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They were a US corporation with a US bank account and registered with FinCEN. What could be the reason their bank account was closed? Overly-cautious risk depar

They were a US corporation with a US bank account and registered with FinCEN. What could be the reason their bank account was closed? Overly-cautious risk department at their choice of bank?

sillysaurus 14y ago
What could be the reason their bank account was closed? I wish Bitfloor had provided this info so that others could defend against the same fate.
- sachingulaya 14y ago
  This is pure speculation but I think it could have something to do with them using CapitalOne's P2P transfer for high volume business transactions. I'm sure they violated the terms of service somewhere.
  - _red 14y ago
    Remember how a few weeks ago when the USGov released a reported acknowledging BTC as a currency? Remember how everyone thought that was a great thing? There was a hidden point to that. Being a currency brokerage company requires millions in compliance / certification / regulatory fees. Its not like the big NY banks are going to just let people get their money out of the system without a fight.
    - julespitt 14y ago
      The FinCEN guidance explicitly states that Currency Exchange regulations do not apply: http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.... "A person must exchange the currency of two or more countries to be considered a dealer in foreign exchange. Virtual currency does not meet the criteria to be considered 'currency' under the BSA, because it is not legal tender. Therefore, a person who accepts real currency in exchange for virtual currency, or vice versa, is not a dealer in foreign exchange under FinCEN’s regulations." Edit: Just need to clarify that Money Transmitter regs do apply.
      - apaprocki 14y ago
        Regulations certainly apply. For example, in the case of Bitfloor's local BoA deposit, a third party was accepting cash deposits and forwarding the money to the exchange. That requires the third party to be a money transmitter and could have repercussions if the bank account was also with BoA.
        julespitt 14y ago
        Sure - I was just responding to the claim that it was Currency Exchange regulations that apply here.
    - ericd 14y ago
      I'm pretty sure the NY banks have things they think are much more important to worry about currently - people "leaving the system" isn't a blip on their radar yet.
      - eric_bullington 14y ago
        Well, I think they've noticed the blip, and are at least pretending not to be concerned: http://blogs.wsj.com/moneybeat/2013/04/17/bitcoin-doesnt-scare-discover/ http://blogs.wsj.com/moneybeat/2013/04/17/bitcoin-doesnt-sca...
  - _delirium 14y ago
    I'm surprised they were able to use CapitalOne's P2P at all, unless their volume was quite low: P2P has a $5000-per-day aggregate transfer limit.
julespitt 14y ago
It's hard to get and keep a bank account for any FinCEN registered purpose, without bringing Bitcoin into it at all. I've always figured that Banks must be fearful that should a customer of their not be compliant enough, they could be considered out of compliance as well. For all the big news stories we all hear of ignoring or circumventing regulations, all I ever see first-hand is outright paranoia and fear.
- eru 14y ago
  There's both. They are often fighting the last war, though.
trotsky 14y ago
looking at their twitter history it looks like they had bank accounts closed on them left and right. They had a lot of different people depositing cash in different places, lots of wires maybe ach. I am sure the fraud/risk/laundering scoring systems see that kind of thing as 10 different kinds of trouble. Risk management is controlling your exposure to potential problems, not reacting to proven problems.
apaprocki 14y ago
My guess? They had two avenues to get local cash into the system, CapitalOne P2P and Bank of America (LocalTill, LLC). By taking cash, LocalTill, LLC would be required to be registered as a money transmitter in NY State (as well as the token FinCEN registration). They almost definitely were not, so once identified or threatened, they probably closed up shop, closing off that route of funds. If the exchange's bank account was also with BoA, they could have easily identified that and decided they didn't want to be a part and would close it. Something similar could have happened at CapitalOne if the P2P TOS were being violated in some way. edit: For those that don't know how LocalTill operates -- The merchant would forward a "deposit" to LocalTill and one would be instructed to deposit a dollar amount plus a processing fee with a unique # of cents to LocalTill's BoA bank account. Upon electronic notification that the amount was received, LocalTill would send the money minus their fee on to the business which set up the transaction.
- deleted 14y ago
  [deleted]

