FinCEN Director Says Agency Receives Over 1,500 Suspicious Activity Reports on Crypto per Month

FinCEN Director Says Agency Receives Over 1,500 Suspicious Activity Reports on Crypto per Month

Francisco Memoria
  • FinCEN's director recently claimed the agency receives over 1,500 reports on crypto per month.
  • He added that businesses in the space need to adhere to anti-money laundering and counter-terrorism financing requirements.

The Financial Crimes Enforcement Network (FinCEN) receives over 1,500 Suspicious Activity Reports (SARs) on cryptocurrencies from financial institutions, according to its director Kenneth Blanco.

Blanco revealed the number of reports received while speaking at the Chicago-Kent Block Legal Conference, where he discussed FinCEN’s role regulating the crypto space. Per Blanco, FinCEN regulates the space in coordination with the US Securities and Exchange Commission (SEC) and with the Commodity Futures Trading Commission (CFTC).

As [the] industry evolves and adopts these new technologies, we also must be cognizant that financial crime evolves right along with it, or indeed sometimes because of it, creating opportunities for criminals and bad actors, including terrorists and rogue states.

Kenneth Blanco

In his speech, the agency’s director noted SARs are important to safeguard our financial system and the innovation within the cryptocurrency and blockchain space. This, as actors’ compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) measures is crucial.

SARs are a type of document that financial institutions have to file whenever they suspect fraud or money laundering is going on. These reports, Blanco noted, come from both traditional financial institutions and cryptocurrency exchanges.

Using the now-defunct BTC-e exchange as an example, Blanco revealed it “was filings by both banks and other virtual currency exchanges that provided critical leads for law enforcement.” BTC-e was a popular cryptocurrency exchange that was taken down by law enforcement earlier this year after authorities seized its domain over alleged money laundering.

It rebranded to World Exchange Services (WEX) after being taken down. As CryptoGlobe covered, WEX has seen cryptocurrencies trade at a premium on its platform, and has been accused by users of sugaring from legal and financial issues.

Blanco further noted that FinCEN’s role in the crypto space sees it focus on “exchanges, administrators, and other persons involved in money transmission.” Cryptocurrency exchanges are seen as money transmission businesses (MSBs) which means they’re also required to file SARs.

Cryptocurrency “mixers” – businesses that anonymize transactions so they aren’t traceable on the blockchain – also need to file SARs, as its part of their obligation to help curb money laundering and terrorism financing, Blanco noted.

As for initial coin offerings (ICOs), the executive admitted these are “rapidly growing” and have been receiving “a lot of recent public attention.” Per Blanco, ICO arrangements vary and may be dependent on different authorities. This, however, doesn’t mean they don’t have to “meet all of their AML/CFT obligations.”

He added:

In short, individuals and entities engaged in the business of accepting and transmitting physical currency or convertible virtual currency from one person to another or to another location are money transmitters subject to the AML/CFT requirements of the BSA and its implementing regulations.

Kenneth Blanco

To comply with AML/CFT requirements Blanco revealed businesses need to register with FinCEN as money services business, develop a program designed to curb money laundering and terrorism financing, and report suspicious activity through SARs.