The U.S. Department of Treasury is ramping up its enforcement against the potential for money laundering and criminal financing through cryptocurrencies.
Improving “anti-money laundering/combating the financing of terrorism (AML/CFT)” rules is one part of regulating the “evolving threat” of cryptocurrencies, according to Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker, who testified before the Senate Banking, Housing and Urban Affairs Committee on Wednesday.
Financial institutions need to implement new rules to ensure they are complying with new regulations, which will include a new “due diligence” rule which takes effect in May 2018, she said.
Cryptocurrency exchanges fall under this umbrella, Mandelker said, outlining how the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) would work with exchanges to ensure criminal parties were not using cryptocurrencies to transfer funds.
“To ensure that virtual currency providers and exchangers know the rules and follow them, FinCEN has prioritized engagement with – and examination of – these entities, focusing both on the approximately 100 that have registered with FinCEN as money transmitters as required, as well as those that have not.”
The agency has partnered with the Internal Revenue Service to recommend actions some of these exchanges can take to better comply with existing regulations, she said. Mandelker also noted that the U.S. is cooperating with other countries to regulate cryptocurrencies in general.
The European Union is in the process of developing more stringent regulations for financial institutions to prevent terrorist financing.as well, she said.
FinCEN has already begun taking enforcement actions as well, she said, citing the U.S.’s shutdown and fine on the former BTC-e exchange, as well as the fine on its alleged operator Alexander Vinnik.
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