I’m not a fan of virtual worlds – to be honest, I have enough difficulty coping with the complexities of the real one. But as a dedicated AML anorak, I do occasionally have to look into what is happening out there in cyberspace, and particularly when it comes to virtual money.
The problem with virtual money is that it isn’t. It isn’t like Monopoly money, or Smarties (the stake of choice when my father taught me poker) – with those, it is quite tricky to convert them back into a currency that someone might actually accept in the real world. But virtual money is different (and you will excuse my layman’s language here): it’s virtual only in the middle, and real at both ends. (There must be a joke in there – I’ll work on that.) You use real money to buy the virtual currency, and then at the end of whatever fun you have had with it, you convert it back into real money. Which is why it has been giving AML types a real headache for some time now.
On 18 March 2013, FinCEN (the American FIU) put an end to the speculation and debate, to the cross-eye-inducing discussions about “when is it real, when is it virtual”, and issued guidance on “Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies“. And it’s all now lovely and clear. To quote the relevant bits: “A user [of virtual currencies] is a person that obtains virtual currency to purchase goods or services. An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency. An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency.” The question is which of these counts as a money services business (MSB) and therefore comes under US AML legislation – an approach that could quickly and easily be adopted by other jurisdictions. And the answer is: users are not MSBs, while exchangers and administrators are (with certain small exceptions – please read the actual FinCEN stuff if this may concern you). So that’s a real load off my virtual mind.
I hate money laundering 