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Author Topic: Is "Money Laundering" with Bitcoin really "Money Laundering"?  (Read 5035 times)
DeathAndTaxes
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Gerald Davis


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June 21, 2012, 03:52:16 PM
 #21

Subscribing, interesting topic and I hope more of it gets answered soon.

Are there any state laws to worry about as well? Or possibly even smaller governments that you may have to answer to (county, city, etc)

Usually nothing at the local level (not that I am aware).  Most states do require MSB to register.  Some states (roughly 10) require MSB in other states to register with their state if they offers services to residents of their state.  Many states only regulate some of the MSB categories.  If your business is classified as a Money Transmitter by FinCEN expect to pay a quarter million easy in fees, audits, licensing, and bonds.
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June 21, 2012, 04:07:58 PM
 #22

interesting thread, watching...

BTCitcoin: An Idea Worth Saving - Q&A with bitcoins on rugatu.com - Check my rep
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June 21, 2012, 04:17:13 PM
 #23

sub, although its for Tangible's FinCen query, so maybe another thread for that would be useful?

-bgc

I'm selling great Minion Games like The Manhattan Project, Kingdom of Solomon and Venture Forth at 4% off retail starting June 2012. PM me or go to my thread in the Marketplace if you're interested.

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June 21, 2012, 04:28:12 PM
 #24

Money laundering -> Bitcoin is not money !

Obviously this depends on your understanding of the word "money."  Since BTC does in fact fall under "any object or record that is generally accepted as payment for goods and services"  I would argue it IS money.

Don't assume "money" only refers to government-issued currency.  Money is a more general term.

Another point.  Professionals frequently engage in what's called "service swapping."  e.g. a lawyer represents a doctor in a malpractice suit in exchange for the doctor giving the lawyer's wife a boob job.  No money changes hands at all but the IRS still views the doctor and lawyer as having received income.  This sort of thing is done all the time off the books but if the IRS finds out, you're both charged with tax evasion.

Is a service money?

You are in a maze of twisty little passages, all alike.
Bitcoin AML Helper
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August 03, 2012, 09:11:19 PM
 #25

Even though bitcoin is a currency-like commodity and not a currency, Money Service businesses (MSBs) are a type of financial institution under the law.

A business is an MSB if it Provides Money Transmission Services.

“Money Transmission Service” 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.
(Revised July 2011 by FinCEN).

A Principal MSB must register with the Financial Crimes Enforcement Network (FinCEN) and maintain certain records regarding its Agent and/or foreign counterparty relationships.

In January 2012, FinCEN has issued a Final Rule revising the definition of a Money Service Business (MSB) in order to clarify which entities are covered by the definition.

Foreign-located MSB’s doing business in the United States now have the same registration, reporting, record keeping and other requirements as MSB’s physically located in the US.

The business models of many third-party virtual currency service providers qualify them as money transmitters, and therefore MSBs under 31 CFR Part 1010.100(ff)(5).
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August 03, 2012, 09:37:21 PM
 #26

Their response will be interesting.   Because instead of acquiring bitcoin with the expectation that it has no value unless it is converted back to fit, it really isn't a prepayment of value.  It is instead just a purchase, just like if I were buying bananas.  If I buy bananas at the store to trade them with you for whatever you are selling then there's no prepayment of value.  The seller of the bananas to me is not asserting that those bananas will have any value.

The ability to convert back to hard currency is not a a requirement for a product to be considered prepaid access according to FinCEN.  While the store selling you bananas is a purchase, the store issuing you a "banana card" is considered prepaid access and subject to MSB regulation.

The key thing is that in the case of "Banana card", it would most likely would be considered "closed loop" by FinCEN (my opinion and should not be taken as anything more than that). The requirements and regulatory requirements for a closed loop system are much less restrictive than open loop systems.   Obviously things like the hypothetical banana card and phonecards, wireless pins, etc clearly fall into the "closed loop" category while products like "reloadable debit card, greendot moneypaks, etc" clearly fall into the "open loop category".  Bitcoin kinda falls in the middle.

Our inquiry to FinCEN is on if a Bitcoin prepaid card would be considered closed loop or open loop as that radically changes the cost, regulatory, and information gathering requirements.  Our argument is that Bitcoin stored value card should be considered closed loop as the issuer provides no mechanism for conversion to fiat.  The counter argument is that Bitcoin ease at being converted to fiat makes it an open loop product even without issuer providing an explicit mechanism to convert back to fiat.  Hopefully we will have an answer soon.

You may find this interesting:
http://www.fincen.gov/news_room/nr/html/20111102.html

This is really interesting. I can see the argument for both the closed loop and open loop with Bitcoin.

Concerned that blockchain bloat will lead to centralization? Storing less than 4 GB of data once required the budget of a superpower and a warehouse full of punched cards. https://upload.wikimedia.org/wikipedia/commons/8/87/IBM_card_storage.NARA.jpg https://en.wikipedia.org/wiki/Punched_card
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August 04, 2012, 07:24:05 AM
 #27

From another thread:

I am an attorney currently working as an anti-money-laundering investigator for one of the world's largest banks. The decentralized nature of Bitcoin is raising serious AML concerns within the banking system.

