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Author Topic: FinCEN's new Definition of Money Services Businesses  (Read 4882 times)
Stephen Gornick
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July 19, 2011, 10:30:26 AM
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I tried to decipher yesterday's FinCEN ruling on the Definition of Money Services Businesses as far as how it impacts Bitcoin but I'm stumped.

FinCEN ruling statement:
 - http://www.fincen.gov/news_room/nr/html/20110715.html

Final ruling:
 - http://www.fincen.gov/statutes_regs/frn/pdf/MSB_Final_Rule_Definition_and_OtherRegulations.pdf


There are a few changes of interest.

1.) "The Prepaid Access NPRM addresses stored value issues as a separate category of MSB.
FinCEN is excluding stored value in any form from being considered a form of money transmission."

I've not read the Prepaid Access NPRM, but this appears to be a positive by excluding a stored value transaction as being considered a money transmission.

2.)  The term "dealer in foreign exchange" is replaced with the new term "currency dealer or exchanger," a term used to include the exchange of instruments other than currency as a category of MSB.

I don't think bitcoin is affected by this as bitcoin could hardly be "similar to" the monetary instruments it refers to.

3.) U.S. AML regulations apply to foreign-located persons who offer MSB services in the U.S. from foreign locations.

Did the long arm of the law just get longer?

Quote
An entity qualifies as an MSB based on its activity within the United States, not the physical presence of one or more of its agents, agencies, branches, or offices in the United States.

This requirement arose out of the recognition that the Internet and other technological advances make it increasingly possible for persons to offer MSB services in the United States from foreign locations.

FinCEN seeks to ensure that the BSA rules apply to all persons engaging in covered activities within the United States, regardless of their physical location.


4.) It is the activities performed that cause a person to be categorized as an MSB subject to anti-money laundering rules [and not necessarily] whether the person is licensed as a business, has employees, or is engaged in a for-profit venture.

Taken to the extreme, this would mean every miner selling bitcoins and every bitcoin buyer and seller would be in violation unless registered as an MSB.  Again, if bitcoins are stored value and they are exempted then this is moot.

FinCEN extends Prepaid Access NPRM (Stored Value) comment period 30 days:
 - http://www.fincen.gov/whatsnew/pdf/20100715.pdf

Prepaid Access regulation (proposed):
 - http://edocket.access.gpo.gov/2010/pdf/2010-15194.pdf

This topic needs more eyes.

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TheButterZone
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May 29, 2013, 06:27:06 AM
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Hmmmmmmmmm. Relevant necropost.

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May 29, 2013, 05:22:09 PM
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Why are you bumping this?  These rules have been in effect for almost two years now.
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May 29, 2013, 11:28:16 PM
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Yes, but it was only a few months ago that shit REALLY seemed to hit the fan. IANAL

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May 30, 2013, 12:00:58 AM
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These rules were written long before anyone at FinCEN cared about bitcoin.
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June 01, 2013, 06:46:20 AM
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These rules were written long before anyone at FinCEN cared about bitcoin.


According to recent developments from the U.S. Department of Treasury, the Financial Crimes Enforcement Network (FinCEN), has taken aim at bitcoin poker sites. These gambling sites could face prosecution under 18 USC 1960, which prohibits unlicensed money transmitting businesses from operating within the U.S. territory. This legislation was originally written to prosecute money laundering agents, but the clarification sent out by FinCen brings bitcoin services within prosecutorial scope of the government.

Gambling sites that advertise to attract U.S. players are at risk of falling within FinCen's domain. Therefore, in order to avoid legal action from the U.S. Department of Treasury, these gambling sites must use the Switch Poker model. This model does not provide a service explicitly for U.S. players, however U.S. players may still participate.

What are your thoughts on the implication of FinCen's announcement, and the emergence of different venues that accept Bitcoin and the potential legal consequences of this new technological community?

