The Financial Crimes Enforcement Network (FinCEN) announced on Thursday that it had fined Eric Powers, who operated a peer-to-peer exchanger of convertible virtual currency, for willfully violating the Bank Secrecy Act’s (BSA) registration, program and reporting requirements and has therefore penalized him.
This is the first enforcement action from FinCEN against a P2P virtual currency exchange, and the first instance where the bureau has penalized an exchanger of virtual currency for failing to file Currency Transaction Reports (CTRs).
Powers will have to pay a fine of $35,000 and has also agreed to be barred from the industry. This means he can not provide money transmission services or engage in any activity that would make him a “money service business” (MSB).
FinCEN Found Powers was Violating BSA
The reason for the penalty, according to the statement, was because he did not register as an MSB, and did not have proper measures in place to ensure he was complying with the BSA. Not only this, but the agency also found that Powers failed to report suspicious transactions and currency transactions.
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Furthermore, the statement released from FinCEN states that Powers conducted more than 200 transactions which involved the physical transfer of more than $10,000 in currency but did not file a CTR. Some of these transactions include bitcoin.
In addition, the bureau found that Powers processed numerous suspicious transactions without filing a SAR, which included doing business with the darknet marketplace “Silk Road” as well as servicing customers without determining their identities and determining whether funds were derived from illegal activity.
“For instance, Mr. Powers conducted approximately 160 purchases of bitcoin for approximately $5 million through in-person cash transactions, conducted in public places such as coffee shops, with an individual identified through a bitcoin forum. Of these cash transactions, 150 were in-person and were conducted in separate instances for over $10,000 during a single business day. Each of these 150 transactions necessitated the filing of a CTR,” the statement said.
Commenting on the penalty, FinCEN Director Kenneth A. Blanco said: “Obligations under the BSA apply to money transmitters regardless of their size. 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. 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.”