Irish banks, Bitcoin and Anti money laundering rules

[Leo]

Attorney General Leslie Caldwell "Commerzbank committed these crimes even though managers inside the bank raised red-flags about its sanction-violating practices.."

Forget about their previous infractions, they're going back years are don't involve cryptos. No one suggested they were bitcoid related, so you're arguing a point that was never made. They, or at least some of their staff clearly chose to ignore their obligations in identifying the source of funds. That's a different matter. Their current attempts to clear up their reputation mean they are now perhaps going beyond the minimum required to comply.

As far as your other examples above, it appears a mixed bag. Australian government appears to have given green light for trading but banks are somewhat hostile.

Such is the nature of choosing a few examples there are others. I don't see evidence of hostility from the banks though, I think it would be fairer to say they are nervous and unsure how to proceed.

The question is important as, as citizens in purportedly free and democratic societies, we should have the right to buy and sell what items, products and services we see fit, subject to their legality.

That is absolutely correct, and I don't think anyone is suggesting it should be otherwise, the challenge that needs to be addressed here is how financial institutions can meet their AML and other obligations with cryptos, where these institutions are unable to trace the source of the money. As mentioned multiple times, this really should only be an issue for large transactions, but for some reason some banks are choosing to be more conservative and refuse crypto based transactions. That issue needs to be addressed.

Any notions of banning bitcoin, or crypto, are way off the charts and in total contradiction to the concept of free societies. If we ban bitcoin, then what else?

I haven't seen anyone suggest that.

 

[TheBigShort]

the challenge that needs to be addressed here is how financial institutions can meet their AML and other obligations with cryptos, where these institutions are unable to trace the source of the money

And as I have mentioned, cash deposits from exchanges are electronically recorded. So its source is easily traced.
If I sell €1m of bitcoin and transfer that amount to Coinbase, I then deposit the €1m into Ulster bank. UB can trace its source - coinbase. Coinbase can trace its source, my bitcoin wallet address. Its me who will have identify the source of my bitcoin. Either I bought it on an exchange (easily identifiable) or I traded goods and services for it. If im a trader, I will have inventory records of goods bought and sold - if I dont, its me who comes under investigation.
It is no different to depositing large sums of cash.
On the other hand if I am buying and selling in bitcoin, swapping bitcoin into and out of various bitcoin wallets, I will eventually go hungry as it is practically impossible to buy food with bitcoin.

There may be banks who are hostilr, or nervous about crypto and subsequently reluctant to enter into transactions, but so what? The onus will be on those who use crypto to convince them otherwise.

 

[Leo]

And as I have mentioned, cash deposits from exchanges are electronically recorded. So its source is easily traced.

Identifying the exchange doesn't cut it. The exchange is just that, it's not the source.

or I traded goods and services for it. If im a trader, I will have inventory records of goods bought and sold - if I dont, its me who comes under investigation.
It is no different to depositing large sums of cash.

Seriously? How to you provide enough evidence of the identity of the person?

 

[TheBigShort]

Identifying the exchange doesn't cut it

Why not? Who said it doesn't cut it?



Coinbase, state that they are legally compliant with all regulations in all jurisdictions in which it operates. Being legally compliant, licensed etc has its benefits. It means that if I transfer money from my coinbase account to UB account, UB is under no obligation to identify where coinbase sourced the money - it is a trusted, legal, regulated entity. That is the whole point of licensing etc.

Seriously? How to you provide enough evidence of the identity of the person?

Seriously? If I run a predominantly cash based business like a pub, and lodge €50,000 cash takings at the end of the week into the bank, do I need to know the identity of each individual that bought a drink with cash and where and how they sourced their income?
Of course not. I show cash sales of €50,000 of stock that I sold as a trader involved in the pub trade.

Similarly, if I sold the stock accepting bitcoin, selling the bitcoin on an exchange and depositing it into a bank, why would I need show anything but a record a sales of stock through bitcoin?

 

[Leo]

Why not? Who said it doesn't cut it?



Coinbase, state that they are legally compliant with all regulations in all jurisdictions in which it operates. Being legally compliant, licensed etc has its benefits.

Again with the redirection, who said they weren't regulated? That has nothing whatsoever to do with the AML requirements if a financial institution. At this point I can only assume you are being deliberately obtuse. Read up on the requirements yourself, I have better things to do.

