Borders and Customs: Do You Need to Declare Your Crypto?

When arriving in the United States – and most other countries – customs officials often ask that travelers fill out a form to declare various items. Most of this is to try and catch various contraband items, unapproved foods, and exotic (dangerous to native ecosystems) animals from entering the country. However, these forms also ask about carrying certain amounts of money. This begs the question: if you have a mobile client or a hardware wallet, do you need to claim it? What if you simply memorized your private keys? Wouldn’t this just be treated like a debit card? 

DO I NEED TO DECLARE?

Many travelers have already had to fill these forms out. In the United States, Customs asks if travelers are carrying more than US$10,000 or its equivalent on them in cash. This is largely to prevent money-laundering and other nefarious activity.

But those who have more than ten grand in their bank accounts need not claim their debit cards on these customs forms. Wouldn’t the same apply to having over US$10,000 in cryptocurrency on a mobile wallet, hardware wallet, or in an account for which the individual has memorized his or her seed phrase or private keys?

Probably not, I would argue. Bank accounts are exempt because these can be controlled and frozen. Essentially, having money in a bank means the account holder has given up control of that money; they’ve given over custodianship of these funds to a third party. While the third party should be beholden to its customer, there is always the possibility that it won’t keep the customer in mind. The money stays in the bank, and the account holder requests that they be granted access to their money when using their debit card or withdrawing cash.

Cash, or money over which an individual has full control is really what’s being targeted here. Crypto acts similarly to cash (but is far more secure) in that whoever holds the ability to spend it is the one who owns it. So it is likely that in the future we will see customs require individuals to claim their cryptocurrency holdings, including those that are stored in mobile or hardware wallets, as well as those for which individuals memorize the associated private keys.

I know what many of you are thinking, because was thinking it too: “What if I just don’t tell them?” It would be hard for them to follow up, and most customs agents have no idea what cryptocurrency is. Wouldn’t it be too much of a hassle to explain that knowing a phrase or an app on a phone can have access to funds which may be worth  more than $10K? Perhaps, but it’s about to get way worse if one were to withhold that information.

S.1241, also known as the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017, might – among other things – make withholding information about one’s cryptocurrency holdings a felony.

The UK and EU Plan to Make Bitcoin Investors Use Their Real Names

By: Rhett Jones

Bitcoin managed to set a new price record on Sunday, briefly hitting $11,826per coin. And governments around the world are taking note of the boom in divergent ways. In the European Union, a new plan is expected to regulate cryptocurrencies under the same anti-money laundering laws as fiat money. It’s expected to take effect sometime next year.

For governments that are suspicious of cryptocurrencies, fears of bubbles, ponzi schemes, and economic destabilization have often been the focus. Countries like South Korea and China have publicly come out against initial coin offerings (ICOs) that work as investment opportunities and have a high potential for fraud. But for the UK and the EU, cryptocurrencies’ potential for enabling money laundering, drug dealing, terrorist funding, and other nefarious activities have lawmakers up in arms. According to The Guardian:

[Britain’s] Treasury plans to regulate bitcoin and other cryptocurrencies to bring them in line with anti-money laundering and counter-terrorism financial legislation. Traders will be forced to disclose their identities, ending the anonymity that has made the currency attractive for drug dealing and other illegal activities.

Under the EU-wide plan, online platforms where bitcoins are traded will be required to carry out due diligence on customers and report suspicious transactions.

Last week, London’s Metropolitan Police publicly warned that drug dealers at all levels were using Bitcoin ATMs to stash their profits out of sight.

 In October, Stephen Barclay, the economic secretary to the Treasury in the UK, responded to a parliamentary inquiry with a written plan that would amend anti-money laundering and counter-terrorism regulations to include cryptocurrencies. “The government supports the intention behind these amendments, he wrote. “We expect these negotiations to conclude at EU level in late 2017 or early 2018.”

How seriously these bodies pursue individual cryptocurrency users remains to be seen. It would certainly cause headaches for Bitcoin and alt-coin users because anonymity is one of the most attractive features of cryptocurrency. But the fact is, with Bitcoin and variations like Monero, if a user wants to be anonymous, there’s little that a government can do to stop them. Regulating exchanges will be easier, but if someone wants to bypass an exchange, they could certainly do so. Still, criminalizing the use of cryptocurrencies without attaching identification would certainly be a deterrent, and individuals who don’t take every step to hide their identity could be targeted.

Last week, White House Press Secretary Sarah Huckabee Sanders said that Tom Bossert and the Homeland Security team was “monitoring” cryptocurrencies. It’s unclear whether the US considers Bitcoin to be a security issue, or if the White House was just improvising an answer to a question it hadn’t really considered.

But not all governments are taking the view that cryptocurrencies are a threat.

For Venezuela, they could be an opportunity to find relief from the economic struggle that was only exacerbated by recent sanctions. According to Reuters, Venezuela’s President Nicolas Maduro announced on Sunday that his government would issue its own digital currency called the “Petro.”

 It’s a fitting name because the Petro will be backed by oil, gas, gold and diamond reserves, Maduro said in a television broadcast. While it makes sense that Venezuela would try a drastic economic measure at a time when its monthly minimum wage has fallen to just $4.30, it’s not yet clear how the Petro would actually work. Bitcoin and its imitators are decentralized currencies that mostly use algorithms and public interest to determine their supply and value. Maduro didn’t offer many specifics, mostly making vague proclamations like saying that this initiative will help Venezuela “advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.”