Bitcoin lacks a centralized entity making it incapable of conducting due diligence, monitoring and reporting of suspicious activity, running an AML compliance program, or accepting and processing legal requests like subpoenas.

Despite the above-mentioned risks and concerns of my employer and my employer's regulators, I strongly believe in Bitcoin. I believe it has the potential to completely transform the global monetary system. I am here to help in any way that I can.


FinCEN has not said much about Bitcoin other than that they "are aware of [it]".  Former Federal Reserve economist David Barker likes it.  Former U.S. Treasury Secretary Larry Summers likes it. Google Chairman Dr. Eric Schmidt likes it.   Citibank's Global CTO jokes about it. At the most recent AML conference, there was only a single 1 hour session on it, and there was little interest reportedly.  Traders and analysts at Morgan Stanley and Goldman Sachs trade it on their personal accounts.

Where might these serious concerns be originating?

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Okey Dokey Lokey


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August 04, 2012, 04:13:31 PM
 #28

Money laundering -> Bitcoin is not money !

Obviously this depends on your understanding of the word "money."  Since BTC does in fact fall under "any object or record that is generally accepted as payment for goods and services"  I would argue it IS money.

Don't assume "money" only refers to government-issued currency.  Money is a more general term.

Another point.  Professionals frequently engage in what's called "service swapping."  e.g. a lawyer represents a doctor in a malpractice suit in exchange for the doctor giving the lawyer's wife a boob job.  No money changes hands at all but the IRS still views the doctor and lawyer as having received income.  This sort of thing is done all the time off the books but if the IRS finds out, you're both charged with tax evasion.

Is a service money?

This.

http://bitcoin-otc.com/viewratingdetail.php?nick=DingoRabiit&sign=ANY&type=RECV <-My Ratings
https://bitcointalk.org/index.php?topic=857670.0 GAWminers and associated things are not to be trusted, Especially the "mineral" exchange
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August 04, 2012, 04:39:03 PM
 #29

The CIA, FBI, FinCEN, and every other alphabet agency are aware of Bitcoin, even if they have no idea what it is. I think they need some help. Maybe we need to start an open source bitcoin regulatory software project. They will need to be able to trace address histories, IPs, and have access to an alert channel. Products could be developed and sold to law enforcement agencies.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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August 05, 2012, 01:29:55 AM
 #30

The CIA, FBI, FinCEN, and every other alphabet agency are aware of Bitcoin, even if they have no idea what it is. I think they need some help. Maybe we need to start an open source bitcoin regulatory software project. They will need to be able to trace address histories, IPs, and have access to an alert channel. Products could be developed and sold to law enforcement agencies.

You mean like lawyers and attorneys donating their time and services for free to the community ..... good luck with that.

The only reason "Bitcoin is raising serious AML concerns within the banking system " is because the regulatory capture provided to the banking cartels by the whole "money-laundering" ruse is being challenged by a competing monetary information technology that has the potential to make the dinosaurs extinct.

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Okey Dokey Lokey


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August 06, 2012, 02:17:02 PM
 #31

The CIA, FBI, FinCEN, and every other alphabet agency are aware of Bitcoin, even if they have no idea what it is. I think they need some help. Maybe we need to start an open source bitcoin regulatory software project. They will need to be able to trace address histories, IPs, and have access to an alert channel. Products could be developed and sold to law enforcement agencies.

You mean like lawyers and attorneys donating their time and services for free to the community ..... good luck with that.

The only reason "Bitcoin is raising serious AML concerns within the banking system " is because the regulatory capture provided to the banking cartels by the whole "money-laundering" ruse is being challenged by a competing monetary information technology that has the potential to make the dinosaurs extinct.


NO MORE FIAT PAPER!

http://bitcoin-otc.com/viewratingdetail.php?nick=DingoRabiit&sign=ANY&type=RECV <-My Ratings
https://bitcointalk.org/index.php?topic=857670.0 GAWminers and associated things are not to be trusted, Especially the "mineral" exchange
marcus_of_augustus
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August 06, 2012, 11:12:33 PM
 #32

Actually, the majority of the fiat money supply is in digital database form.

Only approx. 10% exists as fiat paper and muck-metal coin form.

i.e. 90% of Western society's monetary wealth exists as govt. fiat in plain-text digital databases.

Ethereal huh?

Fiyasko
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Okey Dokey Lokey


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August 08, 2012, 04:28:53 PM
 #33

Actually, the majority of the fiat money supply is in digital database form.

Only approx. 10% exists as fiat paper and muck-metal coin form.

i.e. 90% of Western society's monetary wealth exists as govt. fiat in plain-text digital databases.

Ethereal huh?
Not really, The ethereal part is when you get a "loan" from a bank, You didnt just loan money from them, They created money, Gave it to you, And billed you a creation fee

http://bitcoin-otc.com/viewratingdetail.php?nick=DingoRabiit&sign=ANY&type=RECV <-My Ratings
https://bitcointalk.org/index.php?topic=857670.0 GAWminers and associated things are not to be trusted, Especially the "mineral" exchange
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