FinCEN Withdraws Proposal to Lower Cross-Border Transfer Threshold to $250

The US Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve Board have withdrawn a 2020 proposal that would have significantly expanded the recordkeeping and information-sharing requirements applicable to certain cross-border funds transfers. The withdrawal, effective 9 November 2026, means that the existing USD 3,000 threshold remains in place.

The proposal, originally published in October 2020, sought to reduce the threshold for certain international transfers from USD 3,000 to USD 250. It would have required banks and non-bank financial institutions to collect and retain specified information for a wider range of transfers beginning or ending outside the United States. FinCEN also proposed lowering the threshold at which institutions would be required to transmit relevant information to other financial institutions involved in the payment chain.

The proposed amendments covered two related regulatory requirements under the Bank Secrecy Act: the Recordkeeping Rule and the Travel Rule. The Recordkeeping Rule requires covered financial institutions to collect and retain information relating to qualifying funds transfers, while the Travel Rule requires specified information to accompany transfers as they move between financial institutions.

The proposed reduction would have brought substantially more international transactions within the scope of these obligations. Transfers between USD 250 and USD 3,000, which are generally below the existing threshold, would have become subject to the relevant requirements if they began or ended outside the United States.

Another important element of the 2020 proposal concerned digital assets. The agencies sought to clarify that the rules applied to domestic and cross-border transactions involving convertible virtual currencies and certain digital assets with legal tender status for the recipient. The intention was to make the regulatory definitions clearer and address the application of existing transfer-information requirements to transactions involving digital value.

The withdrawal therefore removes both the proposed reduction in the threshold and the proposed clarification concerning the treatment of these digital-asset transactions. It does not, however, amount to a general exemption of cryptocurrency transfers from existing anti-money laundering requirements.

In explaining the decision, FinCEN and the Federal Reserve identified two principal considerations. First, more than five years had passed since the original proposal, making further public consultation necessary before any comparable amendments could be adopted. The agencies stated that withdrawing the proposal would provide certainty that no final rule would be issued without giving the public another opportunity to comment.

Second, the agencies noted significant developments in the convertible virtual currency sector since 2020. Digital-asset markets have matured, and new legal and regulatory frameworks have emerged. The agencies considered that any future amendments concerning digital assets should take these developments into account to ensure that revised requirements remain appropriate and effective.

The original proposal attracted nearly 3,000 public comments from financial institutions, money services businesses, industry associations and individuals. Many respondents opposed reducing the threshold, arguing that the change would impose substantial operational and compliance costs, particularly on smaller financial institutions. Concerns were also raised about the potential impact on international remittances, the increased handling of personally identifiable information and the possibility that additional regulatory burdens could push consumers towards less regulated payment channels.

Some respondents questioned whether the agencies had provided sufficient evidence to justify the proposed reduction. Others highlighted practical difficulties associated with applying the requirements to digital-asset transactions, including technological limitations and the absence of a consistent international messaging standard for certain cryptocurrency transfers.

The withdrawal leaves the existing USD 3,000 threshold applicable to covered transfers under the relevant Recordkeeping and Travel Rules. Financial institutions must therefore continue to comply with the requirements to collect, retain and transmit the prescribed information for qualifying transactions. The withdrawal does not eliminate these obligations or prevent institutions from applying additional controls where their risk assessments indicate that enhanced scrutiny is necessary.

For banks, money services businesses, payment institutions and other covered financial intermediaries, the immediate operational impact is that the proposed expansion will not need to be implemented. Institutions that had been preparing for a lower threshold or additional digital-asset requirements can reassess those plans in light of the withdrawal, while maintaining their existing obligations under the Bank Secrecy Act.

For digital-asset service providers, the decision also means that the proposed amendments will not introduce the specific regulatory wording contemplated in 2020. Nevertheless, applicable existing requirements and other relevant anti-money laundering obligations remain in force. Businesses should continue to assess the nature of their activities, the applicable regulatory framework and the risks associated with transfers involving virtual currencies and other digital assets.

The decision does not rule out future regulatory changes. FinCEN and the Federal Reserve have made clear that any comparable amendments would require further public consultation, particularly given the developments in digital-asset markets and the emergence of new regulatory frameworks.

The withdrawal marks the end of a regulatory proposal that had remained outstanding for more than five years. While it avoids the immediate expansion of reporting and recordkeeping obligations for smaller cross-border transfers, it leaves the existing framework intact and preserves the possibility of a revised approach following further consultation.

By fLEXI tEAM