 I think that if you made a word cloud for today, FinCEN would probably rank up there with everything else. Which is why it's fantastic that our final speaker for tonight is Jennifer Shasky Calvary, who is the director of the Treasury Department's Financial Crimes Enforcement Network. Previously, she worked at the Department of Justice, where she served as the chief of the asset forfeiture and money laundering section, and where much of her work focused on combating criminal financial schemes. Welcome. All right, I have the enviable position of being the last one up and being the one that's keeping you from hopefully going and enjoying maybe an early happy hour somewhere. But I'd like to thank our previous panelists, because as I've sat here just through the afternoon panels, it's been a great conversation, and one that I think was one of the more educated and interesting conversations I've heard on this topic and coming from a multitude of directions. So I'll try not to lower the bar here. I am, however, going to start with some prepared remarks. I think people at the Department of Treasury are a little scared to let me just speak on my own in an unscripted format. Never know what that Shasky, the former prosecutor, might say. So I'm going to start with some prepared remarks, but then go to the unscripted side on a Q&A, which I'm looking forward to. So let me start with this. First of all, good afternoon. I'd like to take a few minutes to set the stage on how FinCEN and this country's anti-money laundering and counter-terrorist financing regulator has been approaching the issue of virtual currency, as well as some developments that we've been observing as the industry continues to take shape, much of which has already been discussed this afternoon. Because any financial institution, payment system, or medium of exchange, has the potential to be exploited for money laundering, fighting such illicit use requires consistent regulation across the financial system. Virtual currency is no different from other financial products and services in this regard. What is important is that financial institutions that deal in virtual currency put effective AML, CFT controls in place to harden themselves from becoming the targets of illicit actors that would exploit their vulnerabilities. And I'm sorry, I use virtual currency, and I've been told by others that I should be using digital currency, but since our regulations speak in virtual currency, I'm gonna stick with that and we can debate this in the future, whether we need to change it to digital currency. To help in this regard, FinCEN issued interpretive guidance last March, which has been discussed widely today, to bring clarity and regulatory certainty for businesses and individuals engaged in money transmitting surfaces and offering virtual currencies. In the simplest of terms, FinCEN's guidance explains that administrators or exchangers of virtual currencies must register with FinCEN and institute certain record keeping, reporting, and AML program control measures, and less an exception to these requirements applies. The guidance also explains that those who use virtual currencies exclusively for common personal transactions, like buying goods or services online or buying pizza or living for a week on Bitcoin and San Francisco, are users and not subject to regulatory requirements under the BSA. In all cases, FinCEN's employs an activity-based test to determine when someone dealing with virtual currency qualifies as a money transmitter. The guidance clarifies definitions and expectations to ensure that businesses engaged in such activities are aware of their regulatory responsibilities, including registering appropriately. Furthermore, FinCEN closely coordinates with its state regulatory counterparts, such as Ben Loskey in New York, to encourage appropriate application of FinCEN guidance as part of the state's separate AML compliance oversight of financial institutions. Also to expand upon our March 2013 guidance, FinCEN issued two administrative rulings just this last month on January 30th. The rulings provided additional information on our regulatory coverage of certain activities related to convertible virtual currency, and both rulings the convertible virtual currency at issue was the cryptocurrency Bitcoin. The first ruling states that to the extent a user creates or mines a convertible virtual currency, solely for a user's own purposes, the user is not a money transmitter. The second states that a company purchasing and selling convertible virtual currency as an investment exclusively for the company's benefit is not a money transmitter. Since our March 2013 guidance was issued, many of the questions we've received have been about the applicability of our regulations to users of convertible virtual currency, and in particular Bitcoin. We're hopeful that these rulings will help to provide clarity in this area. I'm pleased to report that some virtual currency exchangers have registered with FinCEN since the issuance of last year's guidance. I do, however, remain concerned that there appear to be many domestic virtual currency exchangers that have not taken this step. FinCEN has been engaged in an outreach effort to virtual currency exchangers that have a domestic presence to outline the regulatory requirements and to offer assistance on the registration process. And