FinCEN recently punished Ripple for failing to follow required BSA guidelines related to establishing AML policies. It’s unfortunate that an innovative company like Ripple Labs, whose intention is to create a low cost efficient payment clearing system would violate the law.
Certainly regulations exist to protect businesses and consumers, in this case from illegal payment transactions. Such an action puts doubt on the potential benefits of a new technology especially when combined with ‘Bitcoins’ that have also received negative publicity recently. It is important however, that what Ripple is doing is to establishing the payments infrastructure and not directly working the end clients, instead relying on the banking intermediary to conduct the appropriate sanction screening checks. However, it seems clear from a regulatory perspective that is not sufficient based on Ripple’s failure to file as an MSB.
Let’s hope innovation isn’t stifled by regulation. It’s a delicate balance, but one that needs to be tested in order to see improvement in the financial industry.