FinCEN releases guidance around virtual currency businesses

The US’ Financial Crimes Enforcement Network (FinCEN) has issued guidance around regulatory requirements of virtual currencies.

Its ‘Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (CVC)’, came in response to questions raised by financial institutions, law enforcement and regulators around regulatory treatment of businesses dealing with CVCs.

Alongside the new guidance, the body has issued an Advisory on Illicit Activity Involving Convertible Virtual Currency. This will assist financial institutions with identifying and reporting suspicious activity related to criminal abuse of CVCs for money laundering, sanctions evasion, and other illicit financing purposes.

The advisory also dictates what information would be most valuable for law enforcement contained within suspicious activity reports.

FinCEN director Kenneth Blanco said. “The money transmitter definition we published in 2011 and the guidance we issued in 2013 clarifying how that definition applies to transactions involving virtual currency have proven to be exceptionally durable. Our regulatory approach has been consistent and despite dynamic waves of new financial technologies, products, and services, our original concepts continue to hold true.

“Simply stated, those who accept and transfer value, by any means, must comply with our regulations and the criminal misuse of any methodology remains our fundamental concern.”

The new guidance is not establishing any new regulatory expectations but is consolidating the current FinCEN regulations, guidance and administrative rulings relating to money transmission involving virtual currencies. Additionally, the guidance will apply the same interpretative criteria on other common business models that involve CVC.

Within the guidance, FinCEN identifies certain businesses or individuals involved with CVCs as money transmitters which are subject to the same registration requirements and AML, recordkeeping, and reporting responsibilities as other money services businesses.

US Under Secretary of the Treasury for Terrorism and Financial Intelligence Sigal Mandelker said, “The comprehensive advisory FinCEN issued today highlights the risks associated with darknet marketplaces, peer-to-peer exchangers, unregistered money services businesses, and CVC kiosks and identifies typologies and red flags to help the virtual currency industry protect its businesses from exploitation.”

This guidance has come just weeks after FinCEN fined a Bitcoin trader $35,000 for AML and BSA breaches. An investigation found Eric Powers failed to register as a money services business and did not have written policies or procedures for BSA compliance or report suspicious transactions and currency transactions.

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