Financial Crimes Enforcement Network, Treasury Department Affirm Regulatory Regime for Convertible Virtual Currencies

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued guidance on May 9, 2019, underscoring the application of the Bank Secrecy Act (BSA) and its implementing regulations relating to money services businesses (MSBs) to certain businesses that transact in convertible virtual currencies (CVCs). On the same day, FinCEN issued an advisory to assist financial institutions in identifying and reporting illicit activity involving CVCs. The advisory highlights certain “red flags” with which financial institutions should become familiar in crafting their anti-money laundering (AML) policies. The guidance consolidates current FinCEN regulations and related administrative rulings and guidance issued since 2011 and then applies these rules and interpretations to common CVC business models. While FinCEN noted the guidance “does not establish any new regulatory expectations or requirements,” it was just one of several outreach efforts to the industry since the beginning of May – an indication that the Treasury Department is prioritizing issues involving the potential misuse of CVCs to facilitate money laundering, sanctions evasion and other illicit finance schemes.

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