Financial Crimes Enforcement Network Receives 1,500 Crypto Complaints Per Month

News, Regulation | August 13, 2018 By:

The Financial Crimes Enforcement Network (FinCEN), a bureau within the US Department of the Treasury, receives over 1500 suspicious activity reports (SAR) each month involving cryptocurrency, said FinCEN Director Kenneth Blanco.

Speaking at the Chicago-Kent Block (Legal) Tech Conference last week, Blanco outlined FinCEN’s ongoing role in regulating cryptocurrencies. He said the agency’s role is to protect and secure the financial system from those who seek to misuse important technological advancements for nefarious purposes.

“Innovation in financial services can be a great thing — providing customers greater access to an array of financial services and at faster speeds than ever before,” said Blanco. “However, as industry evolves and adopts these new technologies, we also must be cognizant that financial crime evolves right along with it, or indeed sometimes because of it, creating opportunities for criminals and bad actors, including terrorists and rogue states.”

Blanco said that individuals and entities engaged in the business of accepting and transmitting virtual currency from one person to another or to another location are money transmitters subject to the anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements of the Bank Secrecy Act (BSA) and its implementing regulations.

“The BSA and its regulations are designed to guard against these threats, but these laws and regulations can only do so much on their own,” Blanco said. “Compliance with our anti-money laundering (AML) and countering the financing of terrorism (CFT) framework is critical to protecting our financial system and safeguarding the incredible innovations within the FinTech space.”

The director emphasized the importance of SARs, a document that financial institutions must file with the agaency following a suspected incident of money laundering or fraud. He said they now receive over 1,500 SARs per month describing suspicious activity involving cryptocurrency, with reports coming from both MSBs in the crypto industry itself and other financial institutions.

“We see the industry developing new techniques for identifying suspicious activity in virtual currency, showing us what is possible and giving us unique insight into certain financial crimes,” Blanco said. “By helping us identify and investigate this illicit activity, the industry can focus on legitimate applications and innovations, and stamp out negative perceptions of virtual currency as the coinage of the dark web and bad actors.”

In addition, Blanco said that the agency has been working closely with its federal regulatory colleagues, including the SEC and CFTC, for coordinated policy development and regulatory approaches related to cryptocurrency, including addressing risks. These risks, he said, include potential illicit finance and fraud surrounding initial coin offerings (ICO).

“As my SEC and CFTC colleagues have pointed out, this rapidly growing area has gained a lot of recent public attention,” Blanco said. “While ICO arrangements vary and, depending on their structure, may be subject to different authorities, one fact remains absolute: FinCEN, and our partners at the SEC and CFTC, expect businesses involved in ICOs to meet all of their AML/CFT obligations. We remain committed to taking appropriate action when these obligations are not prioritized, and the U.S. financial system is put at risk.”

Blanco concluded by saying that the agency will continue building its capabilities and understanding in the emerging technologies space to rapidly identify risks, close gaps, and support responsible innovation through clarity.

“We will continue to update our guidance relating to emerging technology, such as virtual currency, in close dialogue with industry, so that we are improving our understanding of both the risks and the clarity that is needed to support responsible innovation, and FinCEN will aggressively pursue individuals and companies who do not take their obligations under US law seriously, whether by targeting victims or enabling those who do,” Blanco said.