The US Federal Reserve Board and Fincen are seeking feedback on their proposal to reduce the threshold at which financial institutions must collect and retain information on remittances. In their joint statement on the proposed change to the rules, the two US agencies want a new threshold for international transactions to be set at $ 250, down from the current $ 3,000. The rule for internal transactions remains unchanged.
Agencies want cryptocurrencies defined as money.
In a press release, the two agencies are also seeking comments on the proposal to broaden the definition of money to include cryptocurrency-related transactions. The current rules apply only to transfers of funds involving banks. The document explains:..
"The agencies also propose to clarify the meaning of money, as used in the same rules, to ensure that the rules apply to domestic and cross-border transactions involving convertible virtual currency (CVC)."
While the agencies acknowledge that cryptocurrencies do not have the status of a legal tender, in the proposed amendment to the rules they want these digital currencies to be treated as money, because the so-called CVCs already act as with the coin, or acts as a substitute for the coin. "
According to the agencies, the proposed rule "explicitly clarifies that both payment orders and transmission orders include any instruction from the sender to transmit the CVC or any digital asset with legal payment status to a recipient".
This means, if adopted, the proposed rule would "replace the current definition of money within the meaning of the Record-Keeping and Travel Rules".
Reduced dollar transactions used to evade authorities
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Meanwhile, in their justification for lowering the threshold to $ 250, the two agencies explain how they observed an increase in transaction volumes involving lower values and how this could threaten US national security.
"The agencies have taken into account suspicious activity reports (SARs) submitted by money transfers, which indicate that a substantial volume of potentially illicit remittances and remittances occur below the $ 3,000 threshold," the agencies said.
Specifically, Fincen, who analyzed data from about 2,000 SARs submitted by money issuers between 2016 and 2019, says he noticed a disproportionate number of low-value transactions compared to higher-value ones.
The agency says that "of the approximately 1.29 million underlying transfers of funds," about 99% of them "began or ended outside the United States," with about 17,000 involving only domestic transactions. Detailing the data below, Fincen says:
"The average and average dollar value of the remittances mentioned in those SARs was about $ 509 and $ 255, respectively. About 71% of these 1.29 million transmissions (more than 916,000) were at or below $ 500, totaling more than $ 179 million. About 57 percent of these transmissions (more than 728,000) were at or below $ 300, totaling more than $ 103 million. "
The two agencies cite the 2015 National Terrorism Finance Risk Assessment when concluding that terrorist financiers and facilitators are using “low-dollar transactions” to achieve their aims.
Meanwhile, the agencies say the written comments on this proposed rule may be submitted on or before the 30th day after the date of publication in the Federal Register.
What do you think about the proposed rule change? Share your views in the comments section below...
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