By admin of MillarLaw A Professional Corporation On Monday, June 11, 2018

The Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Dept of the Treasury issued revised Customer Due Diligence (CDD)rules which may seriously impair the ultimate benefit of cryptocurrency, “Secrecy”. In is news release FinCEN stated:

FinCEN issued the CDD Rule, which amends Bank Secrecy Act regulations, to improve financial transparency and prevent criminals and terrorists from misusing companies to disguise their illicit activities and launder their ill-gotten gains. The CDD rule clarifies and strengthens customer due diligence requirements for U.S. banks, mutual funds brokers or dealers in securities, futures commission merchants, and introducing brokers in commodities and adds a new requirement for these covered financial institutions to identify and verify the identity the natural persons (known as beneficial owners) of legal entity customers who own, control, and profit from companies when those companies open accounts.

The CDD Rule has four core requirements. It requires covered financial institutions to establish and maintain written policies and procedures that are reasonably designed to (1) identify and verify the identity of customers; (2) identify and verify the identity of the beneficial owners of companies opening accounts; (3) understand the nature and purpose of customer relationships to develop customer risk profiles; and (4) conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.

What the new CDD rules will mean is that at the point where a user of crptocurrency enters the banking system they will be subject to enhanced inquiry about source of funds and the nature business generating the funds. A premise for using cryptocurrency it the ability to transfer and use it anonymously. The CDD rules make all financial institutions that handle U.S. dollar transaction the focus of enforcement. They in turn will be cautious to open accounts where the account is associated with the use of cryptocurrency. The use of shell ocpanies and foreign trusts will not immunize cryptocurrency “traders’ from discovery as the ultimate beneficial owner. The IRS is surely going to be involved in the identification of heretofore anonymous traders. Iis definitely better for a taxpayer to conme forward if he/she has unreprted cryptocurrency gains or losses than wait to be caught. For methods of coming forward contact us.