On July 27, the Financial Crimes Enforcement Network (FinCEN), in partnership with the U.S. Attorney’s Office for the Northern District of California, assessed a more than $110 million civil money penalty against an internet-based, foreign-located virtual currency transmitter for willfully violating the anti-money laundering (AML) provisions of the Bank Secrecy Act. A second, separate $12 million penalty was assessed against one of the company’s operators, a Russian national. Additionally, a California grand jury handed down a 21-count indictment against the currency transmitter and the Russian national. According to allegations, the company exchanged fiat currency in addition to virtual currencies such as bitcoin, and “facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.” The company also processed transactions using stolen funds.
Pursuant to the terms of the assessment, from November 2011 through the present, both the company and the operator allegedly failed to (i) meet money services business (MSB) registration requirements; (ii) implement an effective AML program; (iii) detect suspicious transactions or file suspicious activity reports; and (iv) obtain and retain records for transmitted funds of $3,000 or more. FinCEN warned that regardless of ownership or location, foreign-located MSBs are “required to comply with U.S. AML laws and regulations . . . including AML program, MSB registration, suspicious activity reporting, and recordkeeping requirements.”
This is the first action FinCEN has taken against a foreign-located MSB conducting business in the U.S.