Bitcoin Targeted By Latest FinCEN Ruling? – Implications Are Profound

[michaelsuede]

From Libertarian News:

Pay close attention to this ruling.  It could be the beginning of a war on Bitcoin.

Zero Hedge reports:

The Long Arm Of Uncle Sam Just Got Longer

This one’s hot off the presses. Just yesterday, our friends at the Financial Crimes Enforcement Network (FinCEN) issued a press release on its latest ruling related to foreign ‘money service businesses (MSBs).’

An MSB is a private company that provides certain financial services like check cashing, money orders, title pawn, payday loans, travelers’ checks, prepaid stored value cards, tax refund payments, etc.

Frequently, traditional MSB clients tended to be individuals without bank accounts or access to credit.  But increasingly, the US government is looking at companies engaged in electronic payments, crowdsourced funding, and even microcredit finance as money service businesses.

The implication? They should all be regulated. Even if they’re not even US companies.

That’s right. FinCEN’s latest ruling suggests a foreign MSB may now be subject to US regulations AND CRIMINAL PENALTIES “even if none of its agents, agencies, branches or offices are physically located in the United States.”

FinCEN goes on to say that foreign-located MSBs must also comply with US anti-money laundering regulations and submit ‘suspicious activity reports’, i.e. assimilate into the US financial system and become yet another unpaid spy of the US government.

Further, foreign MSBs must register with FinCEN AND appoint a person residing in the United States as a legal representative in matters of compliance. If not, foreign MSBs risk severe civil and criminal penalties.

In other words, FinCEN thinks it has the authority to go after entities such as Mt. Gox that are located in Japan.  Mt. Gox, along with all the other related institutions, such as SpendBitcoins.com that exchange Bitcoins for gift cards, or VirWox which exchange Second Life “Linden dollars” for Bitcoins would be subject to criminal sanction by FinCEN even if they have no physical presence in the US at all.

It should be noted that these are dictatorial decrees by FinCEN.  No legislation has been passed that says FinCEN should be allowed to go after foreign businesses around the globe. FinCEN decided on its own that it has this authority.

I’m not sure if FinCEN is directly targeting Bitcoin with this latest fascist power-grab, but it certainly appears that way.  FinCEN doesn’t like it when people buy and sell things without it being privy to every detail of the transaction.   People might attempt to keep their own money! – gasp!  People might buy evil drugs! – gasp!  THE HORROR!

The relevant regulations:

Foreign-Located Money Services Businesses:

On July 21, 2011, the Financial Crimes Enforcement Network (FinCEN) published in the Federal Register a final rule on definitions and other regulations relating to money services businesses (Final Rule).1 The Final Rule amended the definition of “money services business” at 31 CFR 1010.100(ff). An entity may now qualify as a money services business (MSB) under the Bank Secrecy Act (BSA) regulations based on its activities within the United States, even if none of its agents, agencies, branches or offices are physically located in the United States. The Final Rule arose in part from 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.2 FinCEN seeks to ensure that the BSA rules apply to all persons engaging in covered activities within the United States, regardless of the person’s physical location.

Money Services Business:

The term “money services business” includes any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the following capacities:

(1) Currency dealer or exchanger.
(2) Check casher.
(3) Issuer of traveler’s checks, money orders or stored value.
(4) Seller or redeemer of traveler’s checks, money orders or stored value.
(5) Money transmitter.
(6) U.S. Postal Service.

An activity threshold of greater than $1,000 per person per day in one or more transactions applies to the definitions of: currency dealer or exchanger; check casher; issuer of traveler’s checks, money orders or stored value; and seller or redeemer of travelers’ checks, money orders or stored value. The threshold applies separately to each activity — if the threshold is not met for the specific activity, the person engaged in that activity is not an MSB on the basis of that activity.

No activity threshold applies to the definition of money transmitter. Thus, a person who engages as a business in the transfer of funds is an MSB as a money transmitter, regardless of the amount of money transmission activity.