if a business does not believe it is required to register, we're asking it to contact FinCEN so we can gather additional information in order to make a conclusive determination. Since our outreach efforts began, we've continued to see a steady increase in the number of virtual currency exchangers registering with FinCEN. As the financial intelligence unit for the United States, FinCEN must stay current on how money is being laundered in the United States, including through new and emerging payment systems so that we can share this expertise with our many law enforcement, regulatory, industry, and foreign financial intelligence unit partners and effectively serve as the cornerstone of this country's AML-CFT regime. FinCEN is certainly sought to meet this responsibility with regard to virtual currency and its exploitation by illicit actors. In addition to our efforts on the regulatory side, FinCEN's analysts are working hard to stay ahead of the curve in understanding emerging payment systems and related financial flows, including how they're exploited by bad actors and to put that information into the hands of our law enforcement and regulatory customers who need it most. Virtual currencies are a financial service and virtual currency administrators and exchangers are financial institutions under our regulations. Any financial institution and any financial service could be exploited for money laundering purposes. What is important is for institutions to put controls in place to deal with those money laundering threats and to meet their AML reporting obligations. FinCEN's main goal is to ensure the integrity and transparency of the U.S. financial system so that money laundering and terrorist financing could be prevented and where it does occur, be detected for follow-on action. Every financial institution needs to be concerned about its reputation and to go out of its way to show it is operating within the transparency and integrity within the bounds of the law. And it is in the area of transparency where some of our more recent concerns arise and some of which I think were brought up by the last panel. Liberty Reserve, a web-based virtual currency known to most in this room, I think, was one of our earliest concerns that resulted in a criminal indictment, of course, by the U.S. Department of Justice, as well as a 311 action by FinCEN under the USA Patriot Act. FinCEN designated Liberty Reserve as a financial institution of primary money laundering concern in May of 2013, the first use of section 311 authorities by FinCEN against a virtual currency provider. Liberty Reserve was widely used at the time by criminals around the world to store, transfer, and launder the proceeds of their illicit activities. Liberty Reserve's virtual currency had become a preferred method of payment on websites dedicated to the promotion of facilitation of illicit web-based activity, including identity fraud, credit card theft, online scams, and dissemination of computer malware, and some of the child exploitation that I think folks mentioned earlier. It sought to avoid regulatory scrutiny while tailoring its services specifically to illicit actors. More recent concerns include the use of Bitcoin on Silk Road and the Darknet, which led to a major money laundering indictment discussed again here earlier. Recent allegations that the compliance officer at a registered Bitcoin exchange were engaged in money laundering conspiracy involving the sale of drugs on the Silk Road, and reports that new companies and cryptocurrencies are being established with a stated goal of reducing transparency. However, on a more positive note, we're also starting to see instances where the virtual currency industry is taking steps to increase transparency in this space. In addition to registering with FinCEN, some virtual currency exchanges are beginning to comply with reporting requirements and are filing suspicious activity reports with FinCENs. Suspicious activity reports or SARs are just what they sound like, the report of suspicious transactions. While the dollar threshold differs slightly by industry, if a money transmitter knows, suspects, or has reason to suspect that any transaction or attempted transaction is suspicious, and the transaction or attempted transaction involves or aggregates to funds of $2,000 worth, $2,000 or more, as SAR is required. It's encouraging to see some players in the virtual currency industry taking their responsibilities seriously. Legitimate financial institutions, including virtual currency providers, do not go into business with the aim of laundering money on behalf of criminals, and legitimate customers will be drawn to virtual currency or administrators or exchangers where they know their money's safe and where they know the company has a reputation for integrity. Our discussion here today is, well as what we've seen transpire in the last year, illustrate that virtual currency industry has reached a crossroads, and when you come to a crossroads, you need to decide which way you're gonna turn. Will it be transparency, integrity, and legitimacy, or will it be shadows, criminality, and the risk, like of Liberty Reserve, of extinction? When I spoke on this issue several months ago, I closed with a challenge to our great innovators, which I think Chip may have just repeated here today, which is I asked them to extend their