Legal Expert Fires Back Against FinCEN “Travel Rule” Targeting Crypto Transactions

Founder of technology-focused legal firm Schnapper-Casteras PLLC, JP Schnapper-Casteras, fired back against The U.S. Department of the Treasury, Financial Crimes Enforcement Network (FinCEN)’s proposed rule to lower the cross-border transaction threshold for data collection.

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Frequently referred to as the “Travel Rule,” FinCen’s proposal would require financial institutions to collect and retain information on transactions that begin or end in the United States worth more than $250, lowering the previous required reporting threshold from $3,000. The rule proposal singles out cryptocurrencies, writing that the definition of “money” should be clarified to ensure the rule is applied to digital assets.
Schnapper-Casteras wrote in a publicly-released letter to Secretary of the Board of Governors of the Federal Reserve System, Ann E. Misback, to express concern that privacy concerns were not addressed in the proposal or any supporting documents surrounding the pending Travel Rule. He highlighted that privacy is a key component of the United States Constitution, Supreme Court precedent, state constitutions and a range of federal statutes, but was not considered in regard to the FinCen rule.

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“The right to privacy is especially important where — as here — the government proposes collecting large amounts of personal data about individual Americans that could reveal intimate decisions, medical purchases, political expressions, familial relations, and increasingly granular purchases or movements,” Schnapper-Casteras wrote.

Schnapper-Casteras notes a procedural difference in the consideration of the travel rule in that it does not weigh privacy concerns. He points out that FinCen has addressed privacy issues when processing previous rules, including a 2010 Notice of Proposed Rulemaking on cross-border electronic transfer reporting. In 2010, the agency wrote that the rule posed significant privacy concerns, especially for non-criminal clients. He accused the agency of using arbitrary means to determine when to consider privacy issues when evaluating proposed rules.

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Additionally, Schnapper-Casteras argued that the rule could have a disproportionate effect on Americans who send smaller cross-border payments to family living abroad, immigrant communities, lower-income Americans, and/or communities of color. He added that additional costs could be transferred red to them if the rule is passed. He ended his note with a call for the agency to provide a privacy impact analysis, at the very least.

“At the very least, we respectfully urge the agencies to forestall issuance of this rule until a more fulsome analysis is undertaken that considers the impact on privacy — including data privacy, financial privacy, and the constitutional right to privacy.”

By Emily Mason

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