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On Nov. 6, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve Board withdrew a proposed change to the “Travel Rule.” The change would have required financial institutions to keep and pass along information on money transfers of $250 or more that start or end outside the U.S., down from $3,000 now.
The agencies proposed the lower threshold on Oct. 27, 2020, as a change to their rules under the Bank Secrecy Act, the main U.S. anti-money-laundering law.
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The proposal would have lowered the threshold from $3,000 to $250 for fund transfers and transmittals outside the U.S.. Additionally, it would have clarified the meaning of “money” to ensure that the rules apply to domestic and cross-border transactions involving convertible virtual currencies, such as cryptocurrencies.
FinCEN had argued back then that malicious actors were laundering illicit money using very small transactions.
But the FinCEN and Fed Board jointly withdrew the rule proposal last week, saying the agencies received nearly 3,000 comments from depository institutions, money services businesses, trade associations, individuals, etc. who opposed the proposal to reduce the thresholds.
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Opposition to threshold reduction to $250
The agencies said the comments argued a $250 reporting threshold would:
impose a significant regulatory burden on financial institutions, particularly smaller financial institutions,
disrupt the ability of consumers to send remittances overseas and drive them into less regulated marketplaces,
increase the liability exposure of financial institutions required to maintain personally identifiable information, and
significantly increase the number of transactions subject to reporting.
Many comments also said that some potentially illicit transactions under the $3,000 threshold were already being reported to FinCEN and some argued the agencies didn’t provide sufficient analysis or data to justify the threshold reduction, the agencies said.
They also noted that several commenters asked for the threshold to be increased instead of reduced as the original threshold was adopted in 1995.
Agencies withdraw proposal amid industry developments
The FinCEN and Fed Board said they have decided to withdraw the rule proposal in light of the comments because there have been significant recent developments in the convertible virtual currency industry since the issuance of the proposal and new legal frameworks are emerging.
The proposal has been withdrawn.
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