In a joint statement, the CFTC, FinCEN and the SEC reminded firms engaged in digital asset transactions to comply with the AML and countering the financing of terrorism ("CFT") obligations under the Bank Secrecy Act ("BSA").
Agency leaders underscored the "financial institutions" subject to the obligations, including futures commission merchants ("FCMs") and introducing brokers ("IBs") obligated to register with the CFTC, money services businesses ("MSBs") obligated to register with FinCEN, and broker-dealers and mutual funds obligated to register with the SEC. The agencies also reminded financial institutions that the categorization of "digital assets" as securities, commodities, futures, or swaps is determined for regulatory purposes by the relevant facts and circumstances, not by any label or terminology market participants use to describe a particular digital asset.
In addition:
- the CFTC stated that FCMs and IBs must report suspicious activity and implement reasonably-designed AML programs;
- the SEC stated that broker-dealers and mutual funds also must report suspicious activity and implement reasonably-designed AML programs; and
- FinCEN noted that a person providing money transmission services is an MSB subject to FinCEN regulation, unless that person is registered with and regulated by the SEC or CFTC.
Commentary
Given the slew of regulatory guidance and enforcement actions aimed at digital assets over the past two years, the argument, "I did not know I was subject to regulation," no longer holds water. This joint statement holds three key messages for persons dealing with digital assets. First, many digital assets are subject to regulation by the CFTC, FinCEN, or the SEC. Second, each of the three agencies uses a facts and circumstances test to determine the appropriate regulator. Third, any person subject to regulation by the CFTC, FinCEN, or the SEC has AML/CFT obligations. Market participants should obtain guidance to determine whether their digital assets businesses are appropriately registered, and whether they have implemented adequate AML/CFT processes.
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