focus and devise creative solutions for preventing the abuse of virtual currencies by criminals. That challenge remains, and perhaps with even greater urgency today. I think we can all agree that the stakes are too high for both the industry and the government to allow virtual currency systems to be used by bad actors. FinCEN will continue to draw from the knowledge we've gained through our regulatory efforts, use of targeted financial measures, analysis of the financial intelligence we collect, independent study of virtual currency, outreach to industry, and collaboration with our many partners in law enforcement to protect the integrity and transparency of the US financial system. And with that, let the questions begin. I'll ask the elephant in the room question, because this may be the only room where we've got Jennifer Shastry and Matt Green sitting within five or six feet of each other. So my question is, to the extent that you're willing to say anything, what would you think about something like Zerocoin, which will literally remove any traceability to the identity of people doing transactions? I think the last panel alluded to this issue, and we started down the road of talking about this, the policy issue at stake, and of course at FinCEN, what we care about is protecting the US financial system from money laundering and terrorist finance. So that's our angle of how we look at this, and this is what we're regulating for. And so our rules are designed to do a couple things. One is to prevent dirty money from coming into the US financial system. That's one thing we try to do. The other is to report on it when we think it's in there. And so there's always kind of a sliding scale of trying to have a balance between those two things. But another thing we're trying to balance is privacy, a very real issue of individual privacy, data privacy, privacy in your transactions with the also very real need to have some level of transparency to prevent the abuse of the US financial system by illicit actors. And so it's where exactly on that spectrum we should be is the policy question that I think everyone's trying to come to grips with. It's an issue that I know is being discussed this very week at the Financial Action Task Force which is the international standard-setting body for anti-money laundering and terrorist finance. Different countries have different perspectives on how they look at data privacy versus needing to protect the nation from illicit actors. Different things happen in history to change where folks think that balance needs to be. Obviously after 9-11 we felt one way and that spectrum, it's probably a sliding scale on how you feel over the course of history and then given years. But at this point where we are in this country is seeking a certain level of transparency around financial activity in this country. And I guess I would take, there was a comment earlier kind of comparing the BSA and maybe confusing it a little bit with NSA and what they do. So let me try to pull that back apart. So I think when we were talking about revelations in the last year that have come up through releases of NSA information and Snowden and other things, we're talking about an issue in this country of was there a collection of information that the public didn't know about and that the public disagrees with and thinks it goes too far on the data privacy side in the wrong direction. That is very different than the Bank Secrecy Act which is a public statute. What is collected is on our website. You can see every single piece of information that is collected under the BSA regime. Every time there's a thought that we might collect some new type of information or extend the collection that's done through a public rulemaking process. Most recently when Chip was in the government thinking about beneficial ownership and whether we needed to collect more information on that, he did a city to city tour, asking people of the public to come in, be part of hearings and to comment on whether this was a good idea. That's a very different situation I think when you start talking about what's happening in the BSA public rulemaking space versus what's happening perhaps in the intelligence community. Both have different rules but they also have very different ways of doing business. Thank you very much. So perhaps some questions. I don't know who's got the microphone. I saw Jim Harper raising his hand first but I don't know if the microphone is around. The microphone seems to be gone so perhaps I don't wanna hold the program up so there we go. Here the microphone has arrived, okay. Point well made that the BSA and the NSA are different things. I just wanted to clarify that a little bit because I touched on it only very briefly. A pair of cases after the passage of the Bank Secrecy Act in the early 1970s created the legal doctrine that the National Security Agency uses to as its basis for collecting data about all our telephone calls. So the California Bankers case in US versus Miller were precedents that underlay Smith versus Maryland which is the telephone records case. I think I just wanted to clarify that. No confusion about the two. I won't ask whether you can confirm that the NSA does not collect financial information. I would refer you to the National Security Agency. We'll try to take that up with them. Okay, next I guess. Jerry, we