FinCEN (Financial Crimes Enforcement Network) has recently been investigating and examining businesses involved with virtual currencies such as Bitcoin. In fact, on May 5, 2015, FinCEN announced the first civil enforcement action stemming from a virtual currency provider. FinCEN and the United States Attorney General Office for the Northern District of California assessed a $700,000 civil penalty against Ripple Labs, LLC and a subsidiary for violation of the Bank Secrecy Act (BSA). The applicable businesses apparently did not comply with requirements regarding an anti-money laundering policy as required under the Bank Secrecy Act. Furthermore, penalties were assessed for failing to report suspicious activities (Suspicious Activity Reporting) in regards to certain transactions.
FinCEN’s position is that virtual currency businesses and virtual currency providers as well as exchangers must comply with the Bank Secrecy Act. FinCEN Director Jennifer Calvery stated, “Virtual currency exchangers must bring products to market that comply with our anti-money laundering laws. 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.”
Compliance with the BSA helps safe guard financial institutions and thus the American people from illegal motives, which is why certain institutions must have anti money laundering policies and other compliance and reporting requirements. The failure of an institution or business to comply with the BSA can lead to civil penalties and possible criminal charges. When civil penalties are assessed, the Internal Revenue Service has been delegated the authority and responsibility to collect the amounts that have been assessed. In regards to the benefits of the applicable regulations, it is believed that certain reporting requirements have helped prevent and detect criminal activity related to illegal drug trafficking, terrorism and other illegal activities.
If you are involved with or are considering involvement with a virtual currency business, it is recommended you become aware of the record keeping, reporting and other compliance measures required by the Bank Secrecy Act and other acts implemented for similar purposes. Such compliance issues may include an Anti-Money Laundering Policy (AML), Suspicious Activity Reporting (SAR), Know Your Customer and other programs and procedures.