On Monday, the state of Florida moved a step closer towards amending its money laundering statute to include the nefarious use of bitcoin and other virtual currencies. The bill, H.B. 1379, has sailed through a committee vote and will now be presented to the floor. If the bill passes, it will serve, in pertinent part, to define bitcoin and “virtual currency” (“VC”) as “monetary instruments” within the meaning of the state’s money laundering statute; in the same vein, bitcoin will be defined as a “medium of exchange in electronic or digital format that is not a coin or currency of the United States or any other country.” Continue Reading Florida Lawmakers Seek to Bring Virtual Currency into the Fold
It is a potential crime to conduct a business that exchanges virtual currency and fail to register with the Financial Crimes Enforcement Network (“FinCEN“), even if the State in which one operates does not impose a similar licensing requirement. A federal district court in Louisiana has reaffirmed this principle in United States v. Lord, in which the defendants unsuccessfully sought to withdraw their pleas of guilty to offenses based on a failure to register with FinCEN.
The defendants are father and son. According to the court opinion, in 2013, they began to operate a bitcoin business through a website called localbitcoins.com, which advertised the services of other bitcoin exchangers. The defendants’ clients provided cash, credit card payments and wire transfers to the defendants to purchase bitcoins from a third-party online bitcoin broker on their client’s behalf, in exchange for commissions charged by the defendants. In the Spring of 2014, the third-party bitcoin broker warned the defendants that they were required to register with FinCEN because they were acting as virtual currency exchangers. Although the defendants allegedly misrepresented to the third-party online broker that they already had registered with FinCEN, the defendants did not actually register until November 2014. By that time, however, they already had exchanged more than $2.5 million worth of virtual currency. This registration delay was the basis of the charges relating to the defendants’ virtual currency business. Continue Reading Failure to Register with FINCEN Sustains Guilty Pleas by Virtual Currency Exchangers
Despite the staggering $8 billion figure estimated to be spent on global compliance in 2017, U.S.-based rules regarding Anti-Money Laundering (“AML”) and Combating the Financing of Terrorism (“CFT”) remain anchored in their 1970s design. Contrary to the generally slow pace of Congressional action, new technologies may reshape the global financial system (“GFS”) and with it, the ability to detect and disrupt money laundering schemes and terrorist plots. Chief among these is blockchain, a peer-to-peer technology first implemented as the backbone of the virtual currency Bitcoin. Continue Reading Combating Money Laundering and Terrorist Financing with a Distributed Ledger
The New York State Department of Financial Services (“DFS”) has issued its fifth BitLicense to date, continuing a marked effort to bring legitimacy and controls to the virtual currency (“VC”) industry, whose advantages in lowering costs and creating efficiencies have been marred with concerns of nefarious use.
Founded in 2012, Coinbase, Inc. operates as a digital currency exchange and is perched at the top of well-funded startups in the VC industry. Its BitLicense signifies an important milestone in the company’s nearly two-year, multi-state licensing strategy. In the same vein, the fact that a VC market-leader has sought after and is now approved to do business in New York is an equally important occasion for the BitLicense program itself. Continue Reading Coinbase the Latest to Obtain New York BitLicense
In part two of our review of the 2016 developments in Anti-Money Laundering (AML), the Bank Secrecy Act, (BSA), the criminal money laundering statutes, forfeiture, and related issues, we discuss four additional key topics:
- Federal banking regulators’ efforts to ease industry concerns about overly aggressive Anti-Money Laundering (AML)/Bank Secrecy Act (BSA) enforcement and limit the practice of “de-risking”
- Virtual currency
- Court opinions of note under the money laundering statutes and the BSA
- Forfeiture policy and enforcement
You can read more about these topics areas in the blogs that follow. Click here to read the full article 2016 Year in Review: Money Laundering (Part Two). Click here if you missed Part One of our 2016 year in review.
Under Internal Revenue Code section 7609(f), the IRS may issue a “John Doe” administrative summons to discover the identities of unknown taxpayers. A “John Doe” summons can be a powerful enforcement tool because it allows the government to force third parties, such as banks and credit card companies, to provide numerous records regarding suspected tax code violations by persons whose precise identities are unknown to the IRS but who, as a group, are suspected of tax evasion. The IRS may serve a “John Doe” summons on a third party only with federal court approval.