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[cypherdoc]

so is this irrespective of citizenship of the owner of the money transmitter business?  Mag Tux is French.

sounds like the only requirement is that the business interacts with US citizens within our borders?

[kiba]

Those douchebags dare to violate people's privacy in the name of justice without providing any sort evidence to show their effectiveness of stopping crime or whether or not the cost is worth it.

[cypherdoc]

here is the relevant part:

"Consistent with the standard for reporting suspicious activity under the BSA, if a financial institution knows, suspects, or has reason to suspect that a transaction conducted or attempted by, at, or through the financial institution involves funds derived from illegal activity or appears to be indicative of money laundering, terrorist financing, or other violation of law or regulation, the financial institution should file a suspicious activity report (SAR).8 As noted in the Joint Guidance, financial institutions that provide banking services to MSBs should file a SAR if they become aware that their customers are operating as unregistered or unlicensed MSBs.9"

as long as mtgox makes every reasonable effort to ensure he is not dealing with people engaged in these activities i fail to see how they can be accused of any wrongdoing.  every other bank in the world that services US citizens has the same regulation hanging over its head.

i fail to understand why all the crackheads made a big fuss about how Bitcoin would be the currency of the drug dealers last year.  i, for one, don't think Silk Road had anything to do with last Springs rally.  i just think it was a good idea whose time had come.  its time to disentangle that myth from Bitcoin.

[Yankee (BitInstant)]

Wether or not it is specifically targeting MtGox or not, it definitely still pertains and applies to them.

Fortunately for MtGox, they have operating under this assumption since they began doing business.

Keep trying FinCEN.....

[kiba]

here is the relevant part:

"Consistent with the standard for reporting suspicious activity under the BSA, if a financial institution knows, suspects, or has reason to suspect that a transaction conducted or attempted by, at, or through the financial institution involves funds derived from illegal activity or appears to be indicative of money laundering, terrorist financing, or other violation of law or regulation, the financial institution should file a suspicious activity report (SAR).8 As noted in the Joint Guidance, financial institutions that provide banking services to MSBs should file a SAR if they become aware that their customers are operating as unregistered or unlicensed MSBs.9"

as long as mtgox makes every reasonable effort to ensure he is not dealing with people engaged in these activities i fail to see how they can be accused of any wrongdoing.  every other bank in the world that services US citizens has the same regulation hanging over its head.

KYC is a violation of our financial privacy. In order to pay our taxes, we gave information to the IRS every year. Are you OK with this? I am doing my taxes for the first time year, but I felt like they're watching my every earning, trying to pounce me on the most obscure violation. It probably only happen to 1 in 100,000 but it probably made life hell.

If they're going to sift through somebody's lives, they should be forced to get a warrant and have a judge watching them. I wish I knew a way of changing the situation, but I don't know how.

i fail to understand why all the crackheads made a big fuss about how Bitcoin would be the currency of the drug dealers last year.  i, for one, don't think Silk Road had anything to do with last Springs rally.  i just think it was a good idea whose time had come.  its time to disentangle that myth from Bitcoin.

If something happen and the price rises, people merely assume something happening have to do with why the price rises.

[kiba]

Wether or not it is specifically targeting MtGox or not, it definitely still pertains and applies to them.

Fortunately for MtGox, they have operating under this assumption since they began doing business.

Keep trying FinCEN.....

I would like to hear mtgox's statement on this compliance effort and their candid position on anti-money laundering.

[FreeMoney]

KYC is a violation of our financial privacy. In order to pay our taxes, we gave information to the IRS every year. Are you OK with this? I am doing my taxes for the first time year, but I felt like they're watching my every earning, trying to pounce me on the most obscure violation. It probably only happen to 1 in 100,000 but it probably made life hell.

1 in 100,000? You wish. Try 1 in 100.

Assuming you are talking about audits.

