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Analyzing FinCEN’s Proposed Regulation Relating to AML and KYC Laws

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Financial Cryptography and Data Security. FC 2021 International Workshops (FC 2021)

Part of the book series: Lecture Notes in Computer Science ((LNSC,volume 12676))

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Abstract

Questions related to anti-money laundering

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Notes

  1. 1.

    A “wallet” allows a user to store, send, and receive cryptocurrency.

  2. 2.

    The Proposal was made pursuant to the Bank Secrecy Act (BSA) and the proposed reporting and recordkeeping rules are similar to the rules for transactions in currency and for bank wire transfers, respectively. Relying on the Administrative Procedure Act’s exemption from the 60-day comment period, FinCEN originally provided 15 days for public comment, or until January 4, 2021. However, FinCEN noted that it will endeavor to consider any material comments received after the deadline as well. On January 15, FinCEN extended the comment period for an additional 15 days for comments on the proposed reporting requirements, and for 45 days for comments on the requirement to report counterparty information and the recordkeeping requirements. In so doing, FinCEN noted the volume of comments received, as well as the enactment of the Anti-Money Laundering Act of 2020 (Division F) of Public Law 116-283 (AML Act), which amended 31 USC § 5312(a)(3), the definition of “monetary instruments” in the BSA, on which FinCEN proposes to rely in determining that CVC/LTDA are monetary instruments.

  3. 3.

    Bitcoin Core is the reference implementation for Bitcoin. It is the source code which contains the consensus parameters and rules that define the Bitcoin protocol. Nodes run Bitcoin Core software in order to participate in the Bitcoin network. Read more about Bitcoin Core here: https://river.com/learn/what-is-bitcoin-core/.

  4. 4.

    Institutions and individuals also complained about FinCEN’s unusually short and poorly timed comment period. Coinbase published an entire comment solely dedicated to this issue, and requested that FinCEN extend the comment period to the traditional 60-day timespan. FinCEN initially released the 72-page Proposal in late December, such that the comment period would take place across Christmas Eve, Christmas Day, New Year’s Eve, and New Year’s Day. This circumstance provided minimal time for companies to digest the Proposal and formulate a proper, comprehensive response to the many flaws of the Proposal.

References

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  2. Scheiber, N., Flitter, E.: Banks Suspected Illegal Activity, but Processed Big Transactions Anyway, New York Times (2020). Available at https://www.nytimes.com/2020/09/20/business/fincen-banks-suspicious-activity-reports-buzzfeed.html

  3. Nakamoto, S.: Bitcoin: a peer-to-peer electronic cash system. https://bitcoin.org/bitcoin.pdf (2008)

  4. US v. Jones, 565 U.S. 400, 132 S. Ct. 945, 181 L. Ed. 2d 911 (2012)

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Author information

Authors and Affiliations

  1. Cardozo Law, Yeshiva University, New York City, USA

    Aaron Wright

  2. Georgetown University, Washington DC, USA

    Sachin Meier

Authors
  1. Aaron Wright
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  2. Sachin Meier
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Corresponding author

Correspondence to Aaron Wright .

Editor information

Editors and Affiliations

  1. University of Michigan–Ann Arbor, Ann Arbor, MI, USA

    Matthew Bernhard

  2. Computer Science and Mathematics, Stirling University, Stirling, UK

    Andrea Bracciali

  3. Imperial College London, London, UK

    Lewis Gudgeon

  4. Norwegian University of Science and Technology, Trondheim, Norway

    Thomas Haines

  5. Ithaca College, Ithaca, USA

    Ariah Klages-Mundt

  6. Department of Computer Science, Georgetown University, Washington, WA, USA

    Shin'ichiro Matsuo

  7. Imperial College London, London, UK

    Daniel Perez

  8. Dipartimento di Matematica, University of Trento, Trento, Trento, Italy

    Massimiliano Sala

  9. Imperial College London, London, UK

    Sam Werner

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Wright, A., Meier, S. (2021). Analyzing FinCEN’s Proposed Regulation Relating to AML and KYC Laws. In: Bernhard, M., et al. Financial Cryptography and Data Security. FC 2021 International Workshops. FC 2021. Lecture Notes in Computer Science(), vol 12676. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-63958-0_5

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  • DOI: https://doi.org/10.1007/978-3-662-63958-0_5

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  • Print ISBN: 978-3-662-63957-3

  • Online ISBN: 978-3-662-63958-0

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