DOJ Seeks to Double Jail Time for Money Transmission Crimes

Buried in the U.S. Department of Justice’s crypto crime report last week was a call for Congress to double the criminal penalties for any unlicensed money transmitting violations from five years in prison to 10 years.

While the report, “The Role of Law Enforcement in Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets,” came with many recommendations for areas in which laws needed to be expanded to include cryptocurrencies and virtual asset service providers like exchanges and money services businesses, it listed three high priority legislative changes.

See also: Justice Department Signals Intent to Crack Down on Crypto Crime

These included non-tipoff provisions regarding ongoing investigations, expanding criminal penalties for unlicensed money transmitting and increasing the statute of limitations on investigations involving digital assets like cryptocurrencies.

Of those, extending the maximum jail sentence for unlicensed money transmitting violations from five years to 10 years has far and away the broadest application to the larger payments industry. That’s because, while the other legislation requests are specific to digital assets, this one seeks to greatly expand the penalties for any violation of money transmission licensing requirements.

Beyond that, the Justice Department’s less immediate requests for legislative and regulatory changes seeks another very broad change from the U.S. Sentencing Commission. This seeks to have the sentencing guidelines for Bank Secrecy Act (BSA) violations toughened to recommend longer sentences, both to encourage sentences up to the maximum of five years and to signal the seriousness of these offenses to federal district court judges who impose those sentences.

Serving Five to 10

As for the unlicensed money transmitting business violations: The current five-year maximum jail term for these violations is “materially less than that prescribed for analogous fraud (20 or 30 years) and money laundering statutes (10 or 20 years),” the report noted.

Saying that U.S. sentencing guidelines’ jail term ranges are “often calculated based on the volume of transactions,” the Justice Department added that in many cases unlicensed money transmitting violations — and it does not specify those involving digital assets — would often exceed the five-year maximum.

It also aims for higher fines, noting that for these crimes, they max out at $250,000 for individuals and $500,000 for businesses, whereas “other money laundering statutes, by contrast, provide for individual fines of $500,000 or twice the value of the funds involved in the transactions or transfer, whichever is greater.” And it asks that individual fines double and corporate ones triple for violations exceeding $1 million over 12 months.

As for its reasons for asking for these changes, the Justice Department argued that “in light of the important role that [the act] plays in digital assets investigations, the department would welcome appropriate amendments that strengthen the law’s penalty provisions and substantive reach.”

This is somewhat narrow reasoning for changes affecting anyone who fails to register with FinCEN, obtain necessary state licenses, or knowingly transmits criminally derived or destined funds.

The department did ask that the BSA law be clarified to specifically include “peer-to-peer platforms that profit by connecting buyers and sellers of cryptocurrencies,” noting that some have “openly advertised” that they fall outside of anti-money-laundering (AML) and countering the financing of terror (CFT) regulations.

Expanding Guidelines

While lower down the priority list, the Justice Department suggested another change with an impact far beyond the cryptocurrency industry would be to toughen the sentencing guidelines for violations of anti-money laundering and anti-terrorism reporting requirements.

This is needed for two main reasons, it said. First, even with enhancements for specific types of more serious violations, the “guidelines range for BSA-related violations always falls well below the five-year statutory maximum, even when the violations were widespread or facilitated millions of dollars’ worth of money laundering,” the DOJ said. That’s even though the guidelines raise this to 10 years for “willful violations” committed while violating other federal laws or for more than $100,000 in a 12-month pattern of illegal activity.

Second, as a result, district courts “may end up viewing BSA offenses as mere technical or regulatory violations not meriting a substantial period of incarceration.”

As for the crypto connection, the report said that the failure to increase sentences is “despite the fact that the societal harm and systemic risks posed by non-compliant virtual currency exchanges and other MSBs rise with the scope and size of these entities’ activities.”


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