The National Futures Association ("NFA") advised futures commission merchants and introducing brokers to ensure that their anti-money laundering programs meet requirements set by the U.S. Treasury's Office of Foreign Assets Control ("OFAC") with respect to virtual currency transactions.
The NFA referenced five FAQs that OFAC issued in March that provide guidance about sanctions obligations involving virtual currency. According to the FAQs, OFAC may add digital currency addresses connected to a person on OFAC's Specially Designated Nationals and Blocked Persons ("SND") list.
Commentary / ChristianLarson
Notable in the OFAC FAQs is the statement that "OFAC's digital currency address listings are not likely to be exhaustive." OFAC expects U.S. persons to block virtual currency they believe is owned by or associated with an SDN, even if the virtual currency is transferred to or from a digital currency address that OFAC has not included on the SDN list.
This has far-reaching implications for players in the derivatives space and beyond. Digital currency transactions are often described as "pseudonymous" in the sense that linked transactions on the blockchain are identifiable, and once a person's identity is attributed to one of the transactions, that person's transaction history can be traced by analyzing the blockchain. Whereas regulatory agencies have previously focused on regulating the on- and off-ramps where virtual currency is exchanged for fiat money, OFAC's FAQs call on U.S. persons to consider who stands behind any particular digital currency address including in transactions involving solely virtual currencies, such as a transfer of bitcoin from one person to another, or an exchange of one virtual currency for another, such as bitcoin for ether.
FCMs, IBs and other U.S. persons subject to the anti-money laundering requirements of the Bank Secrecy Act should consider whether the level of diligence they are conducting on digital currency addresses they send to or receive from is sufficient.
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