Seriously? If I run a predominantly cash based business like a pub, and lodge €50,000 cash takings at the end of the week into the bank, do I need to know the identity of each individual that bought a drink with cash and where and how they sourced their income?
Of course not. I show cash sales of €50,000 of stock that I sold as a trader involved in the pub trade.

Again just more misdirection of no relevance to cryptos.

Similarly, if I sold the stock accepting bitcoin, selling the bitcoin on an exchange and depositing it into a bank, why would I need show anything but a record a sales of stock through bitcoin?

For the reasons I pointed out two pages ago, and again, in the circumstances pointed out two pages ago...

 

[TheBigShort]

The challenge is with the audit trail to that point. Likely won't be a challenge for all, but for anyone who obtains bitcoin through trading activities, proving the source is legit and not on any of the blacklisted organisations or nation states will be a challenge.

No it wont. No more than cash transactions.

 

[Leo]

No it wont. No more than cash transactions.

As stated earlier also.

 

[RedOnion]

Expecting a bank to accept all transfers from any crypto trading platform is the money laundering equivalent of doing a funds transfer via Iran, and then saying you've an audit trail showing it originated somewhere else.

The AML requirements on banks are quite onerous, and the consequences of getting it wrong punitive, so it's easier to just outright reject them. Yes, trading platforms in some jurisdictions are regulated, but they do not have banking licences. The riskiest point in AML is the point at which funds enter the banking system.

There are lots of papers from G7, the FATC and IMF amongst others on crypto currency and money laundering / terrorist financing. The guidance is behind the reality, so again banks are just saying no, rather than risking falling foul of rules.

 

[TheBigShort]

Expecting a bank to accept all transfers from any crypto trading platform is the money laundering equivalent of doing a funds transfer via Iran, and then saying you've an audit trail showing it originated somewhere else.

I dont think anyone is expecting banks to accept transfers from just any crypto platform.

Yes, trading platforms in some jurisdictions are regulated, but they do not have banking licences.

True, but in many instances there is no legal requirement to hold a licence. If the trading platform is regulated to the point of complying with AML requirements, and otherwise satisfies all other regulatory requirements, including licensing or not, then there really should be no issue for a third party to accept the transfer of funds from that source.
Notwithstanding that, all financial institutions should have their own checks and balances to identify unusual activities, as would be required of them to satisfy AML requirements.

There are lots of papers from G7, the FATC and IMF amongst others on crypto currency and money laundering / terrorist financing.

Of course, and of cash transactions, stock markets, property, art, casinos etc.

 

[Leo]

True, but in many instances there is no legal requirement to hold a licence. If the trading platform is regulated to the point of complying with AML requirements, and otherwise satisfies all other regulatory requirements, including licensing or not, then there really should be no issue for a third party to accept the transfer of funds from that source.

You're still conflating the role of the exchanges with that of the banking system. Just because one is compliant with the regs that apply to that business model does not mean there aren't issues for the other relating to the whole other set of regulations.

 

[TheBigShort]

You're still conflating the role of the exchanges with that of the banking system. Just because one is compliant with the regs that apply to that business model does not mean there aren't issues for the other relating to the whole other set of regulations.

I'm not.

To save on time, perhaps you could outline in specific detail exactly what the issue is with depositing funds from the sale of bitcoin against depositing cash via the sale of say, piano lessons.

 

[Leo]

I'm not.

To save on time, perhaps you could outline in specific detail exactly what the issue is with depositing funds from the sale of bitcoin against depositing cash via the sale of say, piano lessons.

So we're back going in circles again. I don't think I'll get anywhere explaining the regulatory environments that apply to exchanges or financial institutions if you haven't grasped the fundamental differences yet, and how you bitcoin vs piano lessons doesn't apply.

 

[TheBigShort]

Its pretty simple really. In order to buy or sell bitcoin through an exchange, you need to have a bank account to move money.
All my bitcoin was bought on an exchange using funds transferred from a bank account.
All my sales of bitcoin were via an exchange that electronically recorded the transaction and which any authority or financial institution will have zero difficulty in tracing.

Im off to buy an apple now, in Spar, with cash - I hope this doesnt raise AML flags when Spar attempt to deposit the cash funds for the apple, along with all their other cash funds.

