When financial crimes happen in the United States, one of the agencies which gathers data on them is the Financial Crimes Enforcement Network (FinCEN). Founded in 2013, their mission is to protect the financial system and fight money laundering. With their mandate, it is no surprise that they are on the receiving end of 1,500 complaints about virtual currencies every month.
Kenneth Blanco mentioned this number of monthly complaints regarding virtual currencies in a recent speech on the agency's views on cryptocurrencies and other digital assets.
Technically, these are Suspicious Activity Reports (SARs) which are meant to track potentially illegal activities in the sector. These are submitted by money service businesses (MSBs) in the virtual currency sector. Blanco was actually pleased by the many SARs that were submitted. This was mainly because it meant that people were taking the agency seriously when it comes to regulation. He also praised these MSBs in their efforts to develop techniques that would help detect illegal activities.
FinCEN first released regulatory guidelines for cryptocurrency businesses back in 2013. This ensures that cryptocurrency operators follow financial regulatory rules, especially the anti-money laundering requirements of the 1970 Bank Secrecy Act.
In a statement, Blanco said
FinCEN's rules apply to all transactions involving money transmission—including the acceptance and transmission of value that substitutes for currency, which includes virtual currency. Our regulations cover both transactions where the parties are exchanging fiat and convertible virtual currency, but also to transactions from one virtual currency to another virtual currency.
Tough Stance On Violators
Blanco also emphasizes that FinCEN rules don't just cover transactions done in the United States but also cross border transactions. FinCEN recently imposed a stiff penalty on UK based bitcoin exchange BTC-e. The firm was hit with a $110 million fine for failing to meet regulatory requirements, with its boss Alexander Vinnika receiving a personal $12 million fine.
Director Blanco's speech also pointed out that many cryptocurrency businesses were soft on their anti-money laundering efforts until receiving a warning from FinCEN. The need for a tougher anti-money laundering framework for these businesses is what the director emphasized as the industry moved forward. He said that companies should be doing this without requiring prompting to better protect themselves.
The director ended his speech urging virtual currency businesses to take heed of FinCEN's regulations and use them as the basis to increase security. He warns that FinCEN will be strict in enforcing compliance and prosecuting both knowing fraudsters and those who enable them.
