The division of the Treasury that fights money laundering and other financial crimes is sending letters to U.S. businesses that are involved in some way with bitcoins, the virtual currency rapidly growing in popularity as an tradable commodity or e-commerce payment option.
Treasury’s Financial Crimes Enforcement Network (FinCEN) has sent “industry outreach” letters to several bitcoin business, regarding potential anti-money laundering compliance obligations, Reuters and bitcoin blogs are reporting.
The letters reflect the position expressed by FinCen Directory Jennifer Shasky Calvery in testimony last month before the Senate Homeland Security and Government Affairs Committee.
“What is important is that financial institutions that deal in virtual currency put effective AML/CFT (anti-money laundering/counter-terrorist financing) controls in place to harden themselves from becoming the targets of illicit actors that would exploit any identified vulnerabilities,” Calvery said.
Here is the biggest challenge for bitcoin U.S. businesses: If you deal with virtual currency, your business now may qualify as a “money transmitter” under FinCEN regulation revised in March.
FinCEN’s guidance explains that administrators or exchangers of virtual currencies must register with FinCEN, and institute certain recordkeeping, reporting and anti-money laundering control measures, unless an exception to these requirements applies.
The guidance also explains that those who use virtual currencies exclusively for common personal transactions, like buying goods or services online are users, are not subject to regulatory requirements.
For more than a decade the money-transmission industry, includes prominent businesses such as Western Union and PayPal, has been required to formulate anti-money laundering controls, report suspicious activity, register with FinCEN and obtain state licenses.
The FinCEN letters do not represent infractions or penalties, but can have a chilling effect on small bitcoin startups and entrepreneurs. Mike Caldwell, the operator of Casascius Coins, creates collectible coins with bitcoin “private keys” hidden inside. He has shut his business after receiving one of these letters from FinCen.