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Clifford Chance

Regulatory Investigations and Financial Crime Insights

US Department of Treasury's FinCEN penalizes individual operating peer-to-peer virtual currency exchange

Last week, US Department of Treasury's Financial Crimes Enforcement Network (FinCEN) assessed a $35,350 civil money penalty against an individual operating a peer-to-peer virtual currency exchange without registering as a Money Services Business (MSB).

According to FinCEN, in addition to not registering as an MSB, the individual also did not implement an anti-money laundering compliance program, report suspicious activities, or comply with other recordkeeping and reporting responsibilities required under the Bank Secrecy Act (BSA).  The individual "advertised his intent to purchase and sell bitcoin for others" through postings on websites such as bitcointalk.org and bitcoin-otc.com.  His sales involved money transmission, including coordinating transactions through a depository institution or sending or receiving currency through the mail.  (See https://www.fincen.gov/news/news-releases/fincen-penalizes-peer-peer-virtual-currency-exchanger-violations-anti-money).  These transactions included over 200 transactions involving over $10,000 in cash, for which the individual did not file a currency transaction report required under the BSA.

In 2013, FinCEN issued guidance to provide more clarity for businesses interested in the virtual currency industry.  The guidance defined certain businesses and individuals as MSBs based on their financial activities and clarified that an "administrator" or "exchanger" of virtual currency is an MSB under FinCEN regulations, specifically as a money transmitter.(See https://www.cliffordchance.com/briefings/2017/07/virtual_currencieswithrealimplications.html for information on previous related FinCEN actions).

With this action, FinCEN showed its willingness to act against unregistered virtual currency operators regardless of their size.