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Chainalysis Hires FinCEN Vet to Tackle Crypto’s New ‘Travel Rule’ Challenge

Originally published on: CoinDesk
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June 26, 2019


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The blockchain investigations firm Chainalysis has hired a top official from the main U.S. anti-money-laundering agency to help its cryptocurrency clients comply with tough new international data-sharing requirements.

Announced Wednesday, Mike Mosier, the former chief of strategic advancement and tactical development at the U.S. Financial Crimes Enforcement Network (FinCEN), has joined Chainalysis as chief technical counsel.

Mosier has spent a decade in various financial regulatory bodies: before FinCEN, he worked at the Office of Foreign Assets Control (OFAC), the National Security Council and the Department of Justice’s Money Laundering and Asset Recovery Section.

Leveraging his experience in financial crime prevention, Mosier will first and foremost tackle legal and technical solutions for the “travel rule” that is now being imposed on the crypto industry by the Financial Action Task Force (FATF).

Under that standard, finalized last week, FATF’s member countries will require crypto exchanges and wallet providers to identify both the sender and recipient of funds and pass this information to each other along with each transfer.

While this is a longstanding requirement for banks when they transmit money on customers’ behalf, it presents a daunting challenge for the crypto industry given the pseudonymous nature of wallet addresses.

Chainalysis itself had warned during the public consultation period that this requirement would force “onerous investment and friction” onto regulated firms, potentially putting some out of business and driving activity into the shadows.

Speaking to the need to balance the benefits and risks of crypto, Mosier told CoinDesk:

“There is a really important moment: there is this censorship resistant and financially inclusive industry that also was involved in the Dark Web and election intervention.”

The challenge ahead

Chainalysis will keep engaging with the blockchain community, as it has been for a while now, to work out technical solutions for implementing the travel rule, Mosier said. No particular technology has been agreed upon so far, he said.

“There have been a few ideas, but I think it’s a bit too early to see something that will work,” he said, adding that looking at how banks struggled to implement the original travel rule and how they solved that issue might be helpful.

While stressing that it is “technology-neutral,” the FATF guidance released Friday did offer several examples of existing technologies that the industry might consider to help identify recipients of crypto transfers and transmit this data.

These include public and private keys,  Transport Layer Security/Secure Sockets Layer (TLS/SSL) connections, X.509 certificates and APIs, the FATF said.

The other issues on Mosier’s plate will be data privacy and product development, he said.

He will be also making sure that Chainalysis’ solutions for blockchain transaction monitoring (its namesake offering) will be compatible with regulations in jurisdictions other than the U.S. where the company also has clients, Mosier said.

Building a team

Talking about his motivation to join the blockchain industry, Mosier said that working in financial crime prevention he has been looking at new areas of financial monitoring.

“As I was moving more and more towards innovation at FinCEN, Chainalysis had a really sweet spot for me,” he said. “They focus on maintaining financial integrity but also privacy, to understand what the risks are but not getting into the personal data, making sure that the industry is growing, but not on the risk side.”

Mosier is joining Chainalysis’ Washington D.C., office soon after Jesse Spiro, who recently came from Refinitiv, a provider of finance risk management solutions owned by Blackstone Group and Thomson Reuters, and Kristofer Doucette, Chainalysis’ vice president of government affairs, who worked 14 years at the U.S. Department of the Treasury.

The company is also looking to fill a new position of a federal account executive, who will “engage with defense, intelligence, law enforcement, and state/local entities” to help them investigate illicit cryptocurrency activity, the recent job posting by Chainalys says.

Getting experienced government alumni on board is especially helpful when regulators are paying such close attention to the crypto space, Chainalysis CEO and co-founder Michael Gronager said in the company’s announcement.

“As we anticipate major global regulatory developments over the coming months, the strength of our team will ensure all our customers are fully equipped with the technology and the information they need to comply with regulation and combat money laundering in cryptocurrencies,” said Gronager, whose company raised $30 million in a Series B round in February.

This new chapter for crypto, after the FATF ruling, will require a difficult balancing act between the speed and convenience of the technology on one side and adhering to regulations on the other, Moiser said, concluding:

“It doesn’t have to be exactly like with SWIFT or traditional banking, but not that anything goes. I believe there is a middle ground for that.”

Image via Shutterstock.

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