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Author Topic: FinCEN says you must be MSB if you sell bitcoins for $  (Read 20952 times)
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October 18, 2012, 08:27:31 PM
 #21

Also, to "operate within certain limits" of FinCEN, BSA, AML, or KYC rules to avoid notice or regulation is called "structuring" in FinCEN parlance, so they watch for that as well.
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October 18, 2012, 08:31:30 PM
 #22


I knew it was something like that but I figured since you guys did bank to bank thats what it fell under I am sorry for the mistake.


No need to be sorry! Was just making sure the facts are correct.

Sorry if I gave you the impression that you should apologize  Smiley

Bitcoin pioneer. An apostle of Satoshi Nakamoto. A crusader for a new, better, tech-driven society. A dreamer.

More about me: http://CharlieShrem.com
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October 18, 2012, 08:32:57 PM
 #23

Part of the political platform for bitcoin is to DESTROY all Anti-monetary liberty programs.

Part of the political platform for some Bitcoin users is to destroy all AML programmes.  Others simply want a convenient, low-cost payment system.  Some want to get rich speculating on BTC value.  It's ridiculous to assume that everyone who uses BTC does so for ideological reasons when it's pretty obvious that large sections of this community are only interested in BTC for making short-term profits and don't give a shit about political platforms if they can use BTC to increase their income/wealth right now.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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October 18, 2012, 08:36:39 PM
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He's probably part of Occupy Wall Street.  And how'd that work our for you besides getting laid and getting high in your tent at Zuccotti Park?
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October 18, 2012, 08:44:24 PM
 #25

Also, to "operate within certain limits" of FinCEN, BSA, AML, or KYC rules to avoid notice or regulation is called "structuring" in FinCEN parlance, so they watch for that as well.


That's not what I'm talking about.  I'm talking about limits set by the regulators themselves which allow certain types of businesses to be exempt from some aspects of regulation and determine whether or not they need licensing/what type of licence they require.  For example, jewellers can be exempted from AML compliance if they are (i) retailers who exclusively purchase from other dealers subject to the anti-money laundering program regime, (ii) businesses who purchase from the general public, and (iii) non-dealers subject to the anti-money laundering rules as long as purchases of precious metals, jewels and stones are less than $50,000; if purchases exceed $50,000 in a year, then the anti-money laundering regime does apply.

There is nothing even slightly illegal about having an exemption granted by regulators.  When it's granted you agree to abide by the terms of that exemption, which will often only continue to apply as long as you operate within certain limits - adhering to those limits is not "structuring"; trying to find creative ways to bypass them is.


All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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October 18, 2012, 08:50:20 PM
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I dont sell bitcoins I sell Private keys Cheesy.

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October 18, 2012, 08:55:07 PM
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Part of the political platform for some Bitcoin users is to destroy all AML programmes.  Others simply want a convenient, low-cost payment system.  Some want to get rich speculating on BTC value.  It's ridiculous to assume that everyone who uses BTC does so for ideological reasons when it's pretty obvious that large sections of this community are only interested in BTC for making short-term profits and don't give a shit about political platforms if they can use BTC to increase their income/wealth right now.

AML programs are harmful to bitcoin, because they impose a large cost for dubious benefit on users of exchanges.

Also, banks hate it too. Make it more costly for them to earn money. They don't give a damn about their customers practicing tax evasion and other nonsense.

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October 18, 2012, 08:57:45 PM
 #28

P.S. next time call DEA and ask them what license you need to sell drugs on Silk Road. The future of Bitcoin is illegal that might destroy current establishment and governments. Again, fuck the government, fuck any regulations and  fuck them all!

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October 18, 2012, 09:04:38 PM
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I dont sell bitcoins I sell Private keys Cheesy.

That might not matter if those private keys allow someone to access stored value.

One of the problems with the FATF framework, from which the AML/CTF regulations of so many nations derive, is that it really is just a broad framework.  Each individual nation then adopts over-arching regulations and passes its own specific legislation related to that framework.  Each nation then applies those laws and regulations within its own boundaries, but the interpretation of those laws and regulations by the regulators often remains legally untested.  Even organisations which have the resources to mount a legal challenge - such as major banks - agree to civil forfeitures because the penalties per offence are so huge that losing a legal challenge would bankrupt them.  Massive as some of the forfeitures paid by banks have been, they're a drop in the ocean to what they would have been required to pay if a penalty was imposed for every single violation.

