Unlicensed Money Transmitting Business Defense: 18 U.S.C. § 1960 Explained

By Elizabeth Franklin-Best, Esq., and Christopher Zoukis, JD, MBA

Operating a money transmitting business without the right license or registration is a federal felony — and in the cryptocurrency era, that statute reaches far more people than it once did. If investigators have begun asking how your platform or business moves customer funds, talk with an unlicensed money transmitting lawyer before you answer them, because § 1960 can be charged even where the money itself was clean and the operator believed the business was lawful. At Elizabeth Franklin-Best, P.C., we defend individuals and businesses against § 1960 allegations nationwide.

Section 1960 — operating an unlicensed money transmitting business, codified at 18 U.S.C. § 1960 — was enacted as an anti-money-laundering measure, and prosecutors increasingly use it against cryptocurrency exchangers, peer-to-peer traders, and informal money-movement networks. It carries up to 5 years per count. Because it sits inside the family of statutes addressed in our money laundering defense practice, a § 1960 count rarely arrives without company.

Statutory-definition fights are the core of § 1960 work, and they are the kind of work our practice is built around. Our principal attorney, Elizabeth Franklin-Best, has handled more than 330 federal proceedings — over 100 of them appeals across all twelve circuit courts and at the United States Supreme Court — the appellate vantage point from which the definitional and registration questions at the heart of a § 1960 case are usually won or lost. She enters 2026 recognized by Best Lawyers in America as a “Best Lawyer” in Appellate Practice and ranked by Chambers USA for 2026 in Litigation: White-Collar Crime & Government Investigations, and she is the author of Reversing Your Criminal Conviction. Element by element, we test whether what you ran was actually a covered money transmitting business and whether it was actually “unlicensed” within the meaning of the statute. A § 1960 investigation is best met early — and a paid, one-hour initial consultation is how our representation begins.

Unlicensed Money Transmitting: Quick Answer

Question	Answer
What is unlicensed money transmitting?	Knowingly operating a money transmitting business that is unlicensed under state law, unregistered federally, or used to move criminally derived funds — a felony under 18 U.S.C. § 1960.
What must the government prove?	That the defendant knowingly conducted a money transmitting business affecting commerce, and that the business was “unlicensed” in one of three statutory ways.
What penalties can apply?	Up to 5 years in federal prison per count, plus fines and forfeiture of the funds involved.
Does the money have to be dirty?	No. Two of the three ways a business is “unlicensed” require no criminal funds at all — the violation is the missing license or registration.
What is the first step in a defense?	A confidential review of how your operation actually worked. Elizabeth Franklin-Best, P.C. offers a paid, one-hour initial consultation for § 1960 matters nationwide.

Key Takeaways

• Section 1960 criminalizes knowingly operating an unlicensed money transmitting business and was enacted as an anti-money-laundering tool.
• A business is “unlicensed” in three ways: operating without a required state license, failing to comply with federal registration requirements, or transmitting funds known to be criminally derived.
• Two of the three theories require no criminal money at all — the violation is the missing license or registration.
• The First and Second Circuits have now held that bitcoin is “funds” under § 1960, applying the statute to cryptocurrency exchangers and peer-to-peer traders.
• The government must prove the defendant knowingly operated the business — but generally need not prove the defendant knew a license was required.
• Section 1960 carries up to 5 years per count, plus forfeiture of the funds transmitted.
• It is frequently charged with money laundering and Bank Secrecy Act counts.
• An April 2025 Justice Department policy bars prosecutions built on unwitting regulatory violations — but knowing violations, criminal-funds cases, and state prosecutions continue.
• What counts as “money transmitting,” and whether a license was actually required, are real defense issues.

What Is 18 U.S.C. § 1960?

Section 1960 of Title 18 makes it a federal crime to knowingly conduct, control, manage, supervise, direct, or own all or part of an “unlicensed money transmitting business.” Congress enacted it as an anti-money-laundering measure, aimed at the informal and unregulated money-movement channels that criminal proceeds often flow through.