They were a US corporation with a US bank account and registered with FinCEN. What could be the reason their bank account was closed? Overly-cautious risk department at their choice of bank?

sillysaurus 14y ago

What could be the reason their bank account was closed? I wish Bitfloor had provided this info so that others could defend against the same fate.

sachingulaya 14y ago
This is pure speculation but I think it could have something to do with them using CapitalOne's P2P transfer for high volume business transactions. I'm sure they violated the terms of service somewhere.
- _red 14y ago
  Remember how a few weeks ago when the USGov released a reported acknowledging BTC as a currency? Remember how everyone thought that was a great thing? There was a hidden point to that. Being a currency brokerage company requires millions in compliance / certification / regulatory fees. Its not like the big NY banks are going to just let people get their money out of the system without a fight.
  - julespitt 14y ago
    The FinCEN guidance explicitly states that Currency Exchange regulations do not apply: http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.... "A person must exchange the currency of two or more countries to be considered a dealer in foreign exchange. Virtual currency does not meet the criteria to be considered 'currency' under the BSA, because it is not legal tender. Therefore, a person who accepts real currency in exchange for virtual currency, or vice versa, is not a dealer in foreign exchange under FinCEN’s regulations." Edit: Just need to clarify that Money Transmitter regs do apply.
    - apaprocki 14y ago
      Regulations certainly apply. For example, in the case of Bitfloor's local BoA deposit, a third party was accepting cash deposits and forwarding the money to the exchange. That requires the third party to be a money transmitter and could have repercussions if the bank account was also with BoA.
      - julespitt 14y ago
        Sure - I was just responding to the claim that it was Currency Exchange regulations that apply here.
  - ericd 14y ago
    I'm pretty sure the NY banks have things they think are much more important to worry about currently - people "leaving the system" isn't a blip on their radar yet.
    - eric_bullington 14y ago
      Well, I think they've noticed the blip, and are at least pretending not to be concerned: http://blogs.wsj.com/moneybeat/2013/04/17/bitcoin-doesnt-scare-discover/ http://blogs.wsj.com/moneybeat/2013/04/17/bitcoin-doesnt-sca...
- _delirium 14y ago
  I'm surprised they were able to use CapitalOne's P2P at all, unless their volume was quite low: P2P has a $5000-per-day aggregate transfer limit.

julespitt 14y ago

It's hard to get and keep a bank account for any FinCEN registered purpose, without bringing Bitcoin into it at all. I've always figured that Banks must be fearful that should a customer of their not be compliant enough, they could be considered out of compliance as well. For all the big news stories we all hear of ignoring or circumventing regulations, all I ever see first-hand is outright paranoia and fear.

eru 14y ago
There's both. They are often fighting the last war, though.

trotsky 14y ago

looking at their twitter history it looks like they had bank accounts closed on them left and right. They had a lot of different people depositing cash in different places, lots of wires maybe ach. I am sure the fraud/risk/laundering scoring systems see that kind of thing as 10 different kinds of trouble. Risk management is controlling your exposure to potential problems, not reacting to proven problems.

apaprocki 14y ago

My guess? They had two avenues to get local cash into the system, CapitalOne P2P and Bank of America (LocalTill, LLC). By taking cash, LocalTill, LLC would be required to be registered as a money transmitter in NY State (as well as the token FinCEN registration). They almost definitely were not, so once identified or threatened, they probably closed up shop, closing off that route of funds. If the exchange's bank account was also with BoA, they could have easily identified that and decided they didn't want to be a part and would close it. Something similar could have happened at CapitalOne if the P2P TOS were being violated in some way. edit: For those that don't know how LocalTill operates -- The merchant would forward a "deposit" to LocalTill and one would be instructed to deposit a dollar amount plus a processing fee with a unique # of cents to LocalTill's BoA bank account. Upon electronic notification that the amount was received, LocalTill would send the money minus their fee on to the business which set up the transaction.

deleted 14y ago
[deleted]