Florida’s Money Laundering Statute Won’t Affect Most Bitcoin Users

Andrew ‘Drew’ Hinkes is counsel at Berger Singerman LLP, a business law firm in Florida. Hinkes represents companies and entrepreneurs in state and federal commercial litigation matters, representation of court-appointed fiduciaries and electronic discovery issues.

In this opinion piece, Hinkes looks at the potential impact of the recent court decision in Florida that centered in part on the definitions of both bitcoin and money transmission.

Florida’s legislature is considering a bill that would add “virtual currency” to the definition of “monetary instruments” covered within its anti-money laundering (AML) statute.

This proposed revision seems to be a direct reaction to the dismissal order in State vs Espinoza (which remains on appeal), and that would close a loophole in Florida’s money transfer statute.

But, however ominous it may sound, this change would only impact a fraction of virtual currency activities, so the new definition is likely to have a minor impact on its use in Florida.

One of the key innovations of bitcoin and other virtual currencies is the ability to transact pseudonymously. Most virtual currency transactions do not require the transacting parties to know each other, meet face-to-face or directly interact to exchange value. Most often, virtual currency users transact across the internet, through QR codes, trade on exchanges or buy and sell their bitcoins via bitcoin ATMs.

For the purposes of this law, the lack of direct communication between parties is critical, and demonstrates the narrow impact of the proposed legislation.

Getting technical

Florida’s Money Laundering Statute, based upon a similar federal statute (18 U.S.C. §1956 1998) covers nine different behaviors.

First, it punishes “transactions” wherein a person, “knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity,” conducts or attempts to conduct such a “financial transaction” which in fact involves the proceeds of “specified unlawful activity” either:

1. With the intent to promote the carrying on of specified unlawful activity
2. Knowing that the transaction is designed in whole or in part to
   (a) conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or,
   (b) to avoid a transaction reporting requirement under state law.

Florida’s statute also covers “transportation” type of infractions including where any person transports or attempts to transport a monetary instrument or funds:

1. With the intent to promote the carrying on of specified unlawful activity
2. Knowing that the monetary instrument or funds involved in the transportation represent the proceeds of some form of unlawful activity and knowing that such transportation is designed in whole or in part:
   (a) To conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or
   (b) To avoid a transaction reporting requirement or money transmitters’ registration requirement under state law.

Florida’s statute also covers financial transactions which “involve property or proceeds which an investigative or law enforcement officer, or someone acting under such officer’s direction, represents as being derived from, or as being used to conduct or facilitate, specified unlawful activity,” when the person’s conduct or attempted conduct is undertaken with the intent:

1. To promote the carrying on of specified unlawful activity
2. To conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds or property believed to be the proceeds of specified unlawful activity;
3. To avoid a transaction reporting requirement under state law.

Any charge brought under this statute requires that the party charged with its violation have intent and/or actual knowledge.

On Espinoza

Espinoza was charged with violating §896.101(3)(c), Fla. Stat., (relating to law enforcement officers), and (5)(a) and (b) (discussing the appropriate punishment for the violation based upon the amount of value at issue).

The court dismissed that charge against Espinoza based upon three separate defects:

1. A lack of clarity of whether virtual currency is “monetary instrument”
2. A lack of clarity as to the meaning of the word “promote”
3. A lack of clarity of which party to the transaction needs to have intent demonstrated by evidence.

Although the bill may clarify that virtual currency now qualifies as a monetary instrument, the other two issues identified by Judge Pooler in the Espinoza opinion remain unaddressed by this bill.

Because money laundering charges under ch. 896, require that at least one of the two parties to the transaction have knowledge and or intent, and a charge must be supported by evidence of that intent and or knowledge, most virtual currency transactions will still not factually qualify for prosecution under this law.

While there may be greater risk to users of virtual currency who actually interact personally with others, or have actual knowledge of the motives to exchange value, the proposed statutory change will probably not affect most virtual currency users.

Florida state image via Shutterstock