CCA Regulatory Compliance & Reporting 2 — Questions and Answers
Question 1: Under FinCEN's 2019 guidance, which activity requires a cryptocurrency exchange to register as a Money Services Business (MSB)?
- Holding private keys for personal use
- Exchanging virtual currency for fiat on behalf of customers (Correct answer)
- Mining cryptocurrency for block rewards
- Developing a blockchain protocol
Correct answer: Exchanging virtual currency for fiat on behalf of customers
FinCEN requires entities that exchange virtual currency for real currency, funds, or other virtual currency on behalf of others to register as MSBs.
Question 2: Which threshold triggers an automatic Currency Transaction Report (CTR) filing requirement under U.S. BSA rules?
- $5,000 in a single transaction
- $10,000 in cash transactions within a business day (Correct answer)
- $25,000 in wire transfers
- $50,000 in monthly aggregated transactions
Correct answer: $10,000 in cash transactions within a business day
The BSA requires filing a CTR for cash transactions exceeding $10,000 in a single business day by or for any person.
Question 3: The FATF 'Travel Rule' for virtual assets requires VASPs to transmit which information alongside transfers?
- Only the transaction hash and block height
- Originator and beneficiary identifying information (Correct answer)
- The private key of the sending wallet
- KYC documents as email attachments
Correct answer: Originator and beneficiary identifying information
FATF Recommendation 16 requires VASPs to collect, verify, and transmit originator and beneficiary information with virtual asset transfers.
Question 4: A cryptocurrency auditor discovers a client is structuring transactions to avoid CTR thresholds. This activity is known as:
- Layering
- Structuring (smurfing) (Correct answer)
- Integration
- Comingling
Correct answer: Structuring (smurfing)
Structuring, also called smurfing, is the illegal practice of breaking up transactions specifically to evade BSA reporting thresholds.
Question 5: Under the EU's MiCA (Markets in Crypto-Assets) regulation, which entity type is required to obtain authorization before operating?
- Individual crypto traders
- Crypto-Asset Service Providers (CASPs) (Correct answer)
- DeFi protocol smart contract deployers
- NFT artists minting personal collections
Correct answer: Crypto-Asset Service Providers (CASPs)
MiCA requires Crypto-Asset Service Providers to obtain authorization from a competent national authority before providing services in the EU.
Question 6: Which U.S. form must a person file when holding more than $10,000 in foreign financial accounts, including some crypto accounts, at any time during the calendar year?
- Form 8949
- FBAR (FinCEN Form 114) (Correct answer)
- Form 1099-B
- Form W-8BEN
Correct answer: FBAR (FinCEN Form 114)
FinCEN Form 114, the FBAR, must be filed when aggregate foreign financial account balances exceed $10,000 at any point during the year.
Question 7: In the context of crypto compliance, a 'de-risking' strategy by a financial institution typically means:
- Implementing stronger AML controls for crypto clients
- Terminating or refusing banking relationships with crypto businesses (Correct answer)
- Diversifying investments across multiple blockchains
- Reducing transaction fees for high-risk customers
Correct answer: Terminating or refusing banking relationships with crypto businesses
De-risking refers to banks exiting or refusing to serve entire categories of customers perceived as high-risk, such as VASPs, rather than managing individual risk.
CCA Regulatory Compliance & Reporting 2
Under FinCEN's 2019 guidance, which activity requires a cryptocurrency exchange to register as a Money Services Business (MSB)?