 

[TheBigShort]

Yep, where the issues arise is in transferring money into or attempting to take it out of Bitcoin. Those transactions need to comply with whatever anti-money laundering legislation is in place in the local market, and that's causing some problems now. Also, US regulations cover the operation and management of crypto exchanges as evidenced in the Silk Road take down. So while money already in Bitcoin can move regulation free, putting it in, or getting it out is facing increasing hurdles.

The challenge is with the audit trail to that point. Likely won't be a challenge for all, but for anyone who obtains bitcoin through trading activities, proving the source is legit and n

So, perhaps just to wind up on this, if you cant explain to authorities upon request where you sourced the income to buy bitcoin, or if you cannot show the sales transaction of bitcoin to explain new found wealth, that is going to be an issue? Is that correct?

Whereas if you can demonstrably identify all of your crypto transactions and associated payments, then your going be ok? Is that correct?

 

[Leo]

So, perhaps just to wind up on this, if you cant explain to authorities upon request where you sourced the income to buy bitcoin, or if you cannot show the sales transaction of bitcoin to explain new found wealth, that is going to be an issue? Is that correct?

Buying bitcoin, your money is most likely already within the banking system, so assuming the bank in question has done its due diligence on the money coming in in the first place, you've no problem. Taking it out, once you reach AML thresholds, the bank have to satisfy themselves as the the original source of the money. Ignoring speculation, showing transactions between yourself and an exchange doesn't give the bank the level of detail they need.

Whereas if you can demonstrably identify all of your crypto transactions and associated payments, then your going be ok? Is that correct?

The challenge is tracing where the money originally came from, if you're selling items of high value and taking bitcoin as payment, fine, we know you got the money for selling your stock, but how do you prove the identity of the person you're dealing with?

 

[Brendan Burgess]

Hi Leo

This important issue might have been missed as it was buried in a long thread on a separate topic, so I have moved them all into this new thread.

There seems to be quite a few Bitcoin owners on askaboutmoney.

Would you have the time to do a post about what they should do to make sure that they can actually get the benefit of Bitcoin if they want to sell?

Is there anything they can do?

For example, if they suddenly lodge €1m in their AIB bank account, might AIB refuse?

If they part sell it and lodge €50k, would that be ok?

Do I need to worry if I make money on IG Index through short selling Bitcoin?

I get daily statements from them, so it's easy for me to show the bank where the money came from.



Brendan

 

[TheBigShort]

The challenge is tracing where the money originally came from, if you're selling items of high value and taking bitcoin as payment, fine, we know you got the money for selling your stock, but how do you prove the identity of the person you're dealing with?

Why do I need to prove the identity if I have carried out a legitmate trade? Why is the identity of the customer who trades with me BTC needed, but not needed if trading in cash?

 

[jman0war]

A new report on Bitcoin Laundering undertaken by joint bitcoin analysis team FDD and Elliptic, have reported that laundering accounts for less than one percent of bitcoin transactions.

Story is here: https://cointelegraph.com/news/bitcoin-laundering-less-than-one-percent-of-all-transactions
Source of report is here: https://info.elliptic.co/whitepaper-fdd-bitcoin-laundering

 

[TheBigShort]

For example, if they suddenly lodge €1m in their AIB bank account, might AIB refuse?

This is a good example. My banking activities are usually restricted to the value of my wages.
So if I suddenly arrive with €1m cash, a €1m cheque or try to deposit €1m from a cryto exchange, flags are going to be raised - where did I source the €1m?

If I can explain, providing a record, paper or electronic, of the sale of an item, or items, for the sum of €1m, then I do not see what the problem is.

Eg: Perhaps I sold a house for €1m, or bought a winning lotto ticket, or sold BTC over the Coinbase exchange for €1m.
All of these transactions will be traceable.

 

[TheBigShort]

Hi

In order to deposit cash into Coinbase, it is sent to an Estonian bank account. From one EU bank account to another.
I rang Ulster Bank back in June when I completed my id and account registration.
I bought and sold a small amount of BTC in order to ensure I could get money in and out without fuss.
The transfer out was taking longer than expected so I rang UB to see if they had any issues with this other bank a/c.
The answer was along the lines, we do not refuse or block transfers from other EU banks without reasonable cause.
My money arrived a day later.