Kenneth A. Blanco, director of the United States Financial Crimes Enforcement Network (FinCEN), said that the agency has seen an increased number of cryptocurrency businesses adopting its May 2019 guidance publication on convertible virtual currencies (CVC).
He made his speech at the annual American Bankers Association/American Bar Association Financial Crimes Enforcement Conference on Dec.10.
FinCEN published an advisory earlier in May, explaining how its regulations can be applied to various new businesses in the cryptocurrency industry.
Blanco admitted that there has been a notable increase in the number of reports coming into the agency ever since the publication of the guidance. According to him, a total of 11,000 Suspicious Activity Reports (SARs) has been brought to the agency.
Among this number of reports, two-thirds, which is approximately 7,100, are crypto conversion entities like “kiosks, exchanges, and peer-to-peer exchanges.”
This figure is noteworthy because, before the publication of the advisory, the agency received reports that were very low, about half of the report, from crypto businesses.
He also noted that businesses in the cryptocurrency space have recently started making use of the agency’s advisory in their filings. He added, “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.”
Blanco shared some of the trends that the agency has seen in the reports. He said that there have been increased filings from most exchanges that identify money services businesses (MSBs) overseas that are perhaps not registered, precisely Venezuela-based peer-to-peer exchangers.
He also made mention of reports regarding customers’ crypto transactions using wallets that can be linked to darknet markets. There has also been an increase in reports regarding suspicious activities that indicate victims of scam especially people who have little or no knowledge about cryptocurrencies, including the elderly.
Concluding his speech, the FinCEN director implored all institutions who are yet to internalize the advisory published by the agency to do so as soon as possible. He said, “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.”
In April, the FinCEN penalized California based cryptocurrency trader, Eric Powers, for running an unregistered peer-to-peer crypto exchange. Powers was asked to pay a fine of $35,000. He was also barred from providing money transmission services.