Now it's possible that a court might find that existing laws cannot be applied to certain types of BTC activity (a loophole which would be quickly closed, BTW), but such a finding would require a test case which would be expensive to defend and in which the stakes would be extremely high for the person/entity challenging the regulator's ruling.  Even the biggest of existing Bitcoin businesses couldn't afford to pay millions of dollars in penalties if they lost.

Quote
Also, banks hate it too. Make it more costly for them to earn money. They don't give a damn about their customers practicing tax evasion and other nonsense.

Of course they hate it.  The cost of compliance is huge.  They comply because the cost of not complying is potentially catastrophic.

Regardless of what you believe, it's Bitcoin service operators who are actually putting themselves in potential legal jeopardy.  It's not your right to determine what level of risk is appropriate for them.  That's up to the service operators themselves to decide.  If they don't want to expose themselves to the risk of prosecution for multiple federal offences, that's their right.  They have no obligation to take risks for your benefit.  If you think that "someone" should be taking those risks, put your own ass on the line instead of complaining that others aren't willing to do so.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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October 18, 2012, 09:15:44 PM
 #30

I see the BitInstant Foundation For The Prevention of Competition circlejerk has arrived to dispense their usual, shitty legal advice.

What? What kind of snide comment is this?

It's a comment to point out the fact that you and Jeff do the same little irrelevant "scary regulations" dance on literally every other thread in this forum that pertains to buying or selling Bitcoins outside of the large exchanges.

It would probably be considered illegal market manipulation under the laws you like to cite, if it weren't so ham-fisted.  At the very least, it should be considered unethical for a developer/insider and an early-adopter to go out of their way to discourage someone from selling his Bitcoins, under color of law no less.

So whether you two are doing so intentionally or unintentionally, that's what it looks like to a casual observer.  And it really just needs to stop.


(4) Seller or redeemer of traveler's checks, money orders or stored value.  <---- This is what BitInstant is.

This, for instance, seems like diversionary nonsense.  What BitcoinINV posted is the correct interpretation.  The "stored value" that you exchange are MtGox codes.  And you are regulated because you handle other people's money, not because you sell Bitcoins.  It really isn't that complicated.

Frankly, it is absolutely incredulous to me that you don't understand all of this already, and well enough to explain it in a straightforward manner without sounding like you are intentionally discouraging third-party sales.  If you don't, perhaps you should consult some more with your overpriced lawyers.

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Gerald Davis


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October 18, 2012, 09:16:46 PM
 #31

I dont sell bitcoins I sell Private keys Cheesy.

That might not matter if those private keys allow someone to access stored value.

Bitcoins aren't stored value.   A MtGox code is stored value   It is a liability of MtGox Inc (or whatever their name is).  Since MtGox has an obligation to make good on that promised stored value it is subject to regulation (strangely MtGox is not a MSB despite issuing stored value codes).  Likewise so is an Apple gift card, a prepaid VISA, or even a phone card.  They are a promise of future value.

Bitcoin private key isn't stored value.  Who is the issuer?  If I buy $10,000 worth of BTC and Bitcoin collapses who can I claim reimbursement from?  Calling a Bitcoin private key stored value would be like calling a 1oz gold coin a store of gold in the amount of one ounce, or a house a store of housing value.
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Gerald Davis


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October 18, 2012, 09:22:29 PM
 #32

I was looking at starting up a site that would sell bitcoins through credit card transactions as a US based business. Not wanting to run into immediate regulatory problems I gave FinCEN (Financial Crimes Enforcement Network) a call. It took them a couple of weeks to get back to me but the answer was yes that business would be required to register as a Money Service Business.

One can't simply register as "A" Money Service Business.  MSB is a catch-all for 10 different types of specific business activity that requires registration.  So of course this FinCEN agent told you specifically which type of business activity to indicate on the registration.  Right?

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October 18, 2012, 09:58:25 PM
 #33

Strange the OP didn't mention which section of MSB code the regulator advised him he should register under.  No cites, no references, not even what section.  Just that he MUST.  Dubious.  One can't simply register as some "generic" MSB.  So obviously the OP knows which section a business would need to register under.

I agree that this is very strange.  My experience of dealing with regulators is that they like to give you very lengthy written answers to such questions and tell you exactly what sections of the regulations apply to your question and why.  They also frequently tell you to seek independent legal advice because what they're telling you is how they would apply the regulations to your particular situation, not necessarily how a court would rule on that application - as I mentioned above, a lot of AML related stuff hasn't ever been challenged because nobody wants to take the risk of losing a challenge.

