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The difference between running a business and investing is often important in tax and financial regulatory law. It is always an evaluative judgment, and it is impossible to provide a fixed list of relevant criteria, not least because money launderers and tax evaders would use this to develop creative new strategies. However the factors you have listed are usually relevant, in addition to specific statutory criteria.

If the law being interpreted has the purpose of preventing money laundering, your question "could [your activity] facilitate money laundering" will be relevant to the interpretation of "business." To launder money effectively, one needs to be able to move larger quantities of money than an ordinary person would have access to. So the total cashflow involved is an important consideration.

The federal prohibition on unlicensed money transmitting businesses in 18 U.S.C. 1960 picks up existing State laws that require a "money transmitting license." It is not practical to review all such laws, but the statute also says that:

the term “money transmitting” 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 …

While an investor might buy or sell assets from the public, they would be unlikely to send money on behalf of the public. However this definition is inclusive, not exhaustive. The related definition of "money transmitter" in 31 C.F.R. 1010.100(ff)(5) includes another exception which would protect someone who is transmitting money to a third party just to buy something off them:

The term “money transmitter” shall not include a person that only … (F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds.

Also of relevance to individual investors is the exception in 31 C.F.R. 1010.100(ff)(8):

For the purposes of this section, the term “money services business” shall not include … (iii) A natural person who engages in an activity identified in paragraphs (ff)(1) through (ff)(5) of this section on an infrequent basis and not for gain or profit.

FinCEN has published a detailed explanation of these provisions in a memorandum on the Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (May 9, 2019). But they don't do much more than identify and restate the applicable regulations:

A natural person operating as a P2P exchanger that engages in money transmission services involving real currency or CVCs must comply with BSA regulations as a money transmitter acting as principal. This is so regardless of the regularity or formality of such transactions or the location from which the person is operating. However, a natural person engaging in such activity on an infrequent basis and not for profit or gain would be exempt from the scope of money transmission.

There is an important, and usually obvious, difference between an investor who profits from a change in asset prices (losing money to commissions on each trade), and ana person in the business of moving money, who is neutral on the asset price and earns money from spreads or fees on every transaction.

The difference between running a business and investing is often important in tax and financial regulatory law. It is always an evaluative judgment, and it is impossible to provide a fixed list of relevant criteria, not least because money launderers and tax evaders would use this to develop creative new strategies. However the factors you have listed are usually relevant, in addition to specific statutory criteria.

If the law being interpreted has the purpose of preventing money laundering, your question "could [your activity] facilitate money laundering" will be relevant to the interpretation of "business." To launder money effectively, one needs to be able to move larger quantities of money than an ordinary person would have access to. So the total cashflow involved is an important consideration.

The federal prohibition on unlicensed money transmitting businesses in 18 U.S.C. 1960 picks up existing State laws that require a "money transmitting license." It is not practical to review all such laws, but the statute also says that:

the term “money transmitting” 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 …

While an investor might buy or sell assets from the public, they would be unlikely to send money on behalf of the public. However this definition is inclusive, not exhaustive. The related definition of "money transmitter" in 31 C.F.R. 1010.100(ff)(5) includes another exception which would protect someone who is transmitting money to a third party just to buy something off them:

The term “money transmitter” shall not include a person that only … (F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds.

Also of relevance to individual investors is the exception in 31 C.F.R. 1010.100(ff)(8):

For the purposes of this section, the term “money services business” shall not include … (iii) A natural person who engages in an activity identified in paragraphs (ff)(1) through (ff)(5) of this section on an infrequent basis and not for gain or profit.

FinCEN has published a detailed explanation of these provisions in a memorandum on the Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (May 9, 2019). But they don't do much more than identify and restate the applicable regulations:

A natural person operating as a P2P exchanger that engages in money transmission services involving real currency or CVCs must comply with BSA regulations as a money transmitter acting as principal. This is so regardless of the regularity or formality of such transactions or the location from which the person is operating. However, a natural person engaging in such activity on an infrequent basis and not for profit or gain would be exempt from the scope of money transmission.

There is an important, and usually obvious, difference between an investor who profits from a change in asset prices (losing money to commissions on each trade), and an person in the business of moving money, who is neutral on the asset price and earns money from spreads or fees on every transaction.