A “money transmitting business” is, broadly, a business that transfers funds on behalf of the public by any means. The category includes traditional money transmitters and money services businesses — but courts have read it far more broadly than that. In recent years, § 1960 has been applied to cryptocurrency exchangers, peer-to-peer digital-asset traders, and others who buy and sell virtual currency for customers. As money movement has moved online and into digital assets, the statute’s reach has expanded with it.

The most important — and most surprising — feature of § 1960 is that it does not require dirty money. A business can violate the statute even if every dollar it moved was legitimate. The offense, in two of its three forms, is simply the absence of a required license or registration.

Three Ways a Business Is “Unlicensed”

Section 1960 defines an “unlicensed money transmitting business” in three distinct ways, and a defense must identify which the government has charged.

• No state license. The business operates without an appropriate money transmitting license in a state where such operation is punishable as a misdemeanor or a felony — regardless of whether the operator knew of the licensing requirement.
• No federal registration. The business fails to comply with the federal money transmitting business registration requirements administered under the Bank Secrecy Act.
• Criminal proceeds. The business otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense, or are intended to be used to promote or support unlawful activity.

The first two theories are striking: they require no criminal money at all. A business that moved entirely legitimate funds can violate § 1960 simply because it lacked a state license or failed to register federally. Only the third theory involves criminally derived funds. Knowing which theory is in play shapes the entire defense.

Applied Insight: Because two of the three theories turn on a missing license or registration rather than on criminal money, § 1960 cases often turn on regulatory questions: was this activity actually “money transmitting”? Was a state license genuinely required? Did the federal registration obligation apply? Those questions can be litigated, and they are frequently where a § 1960 defense lives.

The Knowledge Question

Section 1960 requires that the defendant “knowingly” conducted the money transmitting business. But the knowledge requirement is narrower than many people expect.

For the state-license and federal-registration theories, courts have generally held that the government must prove the defendant knowingly operated the business — but need not prove the defendant knew a license or registration was required. For the state-license prong, Congress wrote that rule into the text itself: since the USA PATRIOT Act amendments of 2001, § 1960(b)(1)(A) applies “whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable.” In other words, ignorance that the activity needed a license is generally not a defense to those theories. That makes § 1960 a trap for operators who genuinely did not understand that their activity — particularly a new cryptocurrency business — fell within the licensing regime.

The third theory is different. Where the government proceeds on the criminal-proceeds theory, it must prove the defendant knew the funds were derived from crime or intended to promote unlawful activity. That knowledge element is a genuine, contestable issue. Identifying which theory the government has charged — and holding it to the knowledge that theory actually requires — is a central task of the defense.

Section 1960 and Cryptocurrency

Section 1960 has become one of the government’s primary tools against unregistered cryptocurrency activity. Courts have applied it to operations that exchange traditional currency for digital currency, to peer-to-peer Bitcoin traders, and to crypto businesses that moved customer funds without registering as money services businesses or obtaining state licenses.

This creates real exposure for people who entered the cryptocurrency space believing they were simply trading or facilitating trades. The line between an individual trading for their own account — which is generally not money transmitting — and operating a money transmitting business for others is consequential, and not always obvious. A person who bought and sold digital assets for customers, ran an exchange service, or operated a crypto kiosk may be within the statute even if they never imagined they needed a license.

The statute’s reach now runs well past exchanges. In United States v. Harmon, 474 F. Supp. 3d 76 (D.D.C. 2020), the court held that a bitcoin “mixer” — a service that takes in customers’ coins and sends them onward in a way that obscures their trail — is itself a money transmitting business, and that bitcoin qualifies as money under both the federal registration requirement and the local licensing law, noting that federal district courts have uniformly treated bitcoin as money or funds. Crypto kiosks and ATMs sit in the same exposure zone: a machine that exchanges the public’s cash for cryptocurrency is transferring funds on behalf of the public, which is exactly what § 1960(b)(2) describes. For mixer operators, kiosk networks, and over-the-counter desks alike, the licensing and registration questions are not formalities — they are the line between a business model and a felony count.

