We previously wrote about the National Defense Authorization Act for Fiscal Year 2021 (the “NDAA”), which became law on January 1, 2021. The NDAA includes the Anti-Money Laundering Act of 2020 (the “AML Act”), which in turn contains significant changes to the Bank Secrecy Act (“BSA”) and other anti-money laundering (“AML”) laws. The BSA, enacted in 1970, requires financial institutions to assist the federal government in detecting and preventing money laundering and terrorism financing by meeting special program, recordkeeping, and reporting requirements.
One of the most notable reforms of the AML Act is that it revised the BSA to clearly include cryptocurrency and other digital assets within its regulatory scope. You will not find the phrases “bitcoin,” “cryptobusiness,” “virtual assets,” or “digital currency” anywhere in the AML Act; instead, the statute uses language contained in existing guidance from the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) regarding “value that substitutes for currency.”
Specifically, Section 5312 of the BSA (“Definitions and application”) has been amended so that the definition of “financial institution” includes “a business in the exchange of currency, funds, or value that substitutes for currency or funds” and “a licensed sender of money or any other person who engages as a business in the transmission of currency, funds, or value that substitutes for currency.” It also revises the definition of “money instrument” to include “value that substitutes for any monetary instrument.” In addition, Section 5330 of the BSA (“Registration of money transmitting businesses”) now provides that money transmitting includes any business that transmits “currency, funds, or value that substitutes for currency.”
Though FinCEN has said that cryptocurrency and other digital assets fall within the scope of the AML regulatory regime for years, the recent revisions through the AML Act codify that reality. Consistent with the BSA’s stated purpose, these revisions reflect Congress’s concern, set forth in Section 6102(a)(3) of the NDAA, that “although the use and trading of virtual currencies are legal practices, some terrorists and criminals, including transnational criminal organizations, seek to exploit vulnerabilities in the global financial system and increasingly rely on substitutes for currency, including emerging payment methods (such as virtual currencies), to move illicit funds.”