Topic: Understanding KYC/AML laws (Read 1414 times)

I want one! Print-on-Demand currency is the future. Best thing I've seen since ALFII (Americans for Lawful Financial Independence - long since raided and shut down) let customers print out their own money orders drawn against their accounts at ALFII.

LOL Yeah I know. You're absolutely right. That's the thing about Bitcoin. It highlights some of the absurdity of financial regulations.

In some of these cases it may become increasingly amusing to watch regulators try to defend their positions while trying to keep things clearly delineated.

I don't know. The "drop box" might work. I'm not a lawyer. Unfortunately most people/businesses will probably try to err on the side of being compliant with the law.

Well it WOULD be for 'private use'. That's the point of the box. What if the bar owner didn't make anything out of it? They would use it because maybe they themselves sell/buy bitcoin, or just believe in bitcoin in general? I'm sure there will be takers. Technically the 'site' would be very low-margin as well, maybe like 1% at the most, similar to localbitcoins, to help offset purchases of the box machines, as well as running the websites. Not really a profit deal, hence why I'm discussing the idea here in the open.

I think this depends where the box is 

If it's in a business, say like a bar, then the owner of a bar would be a money transmitter under the FinCEN guidance if I understand correctly:


I know technically the box is just sitting there and the bar owner isn't getting involved, but that's probably not the way the feds would see it. To them it would look more like a "drop" secret agents and such use. The main theme which seems to come from FinCEN is that exchanging or use of virtual currency is basically fine when done for private usage only. As soon as it becomes part of a business which serves multiple parties for direct transfer, it qualifies as money transmission.

That's their cover story anyway.

If they actually cared about terrorism and cybercrime they'd go after the worst offenders and freeze the bank accounts of the DoD and NSA respectively.

The fact that they don't reveals their true motives as enforcers of a protection racket.

They're just mafia goons in fancy clothes.

nono, it is a new invention, decentralized money printing, makes absolutely no difference under the current banking system. print money locally, no need to transport it anymore, that saves CO₂ 

Nation-state laws do not apply to a currency which supercedes their authority.

Your laws are irrelevant.

We are the future.

For all countries!
AML&KYC laws!
Updated list!

https://www.dropbox.com/s/nibs8wdiilib6th/pwc-anti-money-laundering-know-your-customer-quick-reference-guide.pdf

any ATM machine must complain with "money" law ... in Europe, it's 2850 euros per month and per person (id face, fingering and id card).
In my country, the name is "tracfin" law (cloned from the european law).

I think they turned it off as it was getting inaccurate.. But yea they have the 'verification' ability, they have it turned off in BC AFAIK. Either way, this is Canada which is obviously easier to work with, and I have no doubt that I would launch here. But the large market is in the states, which is the topic of this discussion.

Need something that's relatively unpractical to enforce, with a contested 'legal' status...

You are welcome.

Buy the  way I believe Robocoin in Canada scans the veins in your wrist to uniquely identify each user to maintain anti-money laundering limits.

So Robocoin has a roll or stack of the same paper used by the Canadian Mint along with the same inks, and will print out ones, fives, or ten dollar Canadian bills for the user? This is amazing if it really works that way.

The guys in Florida I understand only got arrested/fined because the undercover cop specifically told them he was going to use the bitcoins to buy stolen credit cards online. If the cop didn't say that, they probably would've walked free no?

What prevents me from going to my local convenience store and spending cash I earned from drug-money? It may be ILLEGAL but not very practical to enforce. I'm not planning on hiring lawyers or getting the correct licenses, I want to create a workaround that MAY be illegal (not IS), but is an elegant, unenforceable method. Bitcoin is a whole is somewhat like that if you think about it - Satoshi didn't care about legal/illegal, he just created something that works and also happens to be practically difficult to enforce.


The Robocoin ATM is capable of printing out cash for your bitcoins, and does so in Vancouver WITHOUT ID verification I might add!

Btw, thank you for the good answer BCB, much appreciated!

I wasn't aware that any country allowed ATM machines to print its national currency. ATMs normally only dispense notes printed by by a national mint.

