Bitcoin exchanges, miners, and cryptocurrency-payment processors, operating in the United States are required to comply with federal Anti-Money Laundering (AML) laws.
That means a cryptocurrency user can be prosecuted for violating a number of federal laws. Anybody who converts BTC to USD and sends the money to or from the United States must comply with all AML laws and regulations.
Such laws and regulations are imposed by the U.S. Treasury Department affiliate, FinCEN. The
Financial Crimes Enforcement Network is in charge of enforcing the policies and regulations, which serve as a security measure for conducting any financial activity within the U.S. borders.
All money service businesses, including Bitcoin exchanges, come within the provisions of these laws and guarantee a strong bank secrecy, as well as money laundering control. In the case a financial organization fails to abide by the policy, FinCEN is entitled to recourse through competent legal authorities like the FBI or the U.S. Secret Service.
According to the U.S. Government, digital currency trading is regarded as electronic money transfer, and thus cryptocurrency exchanges need to follow Anti-Money Laundering laws. That means any business that engages in bitcoin or ethereum mining, money transfers, trading or currency exchanges will need to file the appropriate paperwork via BSA E-Filing. Fortunately, FinCEN is willing to work with all organizations that want to do business in the USA.
As the name implies, money laundering takes place when an individual tries to turn criminal proceeds into clean money by disguising the true origin of funds through a number of fake transactions.
A popular money-laundering tactic is to move cash through a number of different accounts. Bitcoin is an option for laundering because it can be moved fast, and makes it more complicated to identify transaction parties.
It comes as no surprise that the government considers cases of this nature a direct threat to the national security and public safety. To prevent money laundering the authorities oblige money-related businesses to collect data about their customers by virtue of law. Therefore, all Bitcoin exchanges, serving American customers, should strictly follow AML laws.
The first step in AML compliance is to understand what is required of MSBs. Here are the main provisions of the current American Anti-Money Laundering laws bitcoin users need to understand:
Fortunately, abiding by the U.S. Anti-Money Laundering Laws is easier than most people think. All the exchanges need to do is use FinCEN’s BSA E-Filing System.
To use this system an exchange much register as a BSA E-Filer. Only BSA E-Filers can submit forms through the system. This includes SAR and CTR forms.
The first step in becoming an E-Filer is to make sure that your system is compatible with FinCen’s requirements.
There are two categories of issuers for the BSA E-Filing System:
Under current FinCEN practice bitcoin exchanges are regarded as Institutions. That means exchanges will have to register for the BSA-Filing System as Institutions.
To register the exchange as a filing organization, it is necessary to identify a representative, who will further act as the BSA point of contact, as well as an intermediary between the exchange and FinCen. This representative is called a Supervisory User.
The Supervisory User will be in charge of BSA filing and will assign IDs and create user accounts. He or she will have to keep track of all BSA filings.
To be approved by FinCEN the exchange rep should fill out a dedicated application form and submit it for further consideration.
FinCEN approval of the Supervisory User is finalized when the applicant receives an email with his User ID and login instructions. That email will also contain a document called Next Steps. The document contains the guidelines for accessing the BSA E-Filing site and submitting appropriate forms.
Having registered for BSA E-Filing System, the Supervisory Unit may learn about privileges available for a regular user and a supervisor from the detailed user manuals, as well as grant access to other members of the organization.
On top of all that, the BSA E-Filing System supports a so-called batch filing procedure, which allows exchanges, having a lot of customers, to save their time and effort. All it takes is using
Batch File Testing Procedures to set everything up.
Oleksandr Lutskevych, CEO of
CEX.IO. 17 years ago, Oleksandr started his career in IT as a software developer. Now, he leads CEX.IO, a UK-based cryptocurrency exchange. Oleksandr values his users' privacy and intentionally invests heavily in customers’ personal data protection & internal security. Thus, he worked tirelessly to ensure CEX.IO passed PCI DSS Level 2 Certification and has already started preparing for Level 1 (the top security accolade in the field).
Along with CEX.IO, Oleksandr was influential in the founding of the GHash.IO Mining Pool, and finds peers among the group of developers who invented cloud mining.
Despite giving 110% of himself to his CEX.IO exchange business, Oleksandr is still able to explore his passions of viticulture, and winemaking techniques during his down time.