This is good news. With clear rules the economy can really begin to prosper.
The problem is the rules aren't clear. The guidance simply says (simplified) virtual currency exchangers are money transmitters. Well that is all well and good except the guidance doesn't provide any guidance on complying with the BSA. Just registering as a MSB is easy. Anyone (company or individual) can do it in about five minutes by filling out a 4 page form.
The problem is compliance. Registering is saying "yes I am in compliance" and if you aren't well that is lose all your money or jail time. The problem is that "compliance" isn't possible if you can figure out how to comply.
Just on example of the inconsitencies and vagueness of applying money transmitter rules/requirements to currency exchangers. Money transmitters are required to collect and record information on money transmissions in excess of $3,000. If I buy 100 BTC from you and pay you $5,000 by bank wire. Who is the sender? Who is the receiver? In a classic money transmitter scenario (the one in all FinCEN courses, and documents) the money transmitter is the middle man. Sender -> Money Transmitter -> Receiver. The MT records the information both both entities. Is the MT both the MT AND the sender? Are you the sender and receiver? Are we both MT and one of the roles? Who knows. There are some plausible "guesses" but get it wrong and you could be fined up to $250,000 for each inaccuracy.
The "guidance" is nothing of the sort. Paraphrased version of FinCEN "guidance":
Um you guys are money transmitters and stuff, so figure out how what we expect you to do without us telling you what we expect you to do and BTW if you get it wrong or we later change our mind and decide you got it wrong well you go to jail.
Below is the regulation in question, now figure out what needs to be recorded.
(e) Nonbank financial institutions. Each agent, agency, branch, or office located within the United States of a financial institution other than a bank is subject to the requirements of this paragraph (e) with respect to a transmittal of funds in the amount of $3,000 or more:
(1) Recordkeeping requirements. (i) For each transmittal order that it accepts as a transmittor's financial institution, a financial institution shall obtain and retain either the original or a microfilm, other copy, or electronic record of the following information relating to the transmittal order:
(A) The name and address of the transmittor;
(B) The amount of the transmittal order;
(C) The execution date of the transmittal order;
(D) Any payment instructions received from the transmittor with the transmittal order;
(E) The identity of the recipient's financial institution;
(F) As many of the following items as are received with the transmittal order: 1
1 For transmittals of funds effected through the Federal Reserve's Fedwire funds transfer system by a domestic broker or dealers in securities, only one of the items is required to be retained, if received with the transmittal order, until such time as the bank that sends the order to the Federal Reserve Bank completes its conversion to the expanded Fedwire message format.
( 1 ) The name and address of the recipient;
( 2 ) The account number of the recipient; and
( 3 ) Any other specific identifier of the recipient; and
(G) Any form relating to the transmittal of funds that is completed or signed by the person placing the transmittal order.
(ii) For each transmittal order that it accepts as an intermediary financial institution, a financial institution shall retain either the original or a microfilm, other copy, or electronic record of the transmittal order.
(iii) For each transmittal order that it accepts as a recipient's financial institution, a financial institution shall retain either the original or a microfilm, other copy, or electronic record of the transmittal order.
(2) Transmittors other than established customers. In the case of a transmittal order from a transmittor that is not an established customer, in addition to obtaining and retaining the information required in paragraph (e)(1)(i) of this section:
(i) If the transmittal order is made in person, prior to acceptance the transmittor's financial institution shall verify the identity of the person placing the transmittal order. If it accepts the transmittal order, the transmittor's financial institution shall obtain and retain a record of the name and address, the type of identification reviewed, and the number of the identification document ( e.g., driver's license), as well as a record of the person's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record of the lack thereof. If the transmittor's financial institution has knowledge that the person placing the transmittal order is not the transmittor, the transmittor's financial institution shall obtain and retain a record of the transmittor's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, if known by the person placing the order, or a notation in the record of the lack thereof.
(ii) If the transmittal order accepted by the transmittor's financial institution is not made in person, the transmittor's financial institution shall obtain and retain a record of the name and address of the person placing the transmittal order, as well as the person's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record of the lack thereof, and a copy or record of the method of payment ( e.g., check or credit card transaction) for the transmittal of funds. If the transmittor's financial institution has knowledge that the person placing the transmittal order is not the transmittor, the transmittor's financial institution shall obtain and retain a record of the transmittor's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, if known by the person placing the order, or a notation in the record of the lack thereof.
(3) Recipients other than established customers. For each transmittal order that it accepts as a recipient's financial institution for a recipient that is not an established customer, in addition to obtaining and retaining the information required in paragraph (e)(1)(iii) of this section:
(i) If the proceeds are delivered in person to the recipient or its representative or agent, the recipient's financial institution shall verify the identity of the person receiving the proceeds and shall obtain and retain a record of the name and address, the type of identification reviewed, and the number of the identification document ( e.g., driver's license), as well as a record of the person's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record of the lack thereof. If the recipient's financial institution has knowledge that the person receiving the proceeds is not the recipient, the recipient's financial institution shall obtain and retain a record of the recipient's name and address, as well as the recipient's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, if known by the person receiving the proceeds, or a notation in the record of the lack thereof.
(ii) If the proceeds are delivered other than in person, the recipient's financial institution shall retain a copy of the check or other instrument used to effect payment, or the information contained thereon, as well as the name and address of the person to which it was sent.
(4) Retrievability. The information that a transmittor's financial institution must retain under paragraphs (e)(1)(i) and (e)(2) of this section shall be retrievable by the transmittor's financial institution by reference to the name of the transmittor. If the transmittor is an established customer of the transmittor's financial institution and has an account used for transmittals of funds, then the information also shall be retrievable by account number. The information that a recipient's financial institution must retain under paragraphs (e)(1)(iii) and (e)(3) of this section shall be retrievable by the recipient's financial institution by reference to the name of the recipient. If the recipient is an established customer of the recipient's financial institution and has an account used for transmittals of funds, then the information also shall be retrievable by account number. This information need not be retained in any particular manner, so long as the financial institution is able to retrieve the information required by this paragraph, either by accessing transmittal of funds records directly or through reference to some other record maintained by the financial institution.
(5) Verification. Where verification is required under paragraphs (e)(2) and (e)(3) of this section, a financial institution shall verify a person's identity by examination of a document (other than a customer signature card), preferably one that contains the person's name, address, and photograph, that is normally acceptable by financial institutions as a means of identification when cashing checks for persons other than established customers. Verification of the identity of an individual who indicates that he or she is an alien or is not a resident of the United States may be made by passport, alien identification card, or other official document evidencing nationality or residence ( e.g., a foreign driver's license with indication of home address).
