On April 18, 2019, the U.S. anti-money laundering (“AML”) agency, the Financial Crimes Enforcement Network (“FinCEN”), announced that it had assessed a civil money penalty of $35,350 against Eric Powers of Kern County, California, for acting as an unregistered money services (“MSB”) business. Mr. Powers also agreed to cease engaging in any activity that might make him be required to register as an MSB under FinCEN regulations, and to not participate directly or indirectly in any activity involving other financial institutions.
Mr. Powers had acted as a “peer-to-peer” exchanger of virtual currency, an MSB business. In March 2013, FinCEN had issued guidance clarifying the application of FinCEN’s regulations on MSBs to virtual currency businesses. Those persons engaging in business as administrators or exchangers of virtual currency are deemed to be engaging in money transmission services and must register as MSBs. Mr. Powers’ activities fell within the definition of a virtual currency “exchanger:” “a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency.”
As a money transmitter, he would have been required, among other responsibilities, to establish and maintain an AML compliance program, report any suspicious transactions to FinCEN and file reports on any transactions in currency (known as CTRs) totaling over USD $10,000.
Mr. Powers bought and sold virtual currency and advertised his services on the Internet. Between December 6, 2012, and September 24, 2014, FinCEN found that Mr. Powers conducted over 1,700 transactions as a money transmitter. In his activities as a money transmitter, he did not have an AML compliance program. Nor did he report any suspicious transactions or file CTRs, even though FinCEN cited several instances where one or both of those reports should have been filed. In fact, FinCEN noted that he publicly stated on the Internet that he could assist customers who wanted to circumvent any AML obligations. FinCEN also determined that Mr. Powers conducted over one hundred transactions with customers over the dark web site Silk Road, which itself was shut down by U.S. federal law enforcement authorities in October 2013.
In its press release, FinCEN noted that this was its first enforcement action against a peer-to-peer currency exchanger, and its first civil penalty of a virtual currency exchanger for failure to file CTRs. Additional information on