[cypherdoc]

what i want to know is the inconsistency i'm sensing from Amir and Jered vs. Mark.  Amir and Jered have already determined that working with the banks has been a horrendous experience and very costly.  this i expected from the very beginning.

Mark may or may not be experiencing the same thing; we just don't know b/c he hasn't commented on it.

[kiba]

Mark may or may not be experiencing the same thing; we just don't know b/c he hasn't commented on it.

From what I can tell, even Mark have some issues working with banks.

[cypherdoc]

Mark may or may not be experiencing the same thing; we just don't know b/c he hasn't commented on it.

From what I can tell, even Mark have some issues working with banks.

so do i understand this right that Jered had problems with California banks specifically?  i never knew TH's banks were based there. 

Marks are in HK and Japan so that may be encouraging.

[Lupus_Yonderboy]

I guess there are no countries left on the planet where someone could operate an exchange outside of US laws?

[michaelsuede]

I guess there are no countries left on the planet where someone could operate an exchange outside of US laws?

The US government doesn't care about borders.

It cares about robbing you blind no matter where you live on the planet.

[vuce]

All the more reason for someone to make a p2p exchange.

[oOoOo]

Here is the original post by Simon Black Some more quotes:

FinCEN’s latest ruling suggests a foreign MSB may now be subject to US regulations AND CRIMINAL PENALTIES “even if none of its agents, agencies, branches or offices are physically located in the United States.

FinCEN goes on to say that foreign-located MSBs must also comply with US anti-money laundering regulations and submit ‘suspicious activity reports’, i.e. assimilate into the US financial system and become yet another unpaid spy of the US government.

Despite the ‘free and democratic society’ that most of us live in, these agencies are accountable to no one. They are not elected officials, they have no checks and balances, and there is little (if any) judicial oversight.

FinCEN’s “rules” subjecting foreign companies to US criminal penalties, this is getting completely out of control.

Each of these rules has been conjured without your knowledge, put into effect without your consent, and tied to the most ridiculous civil and criminal penalties imaginable. You can’t even fill out a passport application anymore without being threatened with a $10,000 fine.

Bitcoin is no longer a little experiment by geeks. Bitcoin is a means of financial survival...

[Boussac]

Interesting thread. The banking lobby will qualify any business thats challenging their monopoly as a business that must be "regulated".

Along the same line, I was hearing tonight a tv report stating that bank card fraud on the internet was on the rise because of the development of the e-commerce.

Apparently it did not cross the mind of the tv reporter that it could also be the result of some obsolete inefficient ill-suited payment means that the banks are forcing us to use to spend our own money.

Thats propaganda at work: brainwash or bribe the media, they will take care of their audience

[michaelsuede]

All the more reason for someone to make a p2p exchange.

Easier said than done.  Just think of the various steps that would be involved.

How do you know a buyer has enough dollars in their bank account?

How do you access the account?

How do you know they have enough Bitcoins in their wallet for sale?

How do you pool Bitcoins so that any size order can be placed or sold?

An exchange doesn't work like eBay, where specific amounts of goods are bought and sold.  An exchange pools the money so that any arbitrary amount can be bought or sold.  

How do you prevent people from altering the client to broadcast more bank funds than they actually have?

It seems incredibly difficult to do those things without a central server to coordinate and secure all the action.

[Yankee (BitInstant)]

Wether or not it is specifically targeting MtGox or not, it definitely still pertains and applies to them.

Fortunately for MtGox, they have operating under this assumption since they began doing business.

Keep trying FinCEN.....

I would like to hear mtgox's statement on this compliance effort and their candid position on anti-money laundering.

Trust me when I tell you this. When FinCEN comes knocking, MtGox will be most prepared.

[Jon]

It's nothing but words on paper at the moment.

There are no real implications until FinCEN makes a move and demonstrates its might.

[kiba]

It's nothing but words on paper at the moment.

There are no real implications until FinCEN makes a move and demonstrates its might.

Better be prepared than never.