In an unprecedented move, FinCEN has assessed civil money penalties of $110,003,314 against a foreign virtual currency exchange company (“Foreign Exchange”) for the alleged willful violation of United States anti-money laundering laws. The Foreign Exchange is a business which operates to convert virtual currencies. It offers the purchase and sale of U.S. dollars, Russian Rubles, Euros, Bitcoin, Litecoin, Namecoin, Novacoin, Peercoin, Ethereum, and Dash.
FinCEN found grounds on which to bring action against the Foreign Exchange because it did business as a money services business wholly or substantially within the United States, which qualifies the business as a “money transmitter” under the U.S. Bank Secrecy Act (“the BSA”). The BSA requires money services businesses to develop, implement, and maintain effective written anti-money laundering programs, which are reasonably designed to prevent the business from being used to facilitate money laundering and the financing of terrorist activities, among other things.
The Foreign Exchange allegedly lacked even basic controls to prevent the use of its services for illicit purposes, and attracted and maintained a customer base of criminals who desired to hide proceeds from activities such as ransomware, fraud, identity theft, tax refund fraud schemes, public corruption, and drug trafficking. Allowing customers to open accounts without collecting and verifying customer information, and allowing transactions to be conducted with only a username, password, and email address. The Foreign Exchange also failed to register as a money services business, as required by the BSA. Furthermore, it did not file suspicious activity reports for transactions that it knew, suspected, or had reason to suspect were suspicious, as required by the BSA.
Due to these violations, FinCEN determined that the Foreign Exchange willfully violated the BSA and its implementing regulations, and that grounds existed to assess the civil money penalty that was ultimately handed down.
For more information, the assessment of civil money penalties can be found here: https://www.fincen.gov/sites/default/files/enforcement_action/2017-07-26/Assessment%20for%20BTCeVinnik%20FINAL%20SignDate%2007.26.17.pdf.