At the end of the day, people need to take the advice of their own lawyers because that's who'll be representing them if they find themselves under legal scrutiny.  That's who'll have to come up with on point legal arguments and actual precedents in the court-room.  Arguments which sound good on a messageboard can be useless in a courtroom and many of them are more wishful thinking than anything else.

I notice that "informal value transfer system" is mentioned on the form posted by D&T.  It would be worth spending a few hours on the FinCEN website and seeing what kinds of activity they've applied this designation to in the past.

Likewise, if there are exemptions available for businesses dealing in stored value (this is how gift card issuers and issuers of pre-paid phone and internet credit get around needing to be licensed deposit-takers and Tier 1 capital requirements here in Australia) then it's in your interests to argue that BTC are stored value.

The issue isn't so much what is the absolute legal "truth" (there's no such thing), but what legal argument would be most beneficial to a given Bitcoin business at a specific time.  Different Bitcoin enterprises will benefit from different types of classification, but they'll likely all seek the classification which regulates their particular type of activity the least.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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October 18, 2012, 10:29:42 PM
 #34

I see the BitInstant Foundation For The Prevention of Competition circlejerk has arrived to dispense their usual, shitty legal advice.


So you are suggesting Charlie is posting about things he's spent significant money to learn - which is free advice for anyone listening - in order to prevent competition? Interesting strategy.

My goodness... imagine if, in addition to his legal understanding, Charlie started also letting competitors use his computers, his business contacts, and even his office! Then he's REALLY be stifling competition.  Roll Eyes

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October 18, 2012, 10:48:46 PM
 #35

Whether or not people consider Charlie's advice "shitty", the OP makes no mention of having obtained legal advice of his own.  Nobody should even consider applying for licensing as a financial services provider of any type without first obtaining their own legal advice.  If you can't afford a lawyer and accountant to advise you on the process, then you likely can't afford proper anti-fraud and AML compliance measures, either.  Some things really aren't DIY, and financial service licensing is one of them.

Some of the larger Bitcoin businesses have a very big moat.  The barriers to entry for certain types of services are much higher than they were twelve months ago and people need to realise that.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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October 19, 2012, 12:11:51 AM
 #36

I was looking at starting up a site that would sell bitcoins through credit card transactions as a US based business. Not wanting to run into immediate regulatory problems I gave FinCEN (Financial Crimes Enforcement Network) a call. It took them a couple of weeks to get back to me but the answer was yes that business would be required to register as a Money Service Business.

Yes, that is expected.  BitInstant is a register MSB, AFAIK.  A couple other exchanges based in the US are registered, or in the process of registering.

According to my research (WARNING: not a lawyer, seek your own professional advice) online bitcoin exchanges in the US would need to register in ~47 of 50 states, as well as registering as an MSB with the federal government.  (or limit the users accessing the website to a select few states)

There is a multi-state surety bond and registration process, making multi-state compliance a bit easier, but it is definitely a lot of paperwork and background checks required.



Heh, and thats the easy part!

You also need to do the following, just off the top of my head:
- Quarterly audits that you pay for
- Every 6 weeks you need a verified and updated AML Program
- Attend BSA training twice a year
- Bend over backwards and get anally raped every day....

I'm sorry to hear about all the contortion and....uhhh....transrectal violation...thanks for going through all that!

Hardfork aren't that hard.
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October 19, 2012, 12:34:13 AM
 #37

I was looking at starting up a site that would sell bitcoins through credit card transactions as a US based business. Not wanting to run into immediate regulatory problems I gave FinCEN (Financial Crimes Enforcement Network) a call. It took them a couple of weeks to get back to me but the answer was yes that business would be required to register as a Money Service Business.

One can't simply register as "A" Money Service Business.  MSB is a catch-all for 10 different types of specific business activity that requires registration.  So of course this FinCEN agent told you specifically which type of business activity to indicate on the registration.  Right?



Can't see how bitcoins or credit cards fit in to that at all lol

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October 19, 2012, 12:55:50 AM
 #38

Can't see how bitcoins or credit cards fit in to that at all lol

Have you read the actual definitions of all the terms used on the form and obtained legal advice about whether they would apply to the OP's situation?   Because "the people on Bitcointalk didn't see how I could be regarded as a MSB" isn't a legal defence for failing to register (the fine for failing to register within the required 180 days of starting business as a MSB is $5000 per day and that's assuming that you're not violating any other regulations at the same time).

