The U.S. government has mandated that financial institutions take actions to aid in the detection and prevention of financial crimes, such as money laundering and the funding of terrorism, for many years.
Financial institutions are required by federal law to maintain records of cash purchases of negotiable instruments, submit reports for cash transactions exceeding $10,000, identify and evaluate customer risk (Know Your Customer (KYC) rules), and report any suspicious activity that might be indicative of money laundering, tax evasion, or other illegal activities.
Federal authorities have been instrumental in updating and implementing these regulations as they pertain to cryptocurrency firms, even though Congress has frequently pushed to strengthen anti-money laundering (AML) legislation and penalties.
States have also added themselves to this regulatory mix in the meanwhile. Confusion and criticism from the bitcoin sector have resulted from these government agencies’ conflicting legal interpretations of AML compliance and their overlapping domains.
Examining recent enforcement actions, regulator declarations, and official guidelines help to concentrate regulatory intentions in the bitcoin sector. Additionally, the proliferation of techniques and tools for conducting KYC and transaction monitoring aids in the clarification and expansion of best practices for industry players.
FinCEN (Financial Crimes Enforcement Network, U.S. Treasury) staked its jurisdictional claim in the early days of cryptocurrency, stating in 2013 that “administrators or exchangers” of virtual currency qualified as money services organizations under the Bank Secrecy Act (BSA) and FinCEN rules.
(FinCEN defined an “administrator” as a person or entity engaged in the business of issuing a virtual currency and who has the authority to redeem such currency.) An “exchanger” is defined as a person or entity engaged in the business of exchanging virtual currency for real currency, funds, or other virtual currency.
To read our blog on “Israeli crypto exchange is the first within country to receive license,” click here