The United States Financial Crimes Enforcement Network (FinCEN) has assessed a civil money penalty for a California resident accused of wilfully violating money transmission laws in his work as a peer-to-peer exchanger of virtual currencies. The news was announced in an official FinCEN news release on April 18.
“As ‘money transmitters,’ peer-to-peer exchangers are required to comply with the BSA [Bank Secrecy Act] obligations that apply to MSBs [Money Services Businesses], including registering with FinCEN […] maintaining an effective AML [anti-money-laundering] program; filing Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs).”
According to FinCEN’s assessment filing, Powers conducted over 1,700 transactions as a money transmitter between December 2012 and September 2014, buying and selling bitcoins (BTC) on behalf of customers.
The news release states that Powers also processed numerous suspicious transactions — over 100 related to the illicit marketplace Silk Road — without filing an SAR. He is also reported to have conducted business via the dark web client TOR without verifying clients’ identities or the source of their funds.
Over 200 of Powers’ transactions reportedly involved the physical exchange of currency worth $10,000, without filing a CTR. A further 160 BTC purchases — worth approximately $5 million — were reportedly conducted via in-person cash transactions with individuals identified through an online bitcoin forum. The vast majority of these (150) involved the transfer of over $10,000 within a business day — often in coffee shops or other public places.
“We will take enforcement action based on what we have publicly stated since our March 2013 Guidance—that exchangers of convertible virtual currency […] are money transmitters and must register as MSBs,” FinCEN director Kenneth A. Blanco states.