That is effectively "money transmission" and there are actually about as many definitions as there are states in the union for that term.

I think there would be a problem with this in most countires.

You can not send Coca-Cola instantly around the world through a decentralized, distributed trust network.
(although if you knew the formula - you could sent that - and they could make their own).

The_Gloomfrost

You ask important and unfortunately not easily answered questions.

The United States has had almost 100 years of ever-evolving money transmission laws at the State Level which covers safety and soundness and consumer protection and about 45 Years of evolving and ever-encroaching Anti-Money Laundering law at the Federal Level.

Here is a great history of the Federal Regulation.
http://www.nmta.us/site/DocsPosted/JFreis.pdf

The two take-aways from this document are:

1.  The AML laws - which were first established in 1970 -  are updated in response to new "threats" every couple of years.
2.  According the a Supreme Court decision in the United States v. Miller in 1976  - customers do not have Fourth Amendment privacy rights in financial records maintained by a financial institution.

Thus the US has established an ever-growing slate of laws and regulations to provide for almost complete "financial surveillance" in the name of preventing  Drug Dealers from benefiting from there ill-gotten gains, income tax evasion and most recently to prevent the financing of terrorists.  

A bitcoin Kiosk while a simple and elegant solution to the bitcoin distribution problem flies in the face of this regulation.  From a Regulator/Law Enforcement point of view, they just can't have people running around pumping dollars into these machines and creating potentially untraceable virtual currency that will then all be funneled to benefit "Transnational organized cyber-criminals."

While this threat has been somewhat mitigated as Law Enforsement has show that the use of both centralized and decentralize virtual currencies does not prevent you from law enforcement action. 

Liberty Reserve Take Down
Silk Road Take Down
Shrem/Fiallia Arrest
The Guys in Florida.

These are not actions against bitcoin per se but actions against the alleged use of virtual currency in violation of existing criminal statues crime.

Bottom line is that there are no easy answers.  The state financial regulators have received a number of inquires about bitcoin kiosks in their states and many of them have no idea to rule on them for many of these reasons.

We've seen a kiosk in NM as MN has no money transmission laws.  Not sure what the rulings in WA and MA were to allow ATM's in those states.  Both one-way and dual-transaction bitcoin Kiosks will be a boon to the industry once there is more clairity in

Washington State has already ruled that virtual currency == value and thus falls under their existing regulations
California seems to be doing the same.
I'd expect something from Texas before the Summer.
And of course NY's "bitlicense" for better or worse will probably be announce in the fall.

Fun times.

I have not looked at those ATM, do they trade BTC for dollar? If it is just dollar for BTC is is nothing different of a coca cola vendor machine.

Bitcoin ATMs are really the most user-friendly, anonymous and quickest way to buy bitcoin currently, and they are automatically 'mainstream' as they are visible in our daily lives sitting in the corner. However, there exists a lot of issues with them, most notable of which is the identification policies imposed on them by some governments as per KYC/AML laws. Some intensive policies such as scanning your fingerprint, scanning id, passport, phone numbers + taking a lot of time and charging 7%+ defeats the purpose of mainstream adoption.

My question is - what exactly is necessary/not necessary under these laws? I had an idea which would use this 'shareable box' that could be placed around cities:

• Someone can deposit bitcoin (through the machine or a website), and they can specify their own sell price on that Bitcoin amount they deposited.
• Then someone who is interested in buying bitcoin can come to the machine and look at who is selling their coins through it. They then deposit their cash and get the coins.
• The person who sold their coins comes to the machine later, puts in their code and the machine prints out that buying person's cash.

There can be many adaptations and features details, but at it's core, the advantage here is that the machine operator at no time has access to anyone's funds, nor do they control the movement. It's very similar to localbitcoins other than that the box is the intermediary between the private exchange, and it makes it safe for people since they never have to meet in person. The machine also can verify bills (won't accept counterfeit).

Anyone understand these laws? Because I know when I sell my car on craigslist, I don't ask to see the person's id, nor does my convenience store merchant, nor do many other parties that transact with cash. IMO this would be similar to that, surely it's legal?