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A virtual currency "exchanger" consented to a Financial Crimes Enforcement Network ("FinCEN") penalty for violations of the Bank Secrecy Act and anti-money laundering ("AML") regulations.
According to FinCEN, Eric Powers conducted more than 1,700 transactions that involved purchasing and selling bitcoin to and from other persons over a two-year period. Mr. Powers admitted to using online forums to advertise his intent to purchase and sell virtual currency for others, and to settling transactions collectively worth more than $5 million using in-person cash payments, cash sent or received in the mail, and wire transfers.
Mr. Powers' activities made him a virtual currency "exchanger," "Money Services Business" ("MSB") and "financial institution" under the Bank Secrecy Act and related FinCEN guidance for exchangers of virtual currency. According to FinCEN, Mr. Powers failed to comply with applicable requirements under the Bank Secrecy Act to (a) register as an MSB with FinCEN, (b) establish and implement an effective written AML program, (c) detect and adequately report suspicious transactions, and (d) report currency transactions.
Mr. Powers consented to pay a fine of $35,350, and to a ban on any activity that would make him an MSB.
Commentary / Christian Larson
FinCEN's enforcement action makes clear that an individual can be a virtual currency "exchanger" by engaging in virtual currency transactions on behalf of others. The action also holds important clues about the level of customer due diligence FinCEN expects virtual currency businesses to undertake. FinCEN suggests that suspicious activity reports should be filed for transactions involving bitcoin addresses previously used to do business with darknet website Silk Road. FinCEN also suggests that a customer with an email address ending in "@tormail.org" should be subjected to additional due diligence. Most interesting of all, FinCEN suggests that searches should be conducted for the screen name aliases of customers to identify any negative public information.
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