Banking and Finance Law Daily FinCEN fines virtual currency exchange $110M for AML violations
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Thursday, July 27, 2017

FinCEN fines virtual currency exchange $110M for AML violations

By J. Preston Carter, J.D., LL.M.

The Financial Crimes Enforcement Network has assessed a $110,003,314 civil money penalty against BTC-e, a/k/a Canton Business Corporation—a virtual currency exchange—for willful violations of U.S. anti-money laundering laws. FinCEN noted that Russian national Alexander Vinnik, one of the operators of BTC-e, has been arrested in Greece, and the agency assessed a $12 million penalty against him for his role in the violations.

According to FinCEN’s press release, BTC-e is an internet-based, foreign-located money transmitter that exchanges fiat currency as well as the convertible virtual currencies Bitcoin, Litecoin, Namecoin, Novacoin, Peercoin, Ethereum, and Dash. The agency said BTC-e facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.

Among other violations presented in FinCEN’s Assessment of Civil Money Penalty, BTC-e failed to obtain required information from customers beyond a username, password, and e-mail address. Instead of acting to prevent money laundering, BTC-e and its operators embraced the pervasive criminal activity conducted at the exchange. Users openly and explicitly discussed criminal activity on BTC-e’s user chat. In addition, FinCEN alleged that BTC-e’s customer service representatives offered advice on how to process and access money obtained from illegal drug sales on dark net markets like Silk Road, Hansa Market, and AlphaBay.

"We will hold accountable foreign-located money transmitters, including virtual currency exchangers, that do business in the United States when they willfully violate U.S. anti-money laundering laws," said Jamal El-Hindi, Acting Director for FinCEN. "This action should be a strong deterrent to anyone who thinks that they can facilitate ransomware, dark net drug sales, or conduct other illicit activity using encrypted virtual currency."

Companies: BTC-e; Canton Business Corporation

MainStory: TopStory BankSecrecyAct BankingOperations EnforcementActions FinancialIntermediaries IdentityTheft

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