QUOTE("WuWei")
Here is a more indepth article on how Digital Currencies will be affected by The Patriot Act II. This was taken from The Gold Economy Magazine - http://www.goldeconomy.com/ .... August 1, 2004. "Operated from US soil" is an important point to consider when speculating on what will become of digital currencies.
---------------------------------
Regards,
Wu Wei
QUOTE
PATRIOT II and its Effect on Digital Currency Systems
Patriot II was a proposed bill that was leaked to the press before it left the Senate Finance Committee. Public outcry resulted in the bill beingquashed, however key elements have apparently been inserted into other bills.
On December 13th, the day that Saddam Hussein was captured, President Bush quietly signed the "Intelligence Authorization Act for Fiscal Year 2004" into law. Hidden inside that bill was a sweeping expansion of erosion of liberty initiated by the USA PATRIOT ACT. In order to obtain financial records, law enforcement agencies are no longer required to obtain a subpoena signed by a judge or a grand jury. As of January 1st, the FBI, IRS and other agencies can simply present a financial institution with a "national security letter" in order to obtain copies of financial records without the knowledge of the "target" of the investigation. Law enforcement agencies can also share data so obtained with one another. The United States is now a society where the secret police have effectively unlimited powers of investigation and surveillance upon the citizenry.
The most significant change in the law for the digital currencyindustry was the amendment to the definition of "financial institution" in the Financial Privacy Act to be the same as the definition of "financial institution" in the Money Laundering Act. The USA PATRIOT Act redefined the Money Laundering Act so that financial institutions include bullion dealers, credit card issuers, car dealerships,jewelers, casinos and virtually any business that extends consumer credit or trades in highly liquid commodities like diamonds, gold, cash and automobiles.
Specifically, digital gold currencies would appear to be covered under the definition of "financial agency" in the Money Laundering Act:
"financial agency" means a person acting for a person(except for a country, a monetary or financial authority acting as a monetary or financial authority,or an international financialinstitution of which the United States Government is a member) as a financial institution, bailee, depository trustee, or agent, or acting in a similar way related to money, credit, securities, gold, or a transaction in money, credit, securities, or gold. (Title 31, Sec. 5312, a, 1)
Under the new definitions, bullion dealers and internet gold currency systems domiciled or operated in the United States are required to identify their customers, keep records of all transactions, and provide copies of the records on request via a "national security letter" without notifying the account holder that he is under investigation or that his records have been released to the government.
The immediate implications of this law are that all digital currency systems that transfer value in fiat currency or gold and are domiciled or operated from the United States are effectively roped into the US financial surveillance system. However, the infrastructure has not yet been put in place to allow law enforcement instant real-time access to records as they currently have with banks.
Specifics of the New Regime
- Rewards for Informants
Some provisions of the new laws call to mind the Soviet Union under the KGB. The Secretary of Treasury may pay a 25% reward to informants of suspicious money transaction with a maximum reward of $150,000.
- Required Record Keeping ofTransactions with Foreign Agencies
Not only must every company in the industry "know its customer" but all persons doing business in the USA must keep and report the following records for all transactions involving a person with a relationship with a foreign agency: 1) the identity and address of participants in a transaction or relationship, 2) the legal capacity in which a participant is acting. 3) the identity of real parties in interest. 4) a description of the transaction.
Since virtually all digital currency exchange transactions involve a "foreign agency" this law requires US currency exchange agencies to keep the above records for every transaction.
- Registration with FINCEN
Any money transmitting business operated in the United States must register with FINCEN within 180 days of opening for business. Failure to do can result in a fine of $5000 per day.
The Silver Loophole
Strangely enough the definition seems to have been written toinclude digital gold currency systems, but not digital silver. Whether the courts would treat this as a loophole or as the same thing remains to be seen. Currently Mobile Silver is the only digital silver currency that doesn't have a gold counterpart.
Operating Costs
The most significant problem for U.S. digital currency companies and exchange providers is that the new regulations require the affected businesses to record the identity of every customer for everytransaction, no matter how small. For digital currency companies the cost of verifying the identity of new account holders is a substantial operating expense. More importantly, requiring proof if identity for opening new accounts is a substantial barrier to acquiring new customers, which gives an advantage to digital currency issuers and exchange providers that are operated outside the United States and do not require proof of identity in order to open an account.
Affected Institutions
The following digital currency systems are operated from US soil and appear to fall under the new regulations: e-gold, e-Bullion, Norfed/Liberty Dollar, INTGold, PayPal and EMOCorp. Crowne-Gold is operated from Nevis but has some or all of its gold stored in the USA, so it is unclear whether that company falls under the new US regulations. Any digital currency exchange provider operated in the United States or by a US person would also appear to fall under the new regulations.
Therefore any user of these systems should bear in mind that US law enforcement agencies including the FBI, IRS, CIA, ATF, DEA and others may have access to your account data at any time without your knowledge or consent. Given the recent increase of federal prosecutionsusing "structuring" as a crime in and of itself, with no associated criminal acts, this places most honest account-holders at risk of federal felony charges if a series of transactions adding up to $10,000 in value is completed without filing the appropriate currency transaction report form. (It appears Rush Limbaugh is being prosecuted for this.)
