- President Biden has proposed a 50% budget increase for the Financial Crimes Enforcement Network.
- FinCEN has previously proposed rules that would force crypto exchanges to collect KYC information on private cryptocurrency wallets.
The Financial Crimes Enforcement Network (FinCEN) is in line to receive a 50% budget increase to help safeguard the financial system.
According to a discretionary budget request from President Biden, the budget increase would allocate $191 million to FinCEN—$64 million above its original 2021 budget—enabling the bureau to close "loopholes in financial reporting requirements" that enable "illicit actors" to evade scrutiny and mask their dealings.
The requested budget increase would go towards creating a database that tracks the ownership and control of "certain companies and organizations" in order to prevent the use of complex corporate structures in shielding illegal activity.
However, the bureau's budget is not yet set in stone. Congress still has to draft its own proposals for discretionary spending, and President Biden is expected to release a more detailed proposal later this year.
FinCEN and crypto
FinCEN's proposed transparency rules have seen it repeatedly clash with the crypto community. In January 2020 the bureau proposed an amendment to the Bank Secrecy Act that would force US citizens to disclose overseas crypto holdings.
However, nothing has generated quite as much pushback as the bureau’s December 2020 proposal, which would require crypto exchanges to perform KYC checks on users’ private wallets.
Civil liberties groups and crypto businesses have rallied against the proposal; payments firm Square argued that it will create “perverse incentives” that drive crypto customers to avoid regulated businesses, while the Electronic Frontier Foundation has claimed that it could lead to users’ entire crypto transaction histories being exposed.
“In my view, one of the most important things about cryptocurrency is that it imports the civil liberties benefits of cash into the digital sphere by allowing for anonymous transactions,” Marta Belcher, who provides special counsel to the Electronic Frontier Foundation, told Decrypt earlier this month.
FinCEN, for its part, claims that the rule is necessary to prevent cryptocurrencies being used for illicit ends; and it has a point, with darknet markets generating more revenue than ever last year.
America’s fight against financial crime
The proposed budget increase for FinCEN follows the passing of the National Defense Authorization Act (NDAA) in January, despite then-President Trump’s attempt to veto the legislation.
As part of the National Defense Authorization Act, companies operating in the United States are required to report information about beneficial owners to FinCEN. Obfuscating ultimate beneficial ownership has been a popular technique for those wishing to hide criminal activity.
Despite the passing of the NDAA, the government has faced continued calls to bolster FinCEN’s resources in the fight against financial crime. Josh Rudolph, a fellow for Malign Finance at Secure Democracy, has publicly advocated for Congress to do more in the fight against financial crime.
And while Rudolph has welcomed the proposed budget increase, he believes the regulatory body’s budget should be doubled.
The total budget request covers $1.52 trillion in discretionary funding—putting FinCEN’s proposed share at about 0.012% of the budget total.