OP needs specific information from FinCEN about which sections of their regulations apply to his proposed business and then he needs to seek expert legal opinion on the information provided by FinCEN and any specific additional requirements in the state where he's planning on operating.  OP may, indeed, be exempt from needing to register as a MSB, but he needs that confirmed by the actual regulators, in writing.  

The definitions aren't straightforward and they really need to be interpreted by someone who is familiar with past FinCEN rulings and enforcement actions.  If you're going to argue that they don't apply to your particular business, you need to have a legal argument to that effect which would stand up in court.

http://www.shajlaw.com/moneyservicesbusiness_faq.html

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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October 19, 2012, 01:02:15 AM
 #39

I was looking at starting up a site that would sell bitcoins through credit card transactions as a US based business. Not wanting to run into immediate regulatory problems I gave FinCEN (Financial Crimes Enforcement Network) a call. It took them a couple of weeks to get back to me but the answer was yes that business would be required to register as a Money Service Business.

One can't simply register as "A" Money Service Business.  MSB is a catch-all for 10 different types of specific business activity that requires registration.  So of course this FinCEN agent told you specifically which type of business activity to indicate on the registration.  Right?



Can't see how bitcoins or credit cards fit in to that at all lol

>Currency dealer or exchanger
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October 19, 2012, 01:14:12 AM
 #40

>Currency dealer or exchanger

So the US federal government has determined that Bitcoin is a currency?  That would be pretty big and AMAZING news.  The price is what $20,000 USD per BTC by now right.

You have court cases, cites, regulatory memorandums, administrative rulings ... ... ...

Definitions matter.  The law is a collection of definitions.

Quote
m) Currency. The coin and paper money of the United States or of any other country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in the country of issuance. Currency includes U.S. silver certificates, U.S. notes and Federal Reserve notes. Currency also includes official foreign bank notes that are customarily used and accepted as a medium of exchange in a foreign country.

http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=d5570d7646c5fc13fe1fa42a61d1dcf1&rgn=div5&view=text&node=31:3.1.6.1.2&idno=31#31:3.1.6.1.2.1.3.1


So Bitcoin is:
the coin and paper money of the United States?
the coin and paper money of any other country?
silver certificates?
Federal Reserve notes?
foreign bank notes?

Note this isn't to say the federal government couldn't tomorrow expand the definition of currency and thus the scope of the MSB to include Bitcoin or just about anything however the law in effect today is as written not some hypothetical future law.

Quote
Money services business. A person wherever located doing business , whether or not on a regular basis or as an organized or licensed business concern, wholly or in substantial part within the United States, in one or more of the capacities listed in paragraphs (ff)(1) through (ff)(7) of this section. This includes but is not limited to maintenance of any agent, agency, branch, or office within the United States.

(1) Dealer in foreign exchange. A person that accepts the currency, or other monetary instruments, funds, or other instruments denominated in the currency, of one or more countries in exchange for the currency, or other monetary instruments, funds, or other instruments denominated in the currency, of one or more other countries in an amount greater than $1,000 for any other person on any day in one or more transactions, whether or not for same-day delivery.

(2) Check casher —(i) In general. A person that accepts checks (as defined in the Uniform Commercial Code), or monetary instruments (as defined at § 1010.100(dd)(1)(ii), (iii), (iv), and (v)) in return for currency or a combination of currency and other monetary instruments or other instruments, in an amount greater than $1,000 for any person on any day in one or more transactions.

(ii) Facts and circumstances; Limitations. Whether a person is a check casher as described in this section is a matter of facts and circumstances. The term “check casher” shall not include:

(A) A person that sells prepaid access in exchange for a check (as defined in the Uniform Commercial Code), monetary instrument or other instrument;

(B) A person that solely accepts monetary instruments as payment for goods or services other than check cashing services;

(C) A person that engages in check cashing for the verified maker of the check who is a customer otherwise buying goods and services;

(D) A person that redeems its own checks; or

(E) A person that only holds a customer's check as collateral for repayment by the customer of a loan.

(3) Issuer or seller of traveler's checks or money orders. A person that

(i) Issues traveler's checks or money orders that are sold in an amount greater than $1,000 to any person on any day in one or more transactions; or

(ii) Sells traveler's checks or money orders in an amount greater than $1,000 to any person on any day in one or more transactions.

(4) Provider of prepaid access —(i) In general. A provider of prepaid access is the participant within a prepaid program that agrees to serve as the principal conduit for access to information from its fellow program participants. The participants in each prepaid access program must determine a single participant within the prepaid program to serve as the provider of prepaid access.