Patriot II was a proposed bill that was leaked to the press before it left the Senate Finance Committee. Public outcry resulted in the bill beingquashed, however key elements have apparently been inserted into other bills.
On December 13th, the day that Saddam Hussein was captured, President Bush quietly signed the "Intelligence Authorization Act for Fiscal Year 2004" into law. Hidden inside that bill was a sweeping expansion of erosion of liberty initiated by the USA PATRIOT ACT. In order to obtain financial records, law enforcement agencies are no longer required to obtain a subpoena signed by a judge or a grand jury. As of January 1st, the FBI, IRS and other agencies can simply present a financial institution with a "national security letter" in order to obtain copies of financial records without the knowledge of the "target" of the investigation. Law enforcement agencies can also share data so obtained with one another. The United States is now a society where the secret police have effectively unlimited powers of investigation and surveillance upon the citizenry.
The most significant change in the law for the digital currencyindustry was the amendment to the definition of "financial institution" in the Financial Privacy Act to be the same as the definition of "financial institution" in the Money Laundering Act. The USA PATRIOT Act redefined the Money Laundering Act so that financial institutions include bullion dealers, credit card issuers, car dealerships,jewelers, casinos and virtually any business that extends consumer credit or trades in highly liquid commodities like diamonds, gold, cash and automobiles.
Specifically, digital gold currencies would appear to be covered under the definition of "financial agency" in the Money Laundering Act:
"financial agency" means a person acting for a person(except for a country, a monetary or financial authority acting as a monetary or financial authority,or an international financialinstitution of which the United States Government is a member) as a financial institution, bailee, depository trustee, or agent, or acting in a similar way related to money, credit, securities, gold, or a transaction in money, credit, securities, or gold. (Title 31, Sec. 5312, a, 1)
Under the new definitions, bullion dealers and internet gold currency systems domiciled or operated in the United States are required to identify their customers, keep records of all transactions, and provide copies of the records on request via a "national security letter" without notifying the account holder that he is under investigation or that his records have been released to the government.
The immediate implications of this law are that all digital currency systems that transfer value in fiat currency or gold and are domiciled or operated from the United States are effectively roped into the US financial surveillance system. However, the infrastructure has not yet been put in place to allow law enforcement instant real-time access to records as they currently have with banks.
Specifics of the New Regime
- Rewards for Informants
Some provisions of the new laws call to mind the Soviet Union under the KGB. The Secretary of Treasury may pay a 25% reward to informants of suspicious money transaction with a maximum reward of $150,000.
- Required Record Keeping ofTransactions with Foreign Agencies
Not only must every company in the industry "know its customer" but all persons doing business in the USA must keep and report the following records for all transactions involving a person with a relationship with a foreign agency: 1) the identity and address of participants in a transaction or relationship, 2) the legal capacity in which a participant is acting. 3) the identity of real parties in interest. 4) a description of the transaction.
Since virtually all digital currency exchange transactions involve a "foreign agency" this law requires US currency exchange agencies to keep the above records for every transaction.
- Registration with FINCEN
Any money transmitting business operated in the United States must register with FINCEN within 180 days of opening for business. Failure to do can result in a fine of $5000 per day.
The Silver Loophole
Strangely enough the definition seems to have been written toinclude digital gold currency systems, but not digital silver. Whether the courts would treat this as a loophole or as the same thing remains to be seen. Currently Mobile Silver is the only digital silver currency that doesn't have a gold counterpart.
Operating Costs
The most significant problem for U.S. digital currency companies and exchange providers is that the new regulations require the affected businesses to record the identity of every customer for everytransaction, no matter how small. For digital currency companies the cost of verifying the identity of new account holders is a substantial operating expense. More importantly, requiring proof if identity for opening new accounts is a substantial barrier to acquiring new customers, which gives an advantage to digital currency issuers and exchange providers that are operated outside the United States and do not require proof of identity in order to open an account.
Affected Institutions
The following digital currency systems are operated from US soil and appear to fall under the new regulations: e-gold, e-Bullion, Norfed/Liberty Dollar, INTGold, PayPal and EMOCorp. Crowne-Gold is operated from Nevis but has some or all of its gold stored in the USA, so it is unclear whether that company falls under the new US regulations. Any digital currency exchange provider operated in the United States or by a US person would also appear to fall under the new regulations.
Therefore any user of these systems should bear in mind that US law enforcement agencies including the FBI, IRS, CIA, ATF, DEA and others may have access to your account data at any time without your knowledge or consent. Given the recent increase of federal prosecutionsusing "structuring" as a crime in and of itself, with no associated criminal acts, this places most honest account-holders at risk of federal felony charges if a series of transactions adding up to $10,000 in value is completed without filing the appropriate currency transaction report form. (It appears Rush Limbaugh is being prosecuted for this.)
---------------------------------
Regards,
Wu Wei
