- A PUBLICATION OF BITAML, INC. -

AN INTRODUCTION TO

BITCOIN ATMAML COMPLIANCE

AN INTRODUCTORY GUIDE TO AML COMPLIANCE FOR BITCOIN ATM OPERATORS

TABLE OF CONTENTS

4Introduction

6Federal Regulation

11State Regulation

15Building a Successful AML Program

19Conclusion

22Resources

Virtual currency exchangers must bring products to market that comply with our anti-money laundering laws.

- Jennifer Shasky Calvery, Director of FinCEN

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Satoshi1 and Genesis1 bitcoin ATM terminals (Courtesy: Genesis Coin, Inc.)

BITCOIN ATM – AML COMPLIANCE

Introduction

Introduction

This eBook serves as an introductory guide forbitcoin ATM operators seeking to understandtheir regulatory and compliance obligations.

The concepts covered in this eBook include:

• AML regulatory requirements

• Reporting and record retention obligations

• Designing an effective AML program

• Regulatory and compliance resources

BITCOIN ATM – AML COMPLIANCE

Federal Regulation

Federal Registration

Bitcoin ATM operators must register as anMSB and fulfill regulatory obligations set forthby FinCEN.

“…persons creating, obtaining, distributing,exchanging, accepting, or transmitting virtualcurrencies…”

are money services businesses (MSBs).

FinCEN guidance states that

FinCEN Regulation

Bitcoin ATM operators must register with

FinCEN within days of establishment.

Registration must be renewed every years.

Bitcoin ATM operators must retain copies of

their FinCEN registration and any supporting

documentation for years.

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Regulatory Obligations

Bitcoin ATM operators must:

Implement an AML program within daysof launch.

Update the AML programConduct an independent AML audit

Report transactions exceeding $10,000 cash;report suspicious activity within days.

Appoint a dedicated compliance officer.

Obtain customer and transaction information; verify customer identification, as required.

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once peryear.

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OFAC Regulation

OFAC Screening

U.S. law requires assets and accounts of anOFAC-specified country, entity, or individualto be blocked.

OFAC Reporting

Institutions must report all blockings to OFACwithin 10 business days of occurrence andannually by September 30th.

Office of Foreign Assets Control (OFAC)administers and enforces economic and tradesanctions based on both foreign policy goalsand national security.

BITCOIN ATM – AML COMPLIANCE

STATE REGULATION

State Licensing

Bitcoin ATM operators must obtain licensingfrom the state(s) within which they operate, ifapplicable.

State-level regulation can vary significantlyfrom state-to-state.

Unlike federal regulation, state regulationremains highly fluid. Regulators continue toevolve their requirements and expectations.

Bitcoin ATM operators should research bitcoinmoney transmitter regulations in their state.

State Regulation

Certain states, including Tennessee and Texas,have determined that bitcoin ATM operatorsare not engaged in money transmission solong as transactions do not involve a third-party exchange.

New York created a separate, comprehensivestate licensing regime covering a broad rangeof business models, including bitcoin ATMoperators.

Some states have not issued any guidance,while others have pending legislation.

Regulatory obligations

Regulatory obligations among states requiringlicensure vary.

While FinCEN registration is declarative or a“check-the-box” exercise, state regulation is apermission-based licensing process.

State licensing may include:

• Business plan and explanation of services• Financial records of company founder(s)• Minimum net worth requirements• Surety bond• Background check; fingerprinting

BITCOIN ATM – AML COMPLIANCE

BUILDING A SUCCESSFULAML PROGRAM

Written AML Program

Bitcoin ATM operators are required by FinCENto develop, implement, and maintain aneffective AML program.

The AML program must be reasonablydesigned to prevent the bitcoin ATM frombeing used to facilitate money laundering andthe financing of terrorist activities.

The AML program must be in writing withcopies available for inspection by FinCEN,upon request.

Written AML Program

The AML program must incorporate policies,procedures, and internal controls designed toprevent and detect money laundering.

The bitcoin ATM operator must identify acompliance officer. He or she is responsiblefor and tasked with day-to-day compliance.

The AML program must provide for ongoing,targeted compliance training.

The AML program itself must be subjected toan independent audit at least annually.

Four Pillars

In summary, the four basic pillars supportinga successful AML Program are as follows:

Effective internal controls designed to thwartmoney laundering

Dedicated compliance officer

Independent AML program audit

Ongoing, targeted training

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BITCOIN ATM – AML COMPLIANCE

CONCLUSION

Conclusion

Bitcoin ATM operators have several regulatoryresponsibilities, including:

• Registering as an MSB with FinCEN.

• Obtaining money transmitter licenses fromstate(s) in which they operate, if required.

• Implementing an effective AML programthat supports each of the four pillars.

• Reporting and storing certain customerand transaction records, as required.

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BITCOIN ATM – AML COMPLIANCE

RESOURCES

Resources

FinCEN registrationhttp://bsaefiling.fincen.treas.gov/main.html

FinCEN AML compliance guide for MSBshttps://www.fincen.gov/financial_institutions/msb/materials/en/prevention_guide.html

State regulatory tracker (Coin Center)coincenter.org/2015/06/state-digital-currency-regulation-tracker/

OFAC program and country sanctionstreasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx

OFAC search toolsanctionssearch.ofac.treas.gov

AML compliance questions?bitaml.com