Coinbase joins Robinhood, Fidelity and others to fight crypto crime

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The fintech consortium has developed a programming solution linking personal information to crypto transactions of $3,000 or more to comply with anti-money laundering rules.

Key points

  • According to a new report from Chainalysis, $8.6 billion worth of crypto was laundered by cybercriminals in 2021, a 30% increase from the previous year.
  • Coinbase and other fintech organizations have developed a way to comply with federal rules, automatically linking sender and recipient information to crypto transactions of $3,000 or more.
  • Recent beta testing has been successful and the system is expected to launch by the end of the year.

According to a new report from blockchain tracking firm Chainalysis, the amount of cryptocurrency laundered by cybercriminals was over $8.6 billion in 2021. This represents a 30% increase in cryptocurrency activity. money laundering compared to 2020. According to the report, over $33 billion worth of crypto has been laundered since 2017. Compliance with federal rules is becoming increasingly important to counter this criminal conduct.

Coinbase and a group of fintech companies unite to fight money laundering

A group of well-established companies active in cryptocurrencies in the United States, including Coinbase, Fidelity and Robinhood, have teamed up to bring digital assets in line with global anti-money laundering (AML) rules . A key part of these AML requirements is the Financial Action Task Force’s “travel rule,” which states that all crypto transactions over a certain amount must be accompanied by identifying information.

In a recently released advisory statement, a US regulator, the Financial Crimes Enforcement Network (FinCEN), outlined the details of the “travel rule” requirements. The rule, according to FinCEN, applies to “transfers of funds equal to or greater than $3,000 (or its foreign equivalent).” It does not apply to “transfers of funds governed by the Electronic Funds Transfer Act or made through ATM or point-of-sale systems”.

The rule requires senders’ financial institutions to include:

  • Issuer name
  • Transmitter account number, if used
  • Sender address
  • Transmitter Financial Institution
  • Transmission order amount
  • Date of execution of the transmission order
  • Beneficiary’s financial institution

And recipient transactions must provide:

  • Recipient’s name
  • Delivery address
  • Recipient’s account number
  • Any other specific identifier of the recipient

This data is called “personally identifiable information” (PII) and PII “travels” with the crypto transaction, hence the name of the law. There have been a number of ways proposed to meet the “travel rule” PII sharing requirements in pseudonymous cryptocurrency transactions by design.

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To start

This latest collective effort brings together 18 Virtual Asset Service Providers (VASPs), participating in the launch of the Travel Rule Universal Solution (TRUST) technology. The new TRUST platform was announced on Wednesday. And in a bunch of acronyms, it was created in response to AML data sharing requirements recommended by the Financial Action Task Force (FATF) and FinCEN.

Members of TRUST programmed a first solution to automatically comply with the travel rule and recently conducted successful tests. The first transactions sent between five VASPs used dummy PII data. TRUST Group plans to roll out actual customer PIIs with crypto transactions by the end of the year.

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