Because the regulatory treatment of digital assets has developed unevenly and continues to evolve, § 1960 cryptocurrency cases often raise genuine questions about whether the activity was covered “money transmitting” and whether a registration or license obligation truly attached. Those questions are part of our broader cryptocurrency fraud defense practice, and they are central to defending a crypto-based § 1960 charge.

Applied Insight: A recurring § 1960 crypto defense is the line between trading and transmitting. Buying and selling digital assets for one’s own account is not running a money transmitting business. The defense closely examines whether the client was a trader or genuinely operated a transmitting business for the public — a distinction the government sometimes glosses over.

The 2025 Shift in § 1960 Enforcement

Section 1960 charging policy moved significantly in 2025. In an April 7, 2025 memorandum titled “Ending Regulation by Prosecution,” the Deputy Attorney General directed federal prosecutors to stop targeting virtual currency exchanges, mixing and tumbling services, and offline wallet providers for the acts of their end users or for unwitting violations of regulations — and, more broadly, to stop pursuing digital-asset cases built on regulatory violations where there is no proof of willfulness or knowledge. The Department’s stated focus shifted to people who victimize digital-asset investors or use digital assets to further other serious crimes.

The courts, meanwhile, have settled the threshold legal question against operators just as the charging posture has narrowed. For a decade the rulings that bitcoin is “funds” under § 1960 came only from district courts; in 2025 and 2026 the first two federal courts of appeals to reach the issue agreed. In United States v. Freeman, 147 F.4th 1 (1st Cir. 2025), the First Circuit held that bitcoin falls within the plain meaning of “funds” in both § 1960 and the registration statute, 31 U.S.C. § 5330, and rejected the argument that the major questions doctrine bars FinCEN from requiring virtual-currency businesses to register — reasoning that Congress ratified that reading when it wrote “value that substitutes for currency” into § 5330 in the 2021 National Defense Authorization Act. The Second Circuit followed in United States v. Goklu, No. 24-767 (2d Cir. 2026), holding that a business exchanging bitcoin for cash for a fee transmits “funds” “by any and all means,” that physically handing over cash is itself a “means” of transmission, and that § 1960 is not unconstitutionally vague as applied to such an exchanger. The practical upshot is that the “crypto is not money” defense is now foreclosed in two circuits and unlikely to survive elsewhere; the live ground has shifted to whether the client actually operated a transmitting business, what the operator knew, and whether the 2025 charging policy supports declination.

That policy matters enormously to anyone under investigation, but it has to be read for what it is. It is charging guidance, not law: the text of § 1960(b)(1)(A) still says a defendant can be convicted whether or not they knew a license was required, state prosecutors remain free to enforce their own licensing statutes, and a future administration can rescind the memorandum as quickly as this one issued it. Where the government believes an operator knew of the registration or licensing duty — or knew the funds were criminal — the prosecutions continue. The memo’s real value is as defense leverage: in a case built on an unwitting regulatory lapse, it gives counsel a direct, department-level argument for declination or dismissal, and we press that argument from the first meeting with the government.

Penalties for an Unlicensed Money Transmitting Conviction

A violation of § 1960 is a felony carrying a statutory maximum of up to 5 years in federal prison per count, along with a fine. Forfeiture is a major feature of these cases: the government routinely seeks forfeiture of the funds involved in the unlicensed transmitting business, which can reach very large sums even where the underlying money was legitimate.

Section 1960 is rarely charged alone. It frequently travels with money laundering counts under §§ 1956 and 1957, with Bank Secrecy Act charges, and — in cryptocurrency matters — with fraud counts. A § 1960 case can therefore be part of a much larger indictment with substantial aggregate exposure.