(ii) Considerations for provider determination. In the absence of registration as the provider of prepaid access for a prepaid program by one of the participants in a prepaid access program, the provider of prepaid access is the person with principal oversight and control over the prepaid program. Which person exercises “principal oversight and control” is a matter of facts and circumstances. Activities that indicate “principal oversight and control” include:

(A) Organizing the prepaid program;

(B) Setting the terms and conditions of the prepaid program and determining that the terms have not been exceeded;

(C) Determining the other businesses that will participate in the prepaid program, which may include the issuing bank, the payment processor, or the distributor;

(D) Controlling or directing the appropriate party to initiate, freeze, or terminate prepaid access; and

(E) Engaging in activity that demonstrates oversight and control of the prepaid program.

(iii) Prepaid program. A prepaid program is an arrangement under which one or more persons acting together provide(s) prepaid access. However, an arrangement is not a prepaid program if:

(A) It provides closed loop prepaid access to funds not to exceed $2,000 maximum value that can be associated with a prepaid access device or vehicle on any day;

(B) It provides prepaid access solely to funds provided by a Federal, State, local, Territory and Insular Possession, or Tribal government agency;

(C) It provides prepaid access solely to funds from pre-tax flexible spending arrangements for health care and dependent care expenses, or from Health Reimbursement Arrangements (as defined in 26 U.S.C. 105(b) and 125) for health care expenses; or

(D) ( 1 ) It provides prepaid access solely to:

(i) Employment benefits, incentives, wages or salaries; or

(ii) Funds not to exceed $1,000 maximum value and from which no more than $1,000 maximum value can be initially or subsequently loaded, used, or withdrawn on any day through a device or vehicle; and

( 2 ) It does not permit:

(i) Funds or value to be transmitted internationally;

(ii) Transfers between or among users of prepaid access within a prepaid program; or

(iii) Loading additional funds or the value of funds from non-depository sources.

(5) Money transmitter —(i) In general. (A) A person that provides money transmission services. The term “money transmission services” means the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means. “Any means” includes, but is not limited to, through a financial agency or institution; a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both; an electronic funds transfer network; or an informal value transfer system; or

(B) Any other person engaged in the transfer of funds.

(ii) Facts and circumstances; Limitations. Whether a person is a money transmitter as described in this section is a matter of facts and circumstances. The term “money transmitter” shall not include a person that only:

(A) Provides the delivery, communication, or network access services used by a money transmitter to support money transmission services;

(B) Acts as a payment processor to facilitate the purchase of, or payment of a bill for, a good or service through a clearance and settlement system by agreement with the creditor or seller;

(C) Operates a clearance and settlement system or otherwise acts as an intermediary solely between BSA regulated institutions. This includes but is not limited to the Fedwire system, electronic funds transfer networks, certain registered clearing agencies regulated by the Securities and Exchange Commission (“SEC”), and derivatives clearing organizations, or other clearinghouse arrangements established by a financial agency or institution;

(D) Physically transports currency, other monetary instruments, other commercial paper, or other value that substitutes for currency as a person primarily engaged in such business, such as an armored car, from one person to the same person at another location or to an account belonging to the same person at a financial institution, provided that the person engaged in physical transportation has no more than a custodial interest in the currency, other monetary instruments, other commercial paper, or other value at any point during the transportation;

(E) Provides prepaid access; or

(F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds.

(6) U.S. Postal Service. The United States Postal Service, except with respect to the sale of postage or philatelic products.

(7) Seller of prepaid access. Any person that receives funds or the value of funds in exchange for an initial loading or subsequent loading of prepaid access if that person:

(i) Sells prepaid access offered under a prepaid program that can be used before verification of customer identification under § 1022.210(d)(1)(iv); or

(ii) Sells prepaid access (including closed loop prepaid access) to funds that exceed $10,000 to any person during any one day, and has not implemented policies and procedures reasonably adapted to prevent such a sale.

DISCLAIMER:  Anyone looking to start a business, any business should seek legal counsel.  However it is my contention that the OP is "full of shit".  No regulatory would provide a single sentence answer and certainly wouldn't provide that answer over the phone.  The regulatory would be acting as an agent of the United States and any statement would have vast legal implications.  It could allow future lawsuits against the federal government or provide protection for a business in the event the federal government sought legal action.  It could even rise to criminal entrapment.

The simple version is the OP was trolling.   Seek your own legal counsel or at the very least do your own personal due diligence.
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