The difference between running a business and investing is often important in tax and financial regulatory law. It is always an evaluative judgment, and it is impossible to provide a fixed list of relevant criteria, not least because money launderers and tax evaders would use this to develop creative new strategies. However the factors you have listed are usually relevant, in addition to specific statutory criteria.

If the law being interpreted has the purpose of preventing money laundering, your question "could [your activity] facilitate money laundering" will be relevant to the interpretation of "business." To launder money effectively, one needs to be able to move larger quantities of money than an ordinary person would have access to. So the total cashflow involved is an important consideration.

The federal prohibition on unlicensed money transmitting businesses in 18 U.S.C. 1960 picks up existing State laws that require a "money transmitting license." It is not practical to review all such laws, but the statute also says that:

the term “money transmitting” 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 …

While an investor might buy or sell assets from the public, they would be unlikely to send money on behalf of the public. However this definition is inclusive, not exhaustive. The related definition of "money transmitter" in 31 C.F.R. 1010.100(ff)(5) includes another exception which would protect someone who is transmitting money to a third party just to buy something off them:

The term “money transmitter” shall not include a person that only … (F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds.

Also of relevance to individual investors is the exception in 31 C.F.R. 1010.100(ff)(8):

For the purposes of this section, the term “money services business” shall not include … (iii) A natural person who engages in an activity identified in paragraphs (ff)(1) through (ff)(5) of this section on an infrequent basis and not for gain or profit.

FinCEN has published a detailed explanation of these provisions in a memorandum on the Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (May 9, 2019). But they don't do much more than identify and restate the applicable regulations:

A natural person operating as a P2P exchanger that engages in money transmission services involving real currency or CVCs must comply with BSA regulations as a money transmitter acting as principal. This is so regardless of the regularity or formality of such transactions or the location from which the person is operating. However, a natural person engaging in such activity on an infrequent basis and not for profit or gain would be exempt from the scope of money transmission.

There is an important, and usually obvious, difference between an investor who profits from a change in asset prices (losing money to commissions on each trade), and a person in the business of moving money, who is neutral on the asset price and earns money from spreads or fees on every transaction.

Source Link
sjy
  • 9.4k
  • 27
  • 49

The difference between running a business and investing is often important in tax and financial regulatory law. It is always an evaluative judgment, and it is impossible to provide a fixed list of relevant criteria, not least because money launderers and tax evaders would use this to develop creative new strategies. However the factors you have listed are usually relevant, in addition to specific statutory criteria.

If the law being interpreted has the purpose of preventing money laundering, your question "could [your activity] facilitate money laundering" will be relevant to the interpretation of "business." To launder money effectively, one needs to be able to move larger quantities of money than an ordinary person would have access to. So the total cashflow involved is an important consideration.

The federal prohibition on unlicensed money transmitting businesses in 18 U.S.C. 1960 picks up existing State laws that require a "money transmitting license." It is not practical to review all such laws, but the statute also says that:

the term “money transmitting” 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 …

While an investor might buy or sell assets from the public, they would be unlikely to send money on behalf of the public. However this definition is inclusive, not exhaustive. The related definition of "money transmitter" in 31 C.F.R. 1010.100(ff)(5) includes another exception which would protect someone who is transmitting money to a third party just to buy something off them:

The term “money transmitter” shall not include a person that only … (F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds.

Also of relevance to individual investors is the exception in 31 C.F.R. 1010.100(ff)(8):

For the purposes of this section, the term “money services business” shall not include … (iii) A natural person who engages in an activity identified in paragraphs (ff)(1) through (ff)(5) of this section on an infrequent basis and not for gain or profit.

FinCEN has published a detailed explanation of these provisions in a memorandum on the Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (May 9, 2019). But they don't do much more than identify and restate the applicable regulations:

A natural person operating as a P2P exchanger that engages in money transmission services involving real currency or CVCs must comply with BSA regulations as a money transmitter acting as principal. This is so regardless of the regularity or formality of such transactions or the location from which the person is operating. However, a natural person engaging in such activity on an infrequent basis and not for profit or gain would be exempt from the scope of money transmission.

There is an important, and usually obvious, difference between an investor who profits from a change in asset prices (losing money to commissions on each trade), and an person in the business of moving money, who is neutral on the asset price and earns money from spreads or fees on every transaction.