Against a major downturn in the crypto industry and as the price of Bitcoin (BTC) hit new record highs several times in recent months, the United States has updated its anti-money laundering / counterterrorism financing cryptocurrency laws.
Related: COVID-19 pandemic drives updates to crypto 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, the Anti-Money Laundering Act of 2020 and the Corporate Transparency Act.
Related: EU Changes AML Crypto Trading Laws As US Reflects
The provisions of the law expand and update the Bank Secrecy Act, or BSA, and the US AML / CFT regime by:
- Codification of existing FinCEN guidelines related to digital currencies by expanding and adapting various definitions and provisions within the BSA to include “value substituting currency”. Therefore, it requires companies working with cryptocurrency to qualify as money transmitters to register with the Financial Crimes Enforcement Network and establish reporting and filing requirements for transactions involving certain types of digital currencies, as outlined in proposed regulations issued by FINCEN (see Below).
- Require many smaller companies to disclose beneficial ownership information to FinCEN.
- Prohibiting any person from knowingly concealing, or attempting to conceal, falsify, or misrepresent, for or to any material fact regarding ownership or control of assets involved in a money transaction, to or , if “(1) the person or entity who owns or controls the assets is a senior foreign political figure, or a direct family member or close associate of a senior foreign political figure” and “(2) the aggregate value of the assets involved in 1 or more monetary transactions is not less than $ 1,000,000. ”
- Creating Awards for Whistleblowers – up to 30% of fines recovered from an entity where the tip resulted in fines in excess of $ 1 million – that report actionable information about BSA AML / CFT violations.
Related: Better regulation is needed to prevent crypto tax evaders from emerging
Proposed AML / CFT Cryptocurrency Regulations
Late last year, the Financial Crimes Enforcement Network of the United States Treasury Department also published regulatory proposals to make convertible digital currency or digital asset transactions subject to similar AML / CFT reporting requirements set by the BSA on other financial institutions.
Adopting the new regulation would require entities covered by AML / CFT, including payments made with ‘non-hosted wallets’ (not owned by an external financial system), to obtain and report the identities of parties involved in cryptocurrency transactions if the transaction exceeds $ 3,000.
This information includes:
- 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 estimated value of the transaction, in US dollars, based on the exchange rate prevailing at the time of the transaction.
- Receive any payment instructions from the client of the financial institution.
- The name and physical address of each counterparty to the financial institution’s customer transaction.
- Other counterparty information that the secretary is obliged to prescribe on the notification form.
- Any other information that uniquely identifies the transaction, the accounts and, to the extent reasonably available, the parties involved.
- Any form related to the transaction completed or signed by the client of the financial institution.
The new regulations also require banks and money service companies to report the same information for cryptocurrency transactions in excess of $ 10,000 to FinCEN 15 days from the date a reportable transaction occurs. Structuring transactions to circumvent reporting requirements is strictly prohibited under the proposed rules.
Related: US crypto regulations will return Bitcoin to the origins of digital cash
According to an official press release, Secretary Steven Mnuchin explained:
“This rule addresses substantial concerns about national security in the CVC [convertible virtual currency] market, and aims to close the gaps that malicious actors try to exploit in the archiving and reporting 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, support law enforcement and increase transparency while minimizing the impact on responsible innovation.”
Related: Cybercrime working group that monitors the global digital financial system
Separately, FinCEN announced its intention to change the BSA’s regulations for foreign banks and financial accounts to require U.S. individuals and entities to report cryptocurrency as part of their foreign financial accounts if they have more than $ 10,000 worth of cryptocurrencies in foreign financial accounts or digital asset service providers.
The views, thoughts and opinions expressed here are solely of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Selva Special, Esq., CPA, is an international tax attorney and chartered accountant who regularly writes on tax, legal and accounting issues for Tax Notes, Bloomberg BNA, other publications and the OECD.