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Amanda Tuminelli
@atuminelli
The most important issue currently facing the digital asset industry: the DOJ’s interpretation of Section 1960 - the criminal code provision punishing unlicensed “money transmitting businesses.” That is why I wrote this paper with @dbarabander and @jchervinsky explaining the issues inherent to Section 1960 and providing legal support for the *correct* interpretation: in order to be a “money transmitting business,” the business must have independent control over user funds. https://edit.financialcrimelitigators.org/api/assets/cd682a1c-1cb0-4c99-a491-ac6155f4bdc2.pdf
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Amanda Tuminelli
@atuminelli
2/ After reading every circuit course case interpreting the statute, we provide compelling legal support for the central thesis of our paper: an entity falls within the scope of Section 1960 only if it operates a business that engages in “money transmitting,” defined as “transferring funds on behalf of the public,” which *requires that the entity has control over the funds at issue.* We also explain the interplay between Section 1960 and the definition of “money transmitting business” found in the BSA, 31 U.S.C. § 5330. We conclude that although Section 1960 does not adopt the BSA definition, Section 5330’s definition is substantively similar and confirms that the plain language of “money transmitting” means the act of both obtaining control and relinquishing control of funds.
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Amanda Tuminelli
@atuminelli
3/ Next, though it is often overlooked as a requirement, the government must also prove a defendant runs a “business” for the purpose of Section 1960. We argue that a “business” is characterized by three elements: 1) operation of a commercial enterprise established specifically for money transmission; 2) completion of multiple transmissions of money; and 3) receipt of a fee paid by a customer specifically for the service of money transmission. We also explore Section 1960’s mens rea requirement - “knowingly” - and argue that Supreme Court precedent dictates that the longstanding common law presumption of mens rea should apply and the government must prove that a defendant knew of the applicable obligations with which his business failed to comply in order to sustain a conviction under Section 1960(b)(1)(B).
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Amanda Tuminelli
@atuminelli
4/ Section 1960 is at the heart of the criminal prosecutions against the devs of Tornado Cash and Samurai Wallet, and an untold number of developers subject to confidential DOJ investigations. We use the Roman Storm case as a study throughout this paper to explain how a self-custodial protocol that never takes control over user funds is not a “money transmitting business.” So why does this matter? Because a badly-written statute = far too much room for the DOJ to use “prosecutorial discretion” to interpret the law ad hoc and go after projects that Congress never intended to include in the statute’s reach. The DOJ has many tools available to go after money laundering - Section 1956 is written expressly for that purpose - and it should rely on them to go after bad actors who are on notice that they are violating the law.
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Amanda Tuminelli
@atuminelli
5/ This paper is just the beginning. We plan to work with others who care deeply about this issue to move Congress to amend Section 1960 so that it cannot be misused to target digital asset industry participants who were never meant to be defined as “money transmitting businesses.” If you care about this issue, we hope you will work with us and support our efforts. I am grateful to work with brilliant lawyers in this space. Thank you to my co-authors, @millercwl, and our friends at Arktouros for their intelligent contributions, patience with many rants, and sharing passion about this subject.
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