THE EVOLVING DEFINITION OF MONEY TRANSMITTING BUSINESS Andrew

THE EVOLVING DEFINITION OF “MONEY TRANSMITTING BUSINESS” Andrew Ittleman, Esq. CAMS Fuerst Ittleman, PL Miami, Florida

18 U. S. C. § 1960 � Prohibition of Unlicensed Money Transmitting Businesses � Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.

18 U. S. C. § 1960 � How is this statute violated? � A money transmitting business which �a. operates without a license in a state which requires a license; �b. fails to register with Fin. CEN; or �c. “otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity. ”

31 U. S. C. § 5330(d) �A Three-Part Definition of “Money Transmitting Business” � Any business which -1. Provides money transmitting services 2. Is required to file Currency Transaction Reports 3. Is not a depository institution.

United States v. e-gold � Prosecution of digital currency provider; � e-gold operated entirely over the internet; � Allowed customers to trade with each other using gold-backed digital currency; � Charged with violating 18 U. S. C. 1960

United States v. e-gold Defendants moved to dismiss the 1960 allegations; � Motion to Dismiss denied: � “Defendants transfer funds on behalf of the public, and are therefore money transmitters. ” � “To the extent that Defendants avoid cash transactions, they avoid the necessity to submit CTRs, but not the legal obligation to do so…” �

United States v. Mazza-Alaluf (2 nd Circuit, September 22, 2010) � Turismo Costa Brava, S. A. (Chile) �Three storefronts in Chile �Full-service financial services company ○ Local currency exchange ○ Casa de cambio

United States v. Mazza-Alaluf (2 nd Circuit, September 22, 2010). � Nexus to the United States �Step 1: Physical delivery of currency into the US by Turismo couriers (all deliveries declared at Customs) �Step 2: Delivery via armored car to AFEX �Step 3: Electronic delivery via AFEX to Turismo’s three US bank accounts (accounts in Illinois, Michigan and New York) �Step 4: Electronic delivery from bank accounts to third party recipients on behalf of Turismo’s clients

United States v. Mazza-Alaluf (2 nd Circuit, September 22, 2010) � Conviction and Sentence: �Violation of 18 U. S. C. § 1960 ○ 42 months imprisonment ○ Forfeiture of $ 10 million

United States v. Mazza-Alaluf (2 nd Circuit, September 22, 2010) � Why is this case so significant? � 1. No allegations of ill-gotten gains, underlying criminal activity or money laundering. � 2. Foreign status of Turismo irrelevant. � 3. A money transmitting business is WHAT a money transmitting business does. � 4. A money transmitting business is WHERE a money transmitting business does.

United States v. Bah (2 nd Cir. 2009) � Money picked up in New York; � Money physically delivered from New York to New Jersey; � Money transmitted out of New Jersey; � Bah was only licensed in New Jersey; � Bah was indicted and convicted in New York.

IMTC WEST 2011 Andrew Ittleman, Esq. CAMS Fuerst Ittleman, PL Miami, Florida THANK YOU