Which Guideline governs the sentence turns on the prong of conviction, and the difference is substantial. Convictions under the license and registration prongs — § 1960(b)(1)(A) and (B) — are scored under U.S.S.G. § 2S1.3, the reporting guideline, which begins at level 6 plus the § 2B1.1 value table and offers a safe-harbor reduction back to level 6 where the funds were lawful in both source and intended use. A conviction under the criminal-proceeds prong, § 1960(b)(1)(C), is referenced instead to § 2S1.1, the money laundering guideline, which keys to the value of the laundered funds and climbs far faster. Holding the case to the correct guideline — and contesting the volume of funds attributed to the offense — is often worth more at sentencing than any other single fight.

Defenses to § 1960 Charges

No two § 1960 cases are alike, and no lawyer can promise a result. But several defense themes recur, and matching them to the evidence is the core of building a strategy:

• Not a money transmitting business. The activity does not meet the statutory definition of money transmitting — for example, trading digital assets for one’s own account rather than transmitting funds for others.
• No license was required. A state money transmitting license was not actually required for the activity, or operating without one was not a state misdemeanor or felony.
• No registration obligation. The federal registration requirement did not apply to the activity as conducted.
• Lack of knowledge of criminal proceeds. For the criminal-proceeds theory, the defendant did not know the funds were derived from crime or intended to promote unlawful activity.
• No knowing operation. The defendant did not knowingly conduct, control, or manage the business.
• Regulatory uncertainty. The unsettled regulatory treatment of the activity — particularly in cryptocurrency — supports the defense, especially on intent and on companion charges.
• Forfeiture and sentencing challenges. The volume attributed to the offense and the scope of forfeiture can be contested.

The right combination depends entirely on the facts. Our role is to test the government’s proof element by element, develop the favorable record, and press every legitimate defense — during the investigation, in pretrial motions, at trial, and on appeal.

How § 1960 Investigations Begin

Section 1960 investigations arise from money laundering and fraud investigations that follow funds into an unregistered transmitting channel, from bank Suspicious Activity Reports, from cryptocurrency-tracing analysis, from undercover operations, and from cooperating witnesses. The first sign is often a seizure of bank or cryptocurrency accounts, or a visit from federal agents.

The early steps matter. Preserve all records, including transaction histories, account records, and any communications with regulators or counsel about licensing. Decline to give an unprepared interview, and consult an experienced unlicensed money transmitting lawyer before saying anything substantive — and before responding to any asset seizure.

Why Work With Elizabeth Franklin-Best, P.C.

Section 1960 cases reward defense lawyers who understand the three statutory theories, who can litigate the regulatory questions of what counts as money transmitting and what licensing applied, and who can defend the modern cryptocurrency cases the statute increasingly produces.

The lawyer who would lead your defense, Elizabeth Franklin-Best, is admitted before the United States Supreme Court and each of the twelve federal circuit courts of appeals, and she wrote the book on undoing convictions — Reversing Your Criminal Conviction. Alongside her, Managing Director Christopher Zoukis supplies the sentencing-system and Bureau of Prisons insight that keeps strategy realistic from day one. Geography is no obstacle: through standing admissions and pro hac vice practice, we stand beside operators, traders, and businesses in district courts across the country.

Outcome guarantees have no place in federal criminal practice, so you will never hear one from us. What you will hear is specific: where the statutory definitions help you, what the transaction records actually show, which regulatory questions are genuinely open, and which fights are worth having. That assessment starts in a paid, one-hour initial consultation.

Talk With an Unlicensed Money Transmitting Defense Lawyer

Section 1960 has a way of turning licensing paperwork into prison exposure, and its forfeiture reach can sweep up funds that were never dirty. The statutory definitions, the registration duties, and the 2025 charging policy all leave genuine room to fight — but every one of those arguments works best when it is raised before charging decisions harden. Put an unlicensed money transmitting defense lawyer in your corner now: book a paid, one-hour initial consultation with our team.