The Financial Crimes Enforcement Network (FinCEN) announced this week that it has penalized an individual cryptocurrency trader for alleged violations of the Bank Secrecy Act (BSA). That trader, California resident Eric Powers, reportedly failed to properly register as a money services business, take the necessary steps needed to comply with the Act’s provisions, or properly report suspicious transactions.
In a statement on the FinCEN website, the regulatory body said that Powers was operating as a “peer-to-peer exchanger of convertible virtual currency” – which, in the agency’s view, made him a ‘money transmitter’ subject to the provisions of the BSA:
As “money transmitters,” peer-to-peer exchangers are required to comply with the BSA obligations that apply to MSBs, including registering with FinCEN; developing, implementing, and maintaining an effective AML program; filing Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs); and maintaining certain records.
The agency determined that Powers advertised his activities, and completed transactions using in-person exchanges, mail transactions, or wire transactions. He reportedly filed no SARs and did at least some of his business on the “Silk Road” darknet. He also apparently conducted some transactions using The Onion Router (TOR), without any know-your-customer precautions.
His more than 200 transactions included transfers involving more than $10,000 in value, an amount that triggers an obligation to file a CTR with regulators. He filed no CTRs throughout the course of his trading activity.
The agency noted that Powers was cooperative and has agreed to pay a $35,000 fine and accept a ban that prevents him from engaging in any type of money services business in the future. While the enforcement action is a first for individual peer-to-peer traders, FinCEN Director Kenneth A. Blanco suggested that regulators have previously issued warnings about this type of activity:
“Obligations under the BSA apply to money transmitters regardless of their size. It should not come as a surprise that we will take enforcement action based on what we have publicly stated since our March 2013 Guidance—that exchangers of convertible virtual currency, such as Mr. Powers, are money transmitters and must register as MSBs.
In fact, there were indications that Mr. Powers specifically was aware of these obligations, but willfully failed to honor them. Such failures put our financial system and national security at risk and jeopardize the safety and well-being of our people, as well as undercut responsible innovation in the financial services space.”