Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF)
This domain tests the Bank Secrecy Act framework as applied to convertible virtual currency (CVC): who is an obliged entity, what a risk-based program must contain, when to file, and how the travel rule operates. Questions reward precision on thresholds and on the difference between suspicion and proof.
Core obligations
- A CVC administrator or exchanger is a money services business (MSB) and money transmitter under FinCEN rules; a person merely using CVC to buy goods or services is a user and not an MSB.
- MSBs must register with FinCEN, designate a compliance officer, adopt written policies, train staff, and undergo independent testing.
- Customer identification and customer due diligence are required; enhanced due diligence applies to high-risk customers, PEPs, and higher-risk geographies.
- Suspicious activity reporting for MSBs is triggered at a $2,000 threshold. Currency transaction reports cover currency over $10,000 in a business day - CVC itself is not currency for CTR purposes.
Travel rule
FATF Recommendation 16 requires originator and beneficiary information to travel with qualifying transfers, with an interpretive threshold of USD/EUR 1,000. In the United States the funds-transfer rule uses $3,000. FinCEN proposed in 2020 to extend travel-rule obligations to CVC transfers; confirm its current status rather than assuming it is in force.
Worked example
A customer buys $9,600 of CVC with cash at a kiosk on Monday, then $9,700 on Tuesday. Each purchase is individually under $10,000, but aggregated cash in a single business day is what matters for CTR analysis, and the pattern suggests structuring. The kiosk should review the activity and file a SAR describing the pattern, not merely process the sales.
Traps
- Using a $10,000 threshold for SARs.
- Tipping off the customer that a SAR was filed - SAR confidentiality is absolute.
- Waiting for proof of a crime instead of reporting reasonable suspicion.