United Kingdom

Details

  • Service: Advisory, Risk Consulting
  • Type: Business and industry issue
  • Date: 04/04/2013

US Treasury cracks down on "Virtual Money" 

assorted dollar notes
 

In February 2013, Fighting Fraud reported on the risk posed to legitimate business by the so called Dark Web”, an online marketplace hidden from regular search engines where illicit goods and services can be traded using online-only, digital currencies.

 

In March 2013 the U.S. Treasury Department has stated that it intends to apply current money-laundering legislation to "virtual currencies," responding to concerns that they are being used to facilitate illegitimate business.

 

The Financial Crimes Enforcement Network (FinCEN), the US government body responsible for utilising financial transaction analysis to combat money laundering and terrorist financing, released guidance on March 18 2013 on the application of the Bank Secrecy Act (BSA). The interpretive guidance has been issued to clarify the applicability of the BSA, the US’s money laundering regulation, to “persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies”.

 

The result is that anyone involved in exchanges of virtual currency, whether defined as a “user”, “exchanger” or “administrator” (see glossary), must be registered as a money services business and adhere to existing legislation.

 

The FinCEN interpretive guidance document provides the following:

 

  • A full definition of “virtual currencies” and comparison with “real” currencies;
  • Guidance on “centralized virtual currencies” and “de-centralized virtual currencies”; and
  • Definitions of, and application of the BSA to, “Users”, “Exchangers” and “Administrators”.

 

Full copy of the FinCEN interpretive guidance document (PDF  274 KB)
 

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Peter Jones 

Peter Jones

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KPMG in the UK

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Glossary

As defined by FinCEN

 

Virtual Currency A medium of exchange that operates like a currency in some environments, but does not have all the attributes of real (coin and paper money) currency. In particular, virtual currency does not have legal tender status in any jurisdiction. This guidance addresses “convertible” virtual currency. This type of virtual currency either has an equivalent value in real currency, or acts as a substitute for real currency.

 

UserA person that obtains virtual currency to purchase goods or services.

 

Exchanger 

A person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency.

 

Administrator a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency.