Regulatory Compliance & Reporting Flashcards
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Read the first 7 Regulatory Compliance & Reporting flashcards as text
The New York BitLicense, issued by NYDFS, is required for which type of activity involving New York residents?
Answer: Virtual currency business activity, including exchange and transmission
The NYDFS BitLicense is required for any entity engaged in virtual currency business activity involving New York or New York residents, including exchange and transmission.
When assessing a crypto firm's AML program, an auditor should verify that the Suspicious Activity Report (SAR) filing process includes:
Answer: Maintaining SAR filings for at least five years without disclosing to the subject
SARs must be retained for five years, and the subject of the SAR must never be informed (tipping off prohibition) under the BSA.
Under IRS Notice 2014-21, how is cryptocurrency received as payment for services treated for income tax purposes?
Answer: It is ordinary income at fair market value on the date received
The IRS treats crypto received for services as ordinary income equal to its fair market value in USD on the date of receipt.
Which regulatory body in the U.S. has primary authority over cryptocurrency futures and derivatives markets?
Answer: CFTC
The Commodity Futures Trading Commission (CFTC) regulates futures, options, and swaps on commodities, which the CFTC has determined includes Bitcoin and other cryptocurrencies.
An auditor reviewing a crypto exchange's transaction monitoring system should assess whether alerts are tuned to detect which typology?
Answer: Layering through rapid conversion between multiple cryptocurrencies
Rapid conversion between cryptocurrencies (chain-hopping) is a common layering typology that transaction monitoring systems should be calibrated to detect.
The concept of 'risk-based approach' in crypto AML compliance means:
Answer: Allocating compliance resources proportional to the assessed level of money laundering risk
A risk-based approach means higher-risk customers and transactions receive more scrutiny and controls, while lower-risk activity is subject to lighter-touch procedures.
Under the Bank Secrecy Act, what is the maximum civil penalty per willful violation for failing to maintain an adequate AML program?
Answer: $1,000,000 or twice the transaction amount
Willful BSA violations can result in civil penalties of up to the greater of $1,000,000 or twice the amount of the transaction involved.