In response to questions by law enforcement, financial institutions and regulators, the Financial Crimes Enforcement Network (FinCEN) issued guidance for companies and individuals “engaged in expanding fields of financial activity.” The guidance was called Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (CVC), FinCEN said in an announcement.
And, to help financial institutions find and report suspicious activity related to the exploitation of CVCs by criminals, the network issued an Advisory on Illicit Activity Involving Convertible Virtual Currency. The network said the advisory covers prominent typologies along with associated “red flags” and points out information that would be most helpful to law enforcement in reports for suspicious activity.
Under Secretary of the Treasury for Terrorism and Financial Intelligence Sigal Mandelker said in the announcement, “Treasury is committed to helping financial institutions better detect and prevent bad actors from exploiting convertible virtual currencies for money laundering, sanctions evasion, and other illicit activities.” Mandelker continued, “The comprehensive advisory FinCEN issued today highlights the risks associated with darknet marketplaces, peer-to-peer exchangers, unregistered money services businesses, and CVC kiosks and identifies typologies and red flags to help the virtual currency industry protect its businesses from exploitation.”
FinCEN also noted that the guidance does not set any new expectations from a regulatory standpoint. It does, however, bring together current guidance and regulations along with administrative rulings that have to do with money transmission involving virtual currency. It also applies “the same interpretive criteria” to other business models that are common involving CVC. At the same time, it pointed out that its rules define certain people or companies involved with CVCs as money transmitters. They are subject to a range of anti-money laundering, program, record-keeping and reporting responsibilities — along with registration requirements — as are other companies in money services.
FinCEN Director Kenneth A. Blanco said in the statement, in part, “Our regulatory approach has been consistent and despite dynamic waves of new financial technologies, products, and services, our original concepts continue to hold true. Simply stated, those who accept and transfer value, by any means, must comply with our regulations and the criminal misuse of any methodology remains our fundamental concern.”