have a question here. Jerry Brito. So recently two men were arrested in Miami charged with violating Florida's money transmission laws and apparently they met each other on local bitcoins which is not necessarily an exchange but it's a site that allows it to form where people can speak and find each other. How would Vincenzo's guidance or the BSA apply? Sure. And what's your general thoughts on that case? So my general thoughts, because great, that's where I was gonna start. So my general thoughts are that that might just be an example of where our AML regime is working. So you're always gonna have mentioned, I think in the prepared remarks that any financial institution, any financial service can be exploited by bad actors. I think we've seen through the test of time it is. They all are at some point exploited by bad actors. And so the whole point of the AML regime is to try to mitigate those risks and to respond to those risks when they do occur. So to me, in a general sense, this is us seeing our AML regime in this country at the federal level and at the state level working. In terms of how we would treat those same individuals under our rules, we have a fact in circumstances kind of test for every situation. So this is where I give you the really wormy answer of it depends on the facts and circumstances, but it is in fact true. But let me give you an example that we have a great analyst who's really into cryptocurrencies and knows them really well, follows everything. And we're having a chat yesterday about the dealers that advertise that if you wanna buy Bitcoins, meet me in the local Starbucks, give me your cash, I'll give you Bitcoins. And would that be an exchanger under our rules? And then we got into a debate because we're really geeky at FinCEN, but we did. There was a whole room full of us debating this issue. And I think the common belief for us is yeah, because essentially you're taking money from the public kind of at large and giving them value in return or something that substitutes for value, which is Bitcoin. So under that circumstance, that person would be required to register as a money transmitter with FinCEN. I'm sorry. So the website at which these exchangers find each other, the website that nearly facilitates. So are you asking whether they would register the website or themselves personally? They would have to register the business, whatever that is. And so we would get into a discussion with them of how they're organized and what that would be. Okay, so I think I've got, I saw Carter, then I saw Carol, then I saw Cashmere. And I don't know where we'll, we might run out of time after that, but it's. Yeah, just to follow on on that Florida case, because that's a really interesting one. And I shouldn't have been surprised that there are special money laundering laws in Florida, but I was, I don't remember my any advice. And, but it did raise the interesting question of, what does FinCEN sort of policy on how you view extra layered on state laws or regulations? Do you encourage them? They exist in some states, they exist in others, mostly as criminal statutes as I understand, but not as banking regulations. Most of the states just say comply with FinCEN's rules. So every state's got some level of its own laws and regulations and licensing requirements for financial institutions and those, they aren't all exactly the same, which is part of the rub that folks find it difficult to navigate, but every state's got something and they all cover banks in one way or another. And then when you get into the non-bank financial institutions, which is where we're finding virtual currency or digital currency, how they're covered depends. I think we heard Ben Loskey today say that he thinks the New York's gonna go in the direction of defining this under their money transmitter laws or laws yet to be determined like we have at the federal level. So this is just, we know this exists. It's not that uncommon, it's true in this space, but it's true in any number of business spaces, criminal law spaces where you have both state law and federal law that apply of concurrent and overlapping jurisdictions. What we try to do to deal with that, to keep the burden as low as possible on business and to have consistency in the way we give a regulatory approach, is to work as closely with the states as we can. There's something called the Conference of State Bank Supervisors, which is where all the state regulators belong to and they come together and try amongst themselves to have some commonality. They're engaging in more and more joint state examinations. So if there's a entity that operates and is licensed in more than one state, you might think of it in a money transmitter, like a more traditional money transmitter, like a Western Union money gram or something like that that's in every state, I think. Several states will come together and do a joint exam together to give that consistency. Vincent Will has started going in on some of those ourselves as well to give that federal to state consistency. There's probably more work we can be doing, but it's an issue that both the states and at the federal level, we take seriously. Thank you, so good. Carol, I think, and then we had Kashmir and I've got it. Thank you. The Interpretive Guidance last March, a year ago, seemed to affirm the position that the Department of Justice