On December 10, 2019, FinCEN Director Kenneth Blanco delivered prepared remarks to a banking conference held in Washington, DC. Among topics he discussed were trends in suspicious activity reporting (SARs) since FinCEN published updated guidance on convertible virtual currency (CVC) in May 2019.
Specifically, as to CVC, Director Blanco stated:
Since FinCEN issued its CVC advisory and guidance, we have seen a significant increase in reporting related to CVC—more than 11,000 SARs in that time. Of these, approximately 7,100 (two-thirds) are from CVC entities including kiosks, exchanges, and peer-to-peer exchangers.
I point this out because before our May advisory, reports from CVC entities made up about half of our convertible virtual currency-related filings. But as of November 2019, over 2,100 unique filers have referenced the advisory key terms directly. It is encouraging that CVC entities, dozens of whom had never filed a SAR report prior to the May advisory, are using the red flags and reporting suspicious activity back to us.
I think it is important for all financial institutions to ask themselves whether they are reporting such suspicious activity. If the answer is no, they need to reevaluate whether their institutions are exposed to cryptocurrency.
Let me also share some trends we are seeing in SAR reporting in response to many of the red flags in the advisory.
FinCEN is seeing an increase in filings from exchanges identifying potential unregistered, foreign-located money services businesses (MSBs), specifically, Venezuela-based peer-to-peer exchangers.
Exchanges also have increased their reporting of customers conducting transactions with CVC addresses linked to darknet marketplaces. Convertible virtual currency kiosk operators also have increased their reporting on activity indicative of scam victims, particularly new customers with limited knowledge of CVC, including the elderly.