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June 01, 2013, 06:53:20 AM
 #7

I tried to decipher yesterday's FinCEN ruling on the Definition of Money Services Businesses as far as how it impacts Bitcoin but I'm stumped.

FinCEN ruling statement:
 - http://www.fincen.gov/news_room/nr/html/20110715.html

Final ruling:
 - http://www.fincen.gov/statutes_regs/frn/pdf/MSB_Final_Rule_Definition_and_OtherRegulations.pdf


There are a few changes of interest.

1.) "The Prepaid Access NPRM addresses stored value issues as a separate category of MSB.
FinCEN is excluding stored value in any form from being considered a form of money transmission."

I've not read the Prepaid Access NPRM, but this appears to be a positive by excluding a stored value transaction as being considered a money transmission.

2.)  The term "dealer in foreign exchange" is replaced with the new term "currency dealer or exchanger," a term used to include the exchange of instruments other than currency as a category of MSB.

I don't think bitcoin is affected by this as bitcoin could hardly be "similar to" the monetary instruments it refers to.

3.) U.S. AML regulations apply to foreign-located persons who offer MSB services in the U.S. from foreign locations.

Did the long arm of the law just get longer?

Quote
An entity qualifies as an MSB based on its activity within the United States, not the physical presence of one or more of its agents, agencies, branches, or offices in the United States.

This requirement arose out of the recognition that the Internet and other technological advances make it increasingly possible for persons to offer MSB services in the United States from foreign locations.

FinCEN seeks to ensure that the BSA rules apply to all persons engaging in covered activities within the United States, regardless of their physical location.


4.) It is the activities performed that cause a person to be categorized as an MSB subject to anti-money laundering rules [and not necessarily] whether the person is licensed as a business, has employees, or is engaged in a for-profit venture.

Taken to the extreme, this would mean every miner selling bitcoins and every bitcoin buyer and seller would be in violation unless registered as an MSB.  Again, if bitcoins are stored value and they are exempted then this is moot.

FinCEN extends Prepaid Access NPRM (Stored Value) comment period 30 days:
 - http://www.fincen.gov/whatsnew/pdf/20100715.pdf

Prepaid Access regulation (proposed):
 - http://edocket.access.gpo.gov/2010/pdf/2010-15194.pdf

This topic needs more eyes.

Stephen,

You make a good point about the confusion of FinCen's seemingly clarification. Their announcement seems to add more questions than answer into the legal implication of the Bitcoin community.

I believe that the vagueness of the "currency dealer or exchanger" is made so that the U.S. Department of Treasury could empower itself with the legal authority to prosecute those who it believes are engaging in illegal activities. While these "illegal activities" are still left to be defined in the scope of the law, this is the first step so that FinCen can extend its arm to reach into the Bitcoin community. The public is still uncertain as to how far Bitcoin will develop, and into what area. FinCen is probably going to wait out, and see these developments from afar. But rest assured, with their announcement, that they are keeping a watchful eye on this community.

The definitions that are in need of defining will most likely be played out in the courtroom with the first few cases regarding Bitcoin. Until then, we can only speculate and be careful as to not violate FinCen's seemingly vague announcements.
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June 01, 2013, 10:13:49 AM
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3.) U.S. AML regulations apply to foreign-located persons who offer MSB services in the U.S. from foreign locations.

Did the long arm of the law just get longer?

No, not really, they already use the exact same thing when they shutdown PokerStars, FullTilt Poker and co, from the US.
And they used the same thing here in France and globally in most of the UE to do the same and regulate locally. (Now we have pokerstars.fr and you can only play with french players..)

melon
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June 08, 2013, 01:21:56 AM
 #9

seems that gox acts as its own exchange plus online broker of btc and all traders are self investors using the brokered online discount fee model; as opposed to transmitting money to others ,but who knows how individuals will be treated since the intent is not business but personal for some...seems there's no differentiation between business and personal 222edit asdd having a busuiness bank aactt would be first clue as to wether its for busuiness or pers investment

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