Navigating Bitcoin ATM Compliance

Have you been thinking about the possibility of starting a Bitcoin ATM operation?  Are you hesitant because you’re unsure where to start or what to do with Bitcoin ATM compliance?  If this sounds familiar, rest assured that you are not alone. Many new operators are learning that there is more to just picking out a Bitcoin ATM. In this blog we are going to identify the four steps to begin operations with compliance.

 

1. Federal Registration with FinCEN

You should begin the process of registering your business with Financial Crimes Enforcement Network (FinCEN), a department of the U.S. Treasury.  FinCEN’s mission is to safeguard the financial system and promote national security. FinCEN follows the Bank Secrecy Act, also known as BSA, which is the law requiring financial institutions to assist government agencies in detecting and preventing money laundering.  FinCEN requires that each Bitcoin ATM business register as a Money Services Business (MSB) within 180 days of the business being establishing. Registration must be renewed every two years. Re-registration is required in limited circumstances.

 

2. Establish a Written AML & KYC Program

The second is to establish a written Anti-Money Laundering and Know Your Customer (AML & KYC) program. Putting a comprehensive AML & KYC program in place is not a simple and straight forward task.  It typically requires assistance from a compliance professional or an attorney. This written program details the business, agents, compliance officer, operations, and the controls used to thwart money laundering and the funding of terrorism.   The appointed compliance officer is overall responsible for ensuring the AML & KYC program is strictly followed, monitoring of all transactions, filing of necessary reports, and that records are well maintained.

 

3. Check with Local State Government for Additional Licensing

Next is to check with your local state government to ensure they do not require any state laws requiring a Money Transmitter License, also known as an MTL.  The laws differ from state to state and are also constantly being updated.  It is critical to either license the business with the state or receive a “No action” or “Opinion letter” for your files in states that do not have MTL’s.  Operating in a state that requires an MTL without a state MTL license is not advisable and is punishable with fines and possible imprisonment.

 

4. Begin Operations and Required Reporting

You are now ready to begin the operation of your Bitcoin ATM’s. The monitoring of every transaction will begin and your compliance officer will assist with the identification of transactions that need to be reported.  The BSA requires a couple different reports.  The first report is the Currency Transaction Reports (CTR’s), which are filed for any transaction (daily aggregation amount) over $10,000. There are also Suspicious Activity Reports (SAR’s) for any transaction that might signify money laundering, tax evasion, or other criminal nefarious activities. Lastly, there is the Office of Foreign Assets Control (OFAC) and Politically Exposed Person (PEP) screening and reporting which is a database of individuals acting on behalf of targeted countries.

After you’ve been operating and completing transactions, you have quarterly staff training to conduct on BSA Compliance. Your compliance officer will typically assist in preparing, conducting quarterly staff training, and maintaining the training records for all staff.  Lastly, the FinCEN requires each MSB to conduct an independent audit/review of their AML & KYC controls.  This audit/review may be conducted by an officer, employee or group of employees, so long as the reviewer is not the designated compliance officer and does not report directly to the compliance officer.

 

Conclusion

In closing, BTM Compliance is here to help you get started and guide you through the process of Bitcoin ATM compliance.  Let us help dispel the daunting thought or fears of dealing with the federal level compliance.  We offer full compliance services from completing your MSB registration, custom tailored AML & KYC programs, assignment of a compliance officer, filing of all necessary reports on your behalf, and quarterly training.

 

About the Author

Jeremy Snyder is the CEO of BTM Compliance, LLC which is a Veteran-owned and operated company providing federal compliance services to operators of the Bitcoin ATM industry.  Prior to becoming the CEO of BTM Compliance, Jeremy has an eclectic background in military, law enforcement, and FinTech compliance operations. You can connect with him on LinkedIn here.

*This blog article cannot and does not contain legal advice. The information is provided for general informational purposes only which factually based on research, personal experience, and is not a substitute for professional advice from your own legal counsel. Accordingly, before taking any actions based upon such information, we encourage you to consult with your legal counsel. We do not provide any kind of legal advice. The use or reliance of any information contained in this blog is solely at your own risk.