This isn't an issue where I'm trying to prove anyone wrong I sure hope your correct i should have contacted Hmrc a few months ago, I'm waiting on a reply from them.
Contacting them and/or your accountant should be something you've done before you started a Bitcoin business. Otherwise, you'll just be in for a lot of surprises.
I received the green light from Barclays bank, Hmrc aml division - who also contacted Hmrc policy department who said they have no specific policy regarding Bitcoin being either a currency or e-money the main advice was to read the proceeds of crime act and report any suspicious transactions, I've taken advice from an accountant I would be interested in the exact nature of the surprises I should expect from Hmrc?
good going. the making a report of a suspicious transactions is done by using the UK's crime devision known as SOCA
http://www.soca.gov.uk/on the top right it has the link to SARS
https://www.ukciu.gov.uk/(jktpc345lxt4gxzeqwcwrkrj)/saronline.aspx. sign up to it. look at the templates of the form to fill out to know what to look out for, and in short what to prevent happening to ever be in a sticky situation.
the whole FSA thing is that if you show that you have limits set to reduce the chances of laundering. and stay within the confines of different laws and show that you hold logs of any identifying characteristic's securely, and have a process set up to deal with large amounts or blatantly obvious proceeds of crime.. and all that blah. this is about making your own guidelines ("handbook") they are happy. this alone if done right would prevent the headache / possibilty of ever needing to do a sars report.
the main thing for the UK is the monetary limit, there are many limits for different reasons. tax, imports, AML, etc etc. which the lowest limit for UK is actually the european wire transfer regulations. of 1000 euro (about £850 give or take exchange rate) for maximum wire transfer amount or multiple amounts in a short period what can EASILY be deemed to be linked.(basically daily) with an upper 15,000 euro (roughly £12k) a year limit.
so having a very maximum of £850/day(£12k a year) but then set an safe buffer of lets say £500/day(£8k/year) ensures you don't have to really ever go into the complexities of grabbing customers whole biological history. if someone does send you the amount over the limit request all the info before allowing the transaction to complete or refund. just giving a refund without taking info/freezing accounts can be deemed as laundering if the funds were indeed part of a crime. so set strict limits and make it impossible to offer more then the limits without ID.
if they send funds without your consent then thats their fault for then getting into a situation requiring ID.
you will need to keep logs of account details and receiving bitcoin addresses and have a way to sort it so that it flags up if a single address receives or gives a larger then limit amount. also ip addresses help with this.
(the downside of ip addresses is if 1000 people are using tor, it may pick up that the limit gets flagged often) so to stay within the rules and keep good practice guidelines it might be best to just ban known Tor IP's.
when it comes to regulations governments dont care much about bitcoin. what they do care about is how much UK pound sterling you are giving people/taking from them. so if anyone complains that their large transaction requires an ID and that crypto is supposedly anonymous, simply tell them that fiat isnt anonymous, so if they want fiat, they cant be anonymous. if they aint happy they can always trade bitcoins for litecoins lol. requesting/giving fiat is not an anonymous transaction.
the other main thing is if someone has sent a large amount (hopefully you have limits/processes to prevent this) and it does seem 'dodgy' where they have blatantly told you its proceeds of crime. you cannot tell them its being investigated or simply give them a refund no questions asked.
hense why bitinstant dwolla/mtgox just have the statement of "frozen funds"
some of this is bad customer service. but if you prevent yourself from getting into the sticky situations by setting limits and describing why the limits are there carefully. then you should never get into those sticky situations.
now a small test.
1)you receive 5 requests for bitcoin. 5 different bank accounts for £500 each but all going to the same bitcoin address in one day. what do you do (totalling £2500)
2)you recieve 100 requests for pound sterling £500 from multiple bitcoin addresses going to one bank account over the course of a year (totalling £50,000) what do you do.
answers
1)when users input the receiving bitcoin address before the transaction begins(before you inform them of your deposit bank account details), it is checked that the address has not received £500 in a short period (daily). and message the customer before the transaction begins. this address has reached its limit. (dont inform them how to get around it).
2)after a few weeks of doing nice little £500 to the bank with reasonable time gaps between it finally gets to your limit of £12k(or whatever lower limit you prefer) for that particular customers bank account. inform them before the money transaction begins that the bank account is at its limit
in both cases inform them if they wish to proceed identification will be required.(or preferably to avoid 'possible' headache you say "sorry transaction cannot be allowed")
so have the system in place if they want fiat, you request their bank sortcode -account number first. (check it against history) before showing them a deposit bitcoin address/ warning message
so have the system in place if they want bitcoin, you request their bitcoin address AND the bank account-sortcode they will use first. (check it against history) before showing them a deposit bitcoin address/ warning message.
this is why blockchain.info asks for your bank details when you buy bitcoins and not just the bitcoin address to receive the coins on.
preventing a sticky situation is much preferable then getting involved in one.
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