On October 11, 2019, the leaders of the Commodity Futures Trading Commission, Financial Crimes Enforcement Network, and Securities and Exchange Commission issued a joint statement to remind businesses that engage in digital asset activities of their anti-money laundering ("AML") and countering the financing of terrorism ("CFT") obligations under the Bank Secrecy Act ("BSA").
As market participants increasingly become involved with digital assets and related activities or services, the agencies clarified that their regulatory treatment is determined by the underlying facts, circumstances, uses, and economic realities, and not the label or terminology used to describe them.
In addition to providing a brief overview of the AML/CFT obligations that apply to certain market participants, the statement also emphasized that the nature of companies' digital asset-related activities is the key factor in determining their registration requirements with the respective agencies. Each agency further highlighted particular concerns:
- The CFTC reminded introducing brokers and futures commission merchants that they are required to report suspicious activity and implement reasonably-designed AML programs. These requirements apply to digital assets that qualify as commodities or which are used as derivatives, and to activities that are not subject to regulation under the Commodity Exchange Act.
- The SEC informed broker-dealers and mutual funds of their similar obligations and that the rules are not limited in their application to activities involving digital assets that qualify as securities under the federal securities laws. It also noted that securities market participants that transactions in digital assets present similar or additional risks, including AML/CFT risks, as transactions in cash and cash equivalents.
- FinCEN called attention to its May 2019 interpretive guidance describing the application of FinCEN regulations governing money services businesses to certain business models involving money transmissions denominated in convertible virtual currencies. FinCEN also clarified that "any person 'registered with, and functionally regulated or examined by, the SEC or the CFTC,' would not be subject to the BSA obligations applicable to MSBs, but instead . . . would be subject to the BSA obligations of such a type of regulated entity."
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