For cryptocurrency evangelists, decentralized money has always been considered a potential option in countries where the people can’t trust their government to properly manage the economy. One could imagine, in theory, that an anonymous currency could help citizens get around economic sanctions and avoid the rapidly depreciating Venezuelan bolivar. But it appears that the Petro will simply be tied into Venezuela’s central bank, an untried strategy for a major country.

On top of that, The Washington Post reports that a third of Venezuela’s citizens don’t have an internet connection. Throw in the fact that digital currency has a bit of a learning curve, and that there’s no infrastructure set up for taking payments, and the plan seems at least a little bit half-baked. Angel Alvarado, an opposition lawmaker and economist, told Reuters that the move has no credibility. “It’s Maduro being a clown,” he said.

 Speaking of clowns, Mark Zuckerberg’s former rivals the Winklevoss twins recently became Bitcoin billionaires, according to The Telegraph, as their combined $11 million investment in the cryptocurrency in 2013 is now worth 10 digits. The last thing the world needs is more dimwitted billionaires. Maybe making this all illegal isn’t such a bad idea.

Crackdown On Bitcoin In UK Over Money Laundering, Tax Evasion

The Treasury of the UK has announced plans to strongly regulate the transfer of cryptocurrencieswith a view to cracking down on money laundering and tax evasion. The regulations have not been stipulated with specificity, but will certainly include anti-money laundering (AML) and know your customer (KYC) details.

The regulation is intended to take force before the end of 2017, or just at the beginning of 2018. The increased regulations, in line with the directives in the EU, are intended to limit the amount of anonymity possible for cryptocurrency traders. According to John Mann, one of the Treasury committee:

“These new forms of exchange are expanding rapidly and we’ve got to make sure we don’t get left behind – that’s particularly important in terms of money-laundering, terrorism or pure theft. I’m not convinced that the regulatory authorities are keeping up to speed. I would be surprised if the committee doesn’t have an inquiry next year. It would be timely to have a proper look at what this means. It may be that we want to speed up our use of these kinds of thing in this country, but that makes it all the more important that we don’t have a regulatory lag.”

Other regulations

Other regulations have been threatened around the world, as Bitcoin price soars. With adoption exploding, and massive influx of institutional capital via futures and other contracts, Bitcoin is becoming far more of a financial reality that it has ever been before. China, Russia, and other countries have made it clear that the digital currency will be off-limits, while other countries like Switzerland and Malta are seemingly far more open.

ICE Agent: Cryptocurrencies Increasingly Used in Money Laundering

By: Nikhilesh De

Criminal organizations are increasingly using cryptocurrencies to launder money or otherwise pay for illicit activities, according to one U.S. Immigration and Customs Enforcement agent.

Child exploiters, drug smugglers, illegal firearm sellers and intellectual property rights violators are all beginning to use cryptocurrencies for their transactions, said Matthew Allen, ICE’s special agent in charge of Homeland Security Investigations (HSI).

Allen testified to the Senate Judiciary Committee on modernizing anti-money-laundering laws to limit both laundering and terrorist financing on Nov. 28, explaining that virtual currencies are the newest major method for hiding criminal proceeds.

In his testimony, he said:

“HSI agents are increasingly encountering virtual currency, including more recent, anonymity enhancing cryptocurrencies (AECs), in the course of their investigations. AECs are designed to better obfuscate transaction information and are increasingly preferred by [transnational criminal organizations].”

Some exchanges are beginning to design services specifically to thwart tracking by use of mixers that anonymize virtual currency addresses, making it even more difficult to determine which user conducted a particular transaction, Allen said.

Drug arrests

The department has had some success in identifying criminals who use bitcoin, however. Allen pointed to the November 2016 arrest of Utah resident Aaron Shamo, who allegedly ran a Xanax and fentanyl manufacturer group.

Shamo allegedly took his profits in bitcoin, and HSI seized approximately $2.5 million from him at the time.

Another alleged fentanyl vendor, Pennsylvanian Henry Koffie, was arrested this past July and had $154,000 seized. Allen said Koffie sold nearly 8,000 orders of the drug, “most of it paid for with bitcoin.”

https://www.coindesk.com/ice-director-cryptocurrencies-are-increasingly-being-used-in-money-laundering/

JPMorgan busted for money laundering after accusing bitcoin of doing the same

The Swiss subsidiary of US bank JPMorgan Chase has been sanctioned by Switzerland’s financial regulator FINMA for money laundering and “seriously violating supervision laws,” according to the local weekly Handelszeitung.

The sanctions are reportedly related to breaches of due diligence in connection with money laundering standards. That literally means the Wall Street banking giant assisted in money laundering.

The ruling was reportedly issued on June 30, but the regulator did not make it known as JPMorgan has been actively trying to prevent the publication. The Federal Administrative Court has since dismissed an appeal by the bank.

It is two months since JPMorgan CEO Jamie Dimon slammed bitcoin, the world’s leading cryptocurrency, labeling it a fraud. According to Dimon, bitcoin could be useful “if you were a drug dealer or a murderer.”

Dimon also compared bitcoin to the 17th-century Dutch tulip mania bubble. At the time, the CEO predicted the eventual demise of the digital currency and pledged to fire any trader trading bitcoin for being stupid.

“A fiat currency is when a government says this is your legal tender, you have to give it and accept it, and of course the central bank can misuse it and inflate it. But what is the use case for bitcoin? You’re in Venezuela, North Korea, you’re a criminal. Great product!” he said during a news conference in Washington.