FinCEN penalizes peer-to-peer Bitcoin Trader for Violating AML Laws for the first time

The Financial Crimes Enforcement Network (FinCEN) has penalized a “peer-reviewed exchanger” for the very first time for violating the Bank Secrecy Act's (BSA) enrollment, application, and reporting needs, FinCEN declared. According to the press launch, Eric Powers never enrolled as a money services business,” had no written guidelines or strategies of ensuring compliance with the BSA, also neglected to report suspicious transactions and money trades.”

“Obligations under the BSA apply to money transmitters regardless of their size,” said FinCEN Director Kenneth A. Blanco. “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.”

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Powers promoted his bitcoin trading online. He finalized trades in person, by email or by cable by means of a depository institution. Although he engaged in questionable transactions, for example doing business on the shadowy net marketplaces, he never reported them.

Blanco further said there were signs that Powers “especially was aware of those duties, but willfully neglected to honor them,” including:

“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.”

Though Powers completed over 200 trades, he never registered a trade report. Powers completed about 160 buys of bitcoin for about $5 million, and every one of these needed a CTR, FinCEN wrote. Powers has received a $35,000 fine. FinCEN has also prohibited him by providing money transmission services.

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