Against the great resistance of the crypto industry and as the price of Bitcoin (BTC) has reached new highs several times during the past two months, the United States has updated its laws to combat money laundering / combat the financing of cryptocurrency terrorism.
Related: The COVID-19 pandemic encourages updates to cryptography laws in J5 countries
The Anti-Money Laundering Act of 2020 and the Corporate Transparency Act
Last December, the Senate passed the National Defense Authorization Act and, as part of that legislation, passed the Money Laundering Prevention Act of 2020 and the Corporate Transparency Act.
Related: EU changes AML laws for crypto commerce, while the US ponders
The law’s provisions extend and update the Bank Secrecy Act, or BSA, and the US AML / CFT regime through:
- Codify FinCEN’s existing guidance related to digital currencies, expanding and modifying various definitions and provisions within the BSA to cover “value that replaces currency”. Accordingly, it requires companies operating in cryptocurrency to qualify as money transmitters to register with the Financial Crimes Enforcement Network and establish reporting and record-keeping requirements for transactions involving certain types of digital currencies, as detailed in the proposed regulations issued by FINCEN (see below).
- Require that many smaller companies disclose information about beneficial ownership to FinCEN.
- Prohibit a person from knowingly concealing or attempting to conceal, falsify or tamper with, from or to a financial institution, a material fact relating to the ownership or control of assets involved in a monetary transaction if “(1) the person or entity that owns or controls the assets are a senior foreign political figure, or any immediate family member or close associate of a senior foreign political figure “e” (2) the aggregate value of assets involved in 1 or more monetary transactions is not less than $ 1,000,000 “.
- Creation of rewards for whistleblowers – up to 30% of the monetary penalties recovered from an entity where the complaint resulted in penalties in excess of $ 1 million – that report actionable information on BSA’s AML / CFT violations.
Related: Better regulation is needed to prevent cryptographers from getting out of control
Proposed AML / CFT cryptocurrency regulations
At the end of last year, the U.S. Treasury Department’s Financial Crimes Enforcement Network also issued proposed regulations aimed at subjecting convertible digital currency or digital asset transactions to similar AML / CFT reporting requirements imposed on other financial institutions by the BSA.
The new regulations, if adopted, would require entities covered by AML / CFT, including payments involving “non-hosted portfolios” (not maintained by a third party financial system), to obtain and report the identities of the parties involved in cryptocurrency transactions if the transaction exceeds $ 3,000.
Such information would include:
- The name and address of the customer of the financial institution.
- The type of cryptocurrency used in the transaction.
- The amount of cryptocurrency in the transaction.
- The time of the transaction.
- The appraised value of the transaction, in US dollars, based on the exchange rate in effect at the time of the transaction.
- Any payment instructions received from the customer of the financial institution.
- The name and physical address of each counterparty in the financial institution’s customer transaction.
- Other counterparty information that the secretary may prescribe as mandatory in the report form.
- Any other information that uniquely identifies the transaction, the accounts and, as far as possible, the parties involved.
- Any form related to the transaction that is completed or signed by the customer of the financial institution.
The new regulations will also require banks and financial services companies to report the same information for cryptocurrency transactions over $ 10,000 to FinCEN 15 days from the date a reportable transaction occurs. Structuring transactions to avoid reporting requirements is strictly prohibited by the proposed rules.
Related: U.S. crypto regulations will return Bitcoin to its digital money origins
According to an official press release, Secretary Steven Mnuchin explained:
“This rule addresses substantial national security concerns in the CVC [convertible virtual currency] market and aims to close the gaps that evil actors seek to exploit in the record and report maintenance regime. “
As a result of the COVID-19 pandemic, governments around the world have been forced to focus on integrating blockchain technology into their financial services. As Secretary Mnuchin added:
“The rule, which applies to financial institutions and is consistent with existing requirements, aims to protect national security, assist law enforcement and increase transparency, minimizing the impact on responsible innovation.”
Related: Cybercrime Task Force Monitoring the Global Digital Financial System
Separately, FinCEN announced its intention to amend the BSA’s Foreign Financial and Banking Account regulations to compel U.S. individuals and entities to report cryptocurrencies as part of their foreign financial accounts if they have more than $ 10,000 in cryptocurrencies with service providers. foreign digital or financial assets.
The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Selva Ozelli, Esq., CPA, is an international tax attorney and certified public accountant who writes frequently on tax, legal and accounting issues for Tax Notes, Bloomberg BNA, other publications and the OECD.