What is an unlawful money transmitting business?

On Behalf of | Apr 11, 2022 | Federal Crimes |

As cryptocurrency, such as bitcoin, is becoming increasingly popular it makes sense that on occasion someone would want to transfer cash into bitcoin or bitcoin into cash. However, in many cases, this type of transaction could be illegal and a serious federal offense; it could result in a charge such as operating an unlawful money transmitting business, or connect or lead someone into related criminal charges such as money laundering.

What the law says about money transmitting businesses

18 U.S. Code § 1960 is the primary federal law prohibiting unlicensed money transmitting businesses. According to this section, a money transmitting business “includes transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier,” and it must involve interstate or foreign commerce (which it usually does).

Although this law was written and enacted well before cryptocurrency existed, the “any and all means” catchall clause covers crypto.

For the money transmitting to be illegal, the money transmitting business must:

  1. Operate without a license in the state
  2. Fail “to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section,” or
  3. Involve the transportation or transmission of funds known by the defendant to be derived from a criminal offense or known to be intended to be used for the furthering of criminal activity.

According to 31 U.S. Code § 5330, failing to properly license a money transmitting business can result in $5,000 in fines, and 18 U.S. Code § 1960 can bring up to five years’ imprisonment for each violation of operating an unlicensed money transmitting business.

Be careful with cryptocurrency

In practice, this legislation means that transferring bitcoin or other forms of cryptocurrency into cash, or vice versa, could be a serious federal offense, particularly if done “off the grid” so to speak.

In addition, the authorities can often link unlicensed money transferring to much more serious offenses like money laundering, embezzlement or international crimes like terrorist activity, espionage, treason and related crimes or drug trafficking crimes.

If the money transferring was done as part of a larger scheme, which it often is, the investigators can usually find the link once they focus in on the money transmitter.

People often think their cryptocurrency transactions are “safe” from the police and other law enforcement, but they are not. Cryptocurrency transactions are vulnerable to being traced like any other transaction, and that include unlicensed money transmitting.

If you believe you are under investigation for a crime involving cryptocurrency or have been charged with a crime with a cryptocurrency component, there can be harsh and serious implications. Make sure you get the best legal defense you can to fight these allegations or charges. Contact attorney Darryl A. Goldberg, an experienced criminal defense lawyer, to protect your interests.


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