Bitcoin Bolt

Earlier this week, FinCEN Director Jennifer Shasky Calvery
addressed the National Cyber-Forensics Training Alliance CyFin 2013
Conference.

She explains again
how the Financial Crimes Enforcement Network (FinCEN) gets its data
from the reports it mandates that banks use to spy on their customers
against them. Lots and lots of reports.

But she promises:

“However, right now this is long and arduous work as
analysts sift through hundreds and sometimes thousands of reports. Very
soon, new capacities made possible by our internal technology
modernization will allow our analysts to deal with such data sets to
find leads in a fraction of the time previously necessary. Very soon, we
will be able to point law enforcement and other stakeholders precisely
to where they should be looking. Our analysts, working hand- in-hand
with our superb technology team, are now putting these new capacities
into place.”

But her talk really focused on “Emerging Payment Systems.” Her
comments have echoed mine (from an entirely different perspective) that
technology (and specifically mobile apps) offer great opportunities (for
free banking) and that those not well served by our current system (the
“unbanked” in the US–immigrants,
poor, racial and ethnic minorities–and people in countries with less
mature financial systems or sound currencies) are a great target market.

“As we all know, during the past decade, the development
of new market space and new types of payment systems have emerged as
alternatives to traditional mechanisms for conducting financial
transactions, allowing developing countries to reach beyond
underdeveloped infrastructure and reach those populations who previously
had no access to banking services. For consumers and businesses alike,
the development and proliferation of these systems are a significant
continuing source of positive impact on global commerce.”

Don’t worry, FinCEN is working to strangle these initiatives in their crib with their regulations. She pays special attention to “crypto-currencies” in her talk.

“We’re viewing our analytic work in this space as an
important part of an ongoing conversation between industry and law
enforcement. While probably most of today’s audience understands what
these emerging payments systems are and how they work, many line
analysts, investigators, and prosecutors in law enforcement may not, and
part of FinCEN’s role is to help be the bridge to explain these new
systems. FinCEN is dedicated to learning more about digital currency
systems, along with other emerging mechanisms, to protect those systems
from abuse and to aid law enforcement in ensuring that they are getting
the leads and information they need to prosecute the criminal actors. As
our knowledge base develops, in concert with you, we will look to
leverage our new capabilities to identify trends and patterns among the
interconnection points of the traditional financial sector and these new
payment systems.

In addition to developing products to help law enforcement follow the
financial trails of emerging payments methods, FinCEN also develops
guidance for the financial industry to clarify their regulatory
responsibilities as they relate to emerging areas.”

And, as our Bitcoin fans know–at least those who follow my posts here or my rants on our Facebook page, FinCEN has “virtual currencies” in their sights. And, remember too, it was FinCEN that shut down e-gold back in the day and crippled the crypto-currency movement last century.

I’ll quote her in the entirety of her virtual currency remarks:

“In fact, just last month, FinCEN issued interpretive guidance to clarify the applicability of BSA regulations to virtual currencies, such as Bitcoin, which has in recent weeks gained significant attention. The guidance responds to questions raised by financial institutions, law enforcement, and regulators concerning the regulatory treatment of persons who use virtual currencies or make a business of exchanging, accepting, and transmitting them.

FinCEN’s rules define certain businesses or individuals as money services businesses (MSBs) depending on the nature of their financial activities. MSBs have registration requirements and a range of anti-money laundering, recordkeeping, and reporting responsibilities under FinCEN’s regulations. The guidance considers the use of virtual currencies from the perspective of several categories within FinCEN’s definition of MSBs.

The guidance explains how FinCEN’s “money transmitter” definition applies to certain exchangers and system administrators of virtual currencies depending on the facts and circumstances of that activity. Those who use virtual currencies exclusively for common personal transactions like receiving payments for services or buying goods online are not affected by this guidance.

Those who are intermediaries in the transfer of virtual currencies from one person to another person, or to another location, are money transmitters that must register with FinCEN as MSBs unless an exception applies. Some virtual currency exchangers have already registered with FinCEN as MSBs, though they have not necessarily identified themselves as money transmitters. The guidance clarifies definitions and expectations to ensure that businesses engaged in similar activities are aware of their regulatory responsibilities and that all who need to, register appropriately.”

The second half of her speech talked about account takeovers via
malware, risks with third party payment processors, improvements they
are making to their analytical work (after some false starts!),
their public-private partnerships with industry, and her personal
initiative “The Delta Team” (“The purpose of the Delta Team is for
industry, regulators, and law enforcement to come together and examine
the space between compliance risks and illicit financing risks. The goal
is to reduce the variance between the two.”).

And let’s not forget FinCEN’s dreams of global domination. They are
in a partnership of 130 other “Financial Intelligence Units” as part of
the Egmont Group.

The text of her remarks is available at the following link:
http://www.fincen.gov/news_room/speech/pdf/20130416.pdf

Reprinted with permission.