The Financial Crimes Enforcement Network (FinCEN) receives more than 1,500 reports every month from financial institutions regarding cryptocurrencies, a senior official said.
FinCEN director Kenneth Blanco, speaking at the Chicago Tech-Kent Block (Legal) conference, discussed the role his agency played in regulating cryptocurrencies. He noted that while cryptocurrencies may prove useful for certain use cases, they also create opportunities for bad actors such as financial criminals, terrorists and rogue states.
Blanco emphasized the importance of SAR (Suspicious Activity Report) documents – a type of document that financial institutions must present following a suspected money laundering or fraud. FinCEN receives more than 1,500 SARs each month for suspicious activities involving cryptocurrency transactions,
These reports come from traditional financial institutions and cryptocurrency exchanges, he said.
"They were presented by banks and other virtual currencies that provided critical indications for law enforcement, including information on beneficial ownership, additional activities attributed to the exchange we were previously unaware of, jurisdictional additional financial information and institutions that we could contact for new leads, all of which were obtained through the SAR and the supporting documents deposited by the financial institutions. "
Blanco also discussed the role of FinCEN in cryptographic space in a wider way, explaining that the regulator has worked for years in the field of cryptocurrency, with a focus on "exchanges, administrators and other persons involved in the transmission of money" relating to cryptocurrencies.
He justified the legal position of the agency in the field by noting that cryptocurrencies act as a substitute for the fiat currencies are covered by a 2011 FinCEN rule issued for companies providing monetary services and money transmission services .
In addition, Blanco noted that the agency worked closely with other regulators, including the US Securities and Exchange Commission (SEC) and the US Commodity Futures Trading Commission (CFTC) on " policy development and regulation approaches "related to cryptocurrency.
Blanco referred to initial coin offerings (ICO) during his observations, noting that "this rapidly growing area has gained a lot of public attention". He specifically mentioned the fraud concerning the fund-raising method as an area of interest.
"While ICO agreements vary and, depending on their structure, may be subject to different authorities, one fact remains absolute: FinCEN, and our partners at the SEC and the CFTC expect companies involved in ICOs fulfill all their [anti-money laundering/combating the financing of terrorism] obligations.We remain committed to taking appropriate action when these obligations are not prioritized and the US financial system is put at risk. " Image of Kenneth Blanco via the US Government / Flickr