18 U.S. Code § 1960 - Prohibition of Unlicensed Money Transmitting Businesses
If you operate an unlicensed money-transmitting business, you could potentially face charges for violating federal law codified under Title 18 U.S. Code 1960.
This federal statute prohibits conducting financial transactions, currency exchanges, check cashing, payment processing, or providing wire transfer services at the foreign or interstate level without having a valid license issued by an authorized state or federal agency.
Operators of money-transmitting businesses are required to obtain a state license or register with the Financial Crimes Enforcement Network (FinCEN), an agency within the United States Treasury Department.
18 U.S.C. 1960 is a standard tool used to prosecute Bitcoin business operators, often used in the electronic currency market. Today, a significant amount of “real” money is invested in this virtual currency.
The Department of Justice (DOJ) will prosecute individuals for failing to register their Bitcoin-related business. Bitcoin and other virtual currencies are covered by Section 1960 and money laundering statutes under 18 U.S.C. 1956 and 1957.
When virtual currencies are used to further underlying criminal activity, federal prosecutors use traditional statutes for other activities, such as drugs, cybercrimes, child exploitation, and firearms laws.
Simply put, 18 U.S.C. 1960 is the criminal statute making it a federal crime to operate a money-transmitting business without first complying with state licensing or federal registration requirements. It's also illegal to run this business, knowing the funds being transmitted are the proceeds of criminal activity.
What Does Federal Laws Say?
The unlicensed money transmitting business statute, 18 U.S.C. 1960, says, “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 five years, or both.”
To establish criminal liability, the government must prove that an individual or a business did the following:
- Transferred funds on behalf of the public, and
- Violated state or federal licensing and registration requirements or
- With the knowledge the funds were derived from a criminal offense.
The federal registration requirements for money-transmitting businesses are described in 31 U.S.C. 5330, a provision within the Bank Secrecy Act. These businesses must register with the Secretary of the Treasury under 31 U.S.C. 5330(a)(1).
A “money transmitter” required to register includes “anyone who transmits currency, funds, or other value that substitutes for currency between persons or locations by any means.”
The term “money transmitting” includes transferring funds on behalf of the public by any means, including transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier” as defined under 18 U.S.C. 1960(b)(2).
Section 5330 defines a money transmitting business as one that “is required to file reports under 31 U.S.C. 5313,” covering domestic financial institutions involved in a transaction for the payment, receipt, or transfer of United States coins or currency or other monetary instruments the Secretary of the Treasury prescribes.
It's not illegal to transfer money. Thus, what would be considered a violation of federal law? Violations of Section 1960 occur when a business transmits money across state or national boundaries that “affect interstate or foreign commerce.” So, a crime occurs when all of these factors are true:
- The business is not licensed within the state where it's located, and it's a crime under state law;
- The owner fails to register their business with the Financial Crimes Enforcement Network (FinCEN) within the Treasury Department defined under Title 31 U.S.C. 5330; or
- The business in question handles transmitting funds known by the owner or operator as the proceeds of criminal activity.
18 U.S.C. 1960 - Quick Facts
Below is a list of some essential facts you should know about this federal law:
- "Money transmitting" means transferring funds for the public, such as wire transfer, check, courier, fax, etc.
- This federal law applies only to businesses transferring funds that affect interstate or foreign commerce. State laws would apply if a money transfer does not cross state lines or use federal infrastructure.
- Section 1960 does not require prosecutors to prove intent.
- The Patriot Act of 2001 amended Section 1960(b)(1)(A) to include "whether or not the defendant knew the operation was required to be licensed."
- The Patriot Act loosened the necessity to prove intent to target large-scale organized financial crimes involving millions of dollars.
- After the 9/11 terrorist attacks on the World Trade Center, prosecutors focused on money-transmitting businesses that could potentially launder money for terrorist organizations and drug trafficking networks.
- The penalties for a conviction for violating U.S.C. 1960 include a fine of up to $250,000 and up to five years in federal prison.
What Are the Related Federal Laws?
18 U.S. Code Chapter 95 racketeering contains numerous federal laws that are related to 18 U.S.C. 1960 prohibition of unlicensed money transmitting businesses, including the following:
- 18 U.S.C. 1951 - Interference with commerce by threats or violence;
- 18 U.S.C. 1952 - Interstate and foreign travel or transportation in aid of racketeering enterprises;
- 18 U.S.C. 1953 - Interstate transportation of wagering paraphernalia;
- 18 U.S.C. 1954 - Offer, acceptance, or solicitation to influence operations of employee benefit plan;
- 18 U.S.C. 1955 - Prohibition of illegal gambling businesses;
- 18 U.S.C. 1956 - Laundering of monetary instruments;
- 18 U.S.C. 1957 - Engaging in monetary transactions in property derived from specified unlawful activity;
- 18 U.S.C. 1958 - Use of interstate commerce facilities in the commission of murder-for-hire;
- 18 U.S.C. 1959 - Violent crimes in aid of racketeering activity.
What Are the Legal Defenses?
If you are accused of operating an unlicensed money-transmitting business, our federal criminal defense lawyers might be able to utilize several strategies on your behalf, as discussed below.
Maybe we can argue that there is a lack of evidence to convict that the business is involved in transmitting funds. Perhaps we can persuade the government there is unreliable evidence of interstate or foreign commerce involvement.
Perhaps we can show the prosecutor can't prove all the elements of the crime beyond a reasonable doubt. Maybe we can offer you are running a legitimate business and not part of a large-scale criminal operation, which is the primary focus of this law.
Perhaps we can negotiate a favorable plea bargain when guilt is not in doubt, but we are prepared to take the case to trial if necessary.
You can contact our law firm for a free case consultation by phone or via the contact form. The Hedding Law Firm has offices in Los Angeles, California.