had taken in the prosecution of the EGLE case back in 2007, 2008. And at that time, the declaration was that it was a money transmitter and a MSB for BSA purposes. There were letters that were written in conjunction with the rewrite of the MSB regulation in 2009 or 10, and then again with the prepaid regulation encouraging that maybe a new category of MSB be created for digital currencies or virtual currencies. As you start to deconstruct what goes on in the digital virtual currency world, there really are multiple types of functions, and I know that the guidance that you put out made it clear that you weren't doing currency, that it wasn't currency exchange because currency exchange was defined to be fiat currency. Are you giving any kind of thought of looking at that there is a currency exchange function and possibly rewriting the definition of currency exchange to accommodate that, and then looking at the second piece of it of what really constitutes money transmission and possibly even reinstating the concept of stored value when you start talking about digital wallets where value is held. As I said, there are at least three or four different things that are going on here. Sure, so we considered, and Jim can tell you because he was director of fencing at the time, so we, i.e. him, and the people working for him at the time, considered all of those issues as I understand it and purposely went in the direction where we are, and we're pretty comfortable with it. Let me explain what that is, why we're comfortable with it and how we got there in a moment, but just to go back to the eagle 2007, 2008 timeframe, one thing that would have set that apart from where we are today, there's probably a couple things. Back then, to charge someone with the legal money transmitting business, prosecutors were using the state law. So we talk about federal and state law. There was not yet the Foley, as I don't think yet at that time, we had the Foley, the registration process in place yet at FinCEN, and so most of those illegal money transmitting cases were brought using state law. Since that time, we now have the registration process in place at the federal level. It's pretty streamlined. There's no cost to it. So businesses are tending to go that way and prosecutions are tending to rely more on the federal system at this point, maybe more of a nuanced detail than important. In terms of why did we go the way we did in terms of defining virtual currency exchangers and administrators under the money transmitting law? So before the guidance in March of last year, yes, last year, about a year or two previous to that, there was a change in the rules to change the definition of money transmission. And that was done purposely with the idea of emerging payment methods that were already being, we saw them in the marketplace, we knew there was more coming and wanted there to be some flexibility around how we would define the transmission, not just of fiat currency, but other things of value. And I always write it down because I can never remember the exact construction, but I think it's other value that substitutes for currency. So that was the phrase that was added into the rule for money transmitter that would give us a certain amount of flexibility that as things develop, as things change, we could throw it into the preexisting rules. The reason that that's important to us is because it gives a level playing field, right? There's all kinds of types of financial institutions out. They're all types of financial services. Generally, we're looking for them to have the same principles in place to protect the US financial system, reporting requirements, AML program controls to prevent dirty money from coming into the system. And we wanted them to get into that preexisting regulatory environment that all other institutions use, all other services are a part of that. At the end of the day, if there's a change and all of a sudden Bitcoin's thought of as a commodity, quite frankly, it's gonna have many of the very same AML regulatory requirements. So it's a little bit apples orange, who cares at the end of the day, as long as we've mitigated the risks, as long as we've got the controls in place. I think we have time for one more question. I think Kashmir here will head her hand up. I was gonna ask you, you have Bitcoin companies that are starting to register. I was wondering if you have any other virtual currency companies that are registering. And then you said they are starting to file SAR suspicious activity reports. And I was just curious how those compare to SARs that you would get from a normal money changer. Are people rave about how great the SARs are and how well written and how useful. So it's not many at this point, quite frankly. It's still pretty low in terms of the number of, we do have different virtual currency exchanges and administrators that have registered with us. It's not just Bitcoin. My folks tell me that we're up to over 400 different types of cryptocurrencies at this point worldwide. So there's a lot out there. And we're getting registrations from different folks. But overall, from what I'm hearing when we, the companies that are filing SARs know what they're doing and they're doing a great job of it. Great, okay. So we're about out of time, but we should thank Jennifer Shastry for a really interesting update. Thank you.