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Ripple Labs Faces Fines From FinCEN

Ripple Labs has become the first virtual currency exchanger to face fines from the Financial Crimes Enforcement Network (FinCEN), according to a press release issued May 5.

Working in conjunction with the U.S. Attorney’s Office for the Northern District of California (USAO-NDCA), FinCEN hit Ripple (and its wholly-owned subsidiary, XRP II, LLC) with a $700,000 civil money penalty.

The fine comes to punish Ripple for the willful violation of various provisions of the Bank Secrecy Act (BSA) including acting as a money services business and selling its virtual currency without first registering with FinCEN.

Ripple also faces fines for failure to maintain what the watchdog considers an “adequate” anti-money laundering program such that money launderers or terrorist financiers don’t start using Ripple as their go-to method to store and move money.

“Virtual currency exchangers must bring products to market that comply with our anti-money laundering laws,” said FinCEN Director Jennifer Shasky Calvery, according to the release. “Innovation is laudable but only as long as it does not unreasonably expose our financial system to tech-smart criminals eager to abuse the latest and most complex products.”

FinCEN’s fine comes concurrently with a settlement agreement announced between USAO-NDCA’s and Ripple Labs/XRP II. As part of that settlement, the companies forfeited $450,000, which will be credited to partially satisfy FinCEN’s $700,000 civil money penalty.

Ripple and XRP II, as a result of this action, have both agreed to work through remedial steps to ensure future compliance with AML/CFT obligations, as well as enhanced remedial measures.

“By these agreements, we demonstrate again that we will remain vigilant to ensure the security of, and prevent the misuse of, the financial markets,” said U.S. Attorney Melinda Haag, according to the release. “Ripple Labs Inc. and its wholly-owned subsidiary both have acknowledged that digital currency providers have an obligation not only to refrain from illegal activity, but also to ensure they are not profiting by creating products that allow would–be criminals to avoid detection. We hope that this sets an industry standard in the important new space of digital currency.”

“Federal laws that regulate the reporting of financial transactions are in place to detect and stop illegal activities, including those in the virtual currency arena,” said Richard Weber, Chief, IRS Criminal Investigation. “Unregulated, virtual currency opens the door for criminals to anonymously conduct illegal activities online, eroding our financial systems and creating a Wild West environment where following the law is a choice rather than a requirement.”

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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