FinCEN Director Notes Improved Oversight of Cryptocurrency Industry

The director of the Financial Crimes Enforcement Network (FinCEN) says the cryptocurrency industry has begun to fall in line with the agency’s regulations on money transmission services.

In a speech delivered at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference on Dec. 10, Kenneth A. Blanco claimed that FinCEN’s May 2019 guidance was having a marked and positive impact on its oversight of the crypto space.

 

Crypto reporting has significantly increased since May

In May, FinCEN published guidance for crypto businesses that clarified how its regulations relating to money services businesses (MSBs) apply to certain business models in the crypto industry and carry specific obligations under the United States Bank Secrecy Act.

In his remarks, Blanco noted that since its publication, the agency has seen a significant increase in Suspicious Activity Reports (SAR): a total of 11,000, of which roughly two thirds (7,100) are from crypto businesses, including kiosks, exchanges, and peer-to-peer exchangers.

Ahead of May, he noted, filings from entities in the crypto space had accounted for markedly less — around half of the SARs the agency received. 

Moreover, he observed that crypto businesses are increasingly internalizing the agency’s key advisory terms and using them in their filings directly. He said he considers this to be an encouraging trend and a sign that the industry is making use of FinCEN’s “red flags” and duly reporting suspicious activity.

 

New scams target crypto newbies and the elderly

As regards the content of the reports, Blanco said that the agency has observed an increase in filings from exchanges that identify possibly unregistered, overseas MSBs — specifically, Venezuela-based peer-to-peer exchangers.

There has also been an increase in reporting of customers conducting crypto transactions with wallets linked to darknet marketplaces, as well as on activity that appears characteristic of scam victims — particularly novice crypto users, including the elderly.

Blanco closed his remarks with an appeal to businesses that are yet to abide by the agency’s guidance:

‘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.”

Blanco’s speech confirms a persistent trend he had noted during a speech this August, when he revealed FinCEN was seeing a surge in SARs, with filings at the time exceeding 1,500 per month. 

That same month, he directly appealed to casinos dealing crypto payments to consider how they will conduct due diligence and comply with their reporting obligations.

This fall, the U.S. House of Representatives passed a bill requiring the Director of FinCEN to conduct a study on the use of emerging technologies, including blockchain, within the agency.

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