Category Archives: FinCEN

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Canada’s Lawmakers Seek AML Regulations for Exchanges, Wallets

Canadian lawmakers are calling for tighter cryptocurrency regulations to cover anti-money-laundering (AML) and illegal activity.

Canada’s move towards further cryptocurrency regulation and transparency reflects the growing trend with governments around the world to tighten the regulatory grip on the industry. The US Securities and Exchanges Commission (SEC) has been particularly active this year in tracking down and prosecuting fraudulent cryptocurrency exchange activity.

The new calls for AML laws follow on from plans for heightened scrutiny of cryptocurrency exchanges, as announced by the Ontario Securities Commission (OSC) earlier this year due to the increase of digital currencies on the market, some of them less reputable than others.

The three new measures were proposed from the House of Commons Standing Committee on Finance (FINA); they include closer monitoring of both cryptocurrency exchanges and wallets. Added to this, MPs are calling for crypto-to-fiat exchanges to be registered as money services businesses, placing exchanges under Financial Transactions and Reports Analysis Centre (FINTRAC) supervision. FINTRAC is Canada’s federal agency for the monitoring of AML and counter-terrorist financing.

The current concern among legislators is that cryptocurrency is used for the financing of illegal activity, a common concern amongst legislators globally. It is an argument which has less traction these days after the results of numerous surveys illustrating that fiat currency is still the preferred financial tool behind organized-crime and terrorist activity. FINA’s proposal suggests:

“Law enforcement bodies must be able to properly identify and track illegal crypto-wallet hacking and failures to report capital gains.”

The government regulatory body also recommends the foundation of a licensing regime similar to that of New York State, whose BitLicense covers financial regulatory issues, independent of FinCEN rules. The Financial Crimes Enforcement Network is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes.

A decision is yet to be made whether such a bureau should operate on a local level across Canada’s ten provinces or should be overseen by a federal regulator.

The Blockchain Association of Canada is not happy with the new proposals, suggesting that rather than take unilateral action, government authorities should cooperate with cryptocurrency exchanges in detecting any criminal activity.


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Marco Santori – Bitcoin Law In The U.S., Part I

Marco Santori – Bitcoin Law In The U.S., Part I:

Marco Santori, Chairman of Bitcoin Foundation (@BTCFoundation)’s Regulatory Affairs Committee, gives a basic primer on the state of US law as it applies to digital currency entrepreneurs.  Excerpts of the post on Coindesk:

If the last few months have taught us anything, it is that there will soon exist a new and evolving body of law: The Law of Digital Currency, or, as some would prefer it: Bitcoin Law.”

”[…] ‘virtual currency’ is something of a loaded term, and bitcoin may not even be best described as a currency at all.”

“[In addition to regulators FinCEN and the SEC, the] consensus among legal professionals is that two more government agencies might soon have a hand in the market as well: the Commodity Futures Trading Commission (CFTC) and the Consumer Financial Protection Bureau (CFPB).”

“Some have called [FinCEN’s issuance of guidance] bitcoin’s ‘watershed moment’ because of its clear, unequivocal positive message: bitcoin is not illegal. The negative consequence, though, was just as obvious: Many bitcoin businesses models are illegal.”

“In effect, the [Bank Secrecy Act (BSA)] deputizes financial institutions, requiring them to act as the government’s foot soldiers in its war on money laundering.”

 – (Further discussion of the article)

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Makeshift Magazine – Hawala, Moving Billions

Makeshift Magazine – Hawala, Moving Billions:

Writer Philippa Young (@_philippayoung_)’s article Thin Wire in the quarterly magazine Makeshift (@MkShftMag) describes Hawala.  Excerpts:

“Hawala, hundi, chiti, chop, and dozens of other names describe a system that moves billions of dollars across grey and black markets, faster and cheaper than your local bank.”

“Before insurance and high-speed travel, moving large amounts of bullion by sea or camel-led caravan was not only slow but also incredibly risky. The answer? Never move the money.”

“In its infancy, hawala created a safe and smooth journey for long-distance merchants, facilitating the first movements of globalized trade. Fast-forward a few hundred years, and hawala has a less celebrated reputation.”

“For families in developing countries supported by diaspora relatives, hawala is a lifeline.”

“Hawala is recordless. With just a name and telephone number, you can transfer thousands of dollars across continents.”

“Just one month from now, First Somali Bank will launch a system to allow diaspora communities of Minnesota and London to send remittances from their mobile phones directly to a recipient’s debit card in Somalia— signs of attempts to formalize hawala’s informal success.”

“The system differs from neighboring Kenya’s M-PESA system in that the money goes directly into the recipient’s bank account. Each person becomes his or her own hawaladar.”

“If money makes the world go round, then hawala is the undervalued engine coughing out a cloak of grey-black smoke.”

 – (Further discussion of the article)

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Jon Matonis – The Fincen Whistleblowers

Jon Matonis – The Fincen Whistleblowers:

Bitcoin Foundation board member Jon Matonis (@JonMatonis) writes a post on how the financial surveillance also occurring is no secret.  Excerpts:  

“The Fincen bureau conducts all of its surveillance activity out in the open and in plain sight, probably for its effect as a deterrent. Fincen even recruits banks and other agent financial institutions to participate in the direct surveillance that make serious and consequential judgment calls along the way.”

“Two generations of educated Americans, including some smart attorneys, have been conditioned to think of money laundering as a real and legitimate category of crime. Eradication of privacy is the goal and manipulation of the semantic crime debate is the tool.”

“Since the available cryptography and technical tools of today permit near absolutes on each side of the privacy-surveillance spectrum, each advancement from one side elicits an equally strong reaction from the other side.”

“As shameful as the existence of PRISM is, and it is monumentally shameful for a free society, it doesn’t even compare to the unprecedented level of financial surveillance the world is on the verge of witnessing.”

“Digital currencies with proper mixing services such as bitcoin become a viable option for preserving some transactional privacy, even if identification is required for its initial acquisition from licensed money transmitters.”

“A world where privacy isn’t sacrificed and all human transactions aren’t tracked is not only possible, but imperative. The alternative will be far worse than you can imagine.”

 – (Further discussion of the article)

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Jerry Brito – Mr. Bitcoin goes to Washington

Jerry Brito – Mr. Bitcoin goes to Washington:

Jerry Brito (@JerryBrito)’s post on The Technology Liberation Front blog describes today’s “Virtual Economy” conference in which he was a panel moderator.  Excerpts:

“On my panel were representatives from the Bitcoin Foundation, the Tor Project, and the DOJ, and we had a lively discussion about how these technologies can potentially be used by criminals and what these open source communities might be able to do to mitigate that risk.”

“I was therefore interested in the keynote remarks delivered by Jennifer Shasky Calvery, the Director of the Treasury Department’s Financial Crimes Enforcement Network.  [In particular, she addressed the fact that since there have been several enforcement actions against virtual currency exchangers and providers, the traditional banking sector has been wary of doing business with companies in the virtual currency space.”

“It would be a shame if [banks] felt they couldn’t do business with an innovative new kind of start-up simply because that start-up has not been (and may never be) adequately defined by a regulator.”

“Hopefully FinCEN will revisit its guidance now that the conversation has begun, and as other regulators consider new rules, they will hopefully engage the Bitcoin community early in order to avoid ambiguity and uncertainty.”

 – (Details of the The Virtual Economy conference)
 – (Further discussion of the article)

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