Fincen, which analyzed data derived from around 2,000 SARs deposited by money transmitters between 2016 and 2019, claims to have observed a disproportionate number of small-value transactions compared to those of higher value.
The agency says that “of the roughly 1.29 million underlying fund transfers”, about 99% of those “started or ended outside the United States,” with about 17,000 involving domestic transactions only. Analyzing the data further, Fincen states:
The average and median dollar value of the fund transmissions mentioned in those SARs were approximately $ 509 and $ 255 respectively. Approximately 71% of these 1.29 million (more than 916,000) transmissions were $ 500 or less. totaling over $ 179 million. About 57% of these transmissions (more than 728,000) were $ 300 or less, totaling over $ 103 million.
The two agencies cite the 2015 National Terrorism Financial Risk Assessment when they conclude that terrorism sponsors and facilitators use “low-cost transactions” to achieve their goals.
Meanwhile, the agencies say written comments on this proposed rule can be submitted no later than 30 days after the date of publication in the Federal Register.
What do you think of the proposed rule change? Share your thoughts in the comments section below.
Image credits: Shutterstock, Pixabay, Wiki Commons