FinCEN Examinations of Digital Currency Businesses ‘Will Drive Innovation Overseas'

The United States' Financial Crimes Enforcement Network (FinCEN) has announced it is working to investigate a string of digital currency businesses, assessing whether they meet financial regulations for the sector.

Announcing the bureau's latest activity was director Jennifer Calvery, speaking at the West Coast AML (Anti Money Laundering) Forum in San Francisco May 6. The three-day event is a chance for federal and state regulators to meet with the government's investigative agencies and other qualified consultants.

Jennifer Shasky Calvery

In her opening speech to the forum Calvery gave top billing to her department’s efforts to investigate potential regulatory violations in the virtual currency sector.

“Working closely with our delegated BSA examiners at the Internal Revenue Service (IRS), FinCEN recently launched a series of supervisory examinations of businesses in the virtual currency industry. […] Where we identify problems, we will use our supervisory and enforcement authorities to appropriately penalize non-compliance and drive compliance improvements.”

The news comes shortly after Ripple was fined by FinCEN for not having registered its service as a money services business with regulators, and for also not following correct AML and know-your-customer (KYC) rules designed to prevent illegal financial uses of the platform. In her speech Calvery explained the bureau's move further:

“Under the terms of the agreement, Ripple and its subsidiary, XRP II, consented to FinCEN’s $700,000 penalty, with credit for $450,000 in criminal forfeiture to be paid to the U.S. Attorney’s Office. They also admitted to FinCEN’s detailed statement of facts and admitted that their conduct constituted willful violations of the Bank Secrecy Act.”

Previous punishments for those failing to comply with established financial services regulations have included jail time for the likes of ex-BitInstant CEO Charlie Shrem. Sentenced to two years in federal prison for operating an un-licensed money transmission service that sent funds to the Silk Road marketplace, the businessman faces a lengthy stretch behind bars.

In her speech, Calvery took pains to note the fact that these regulations are not new, and highlighted the bureau's previous efforts to advertise its existence when “FinCEN issued guidance just over two years ago, noting that virtual currency exchangers and administrators are “money transmitters” under the Bank Secrecy Act (BSA) and its implementing regulations”.

Although financial services companies have always had an obligation to follow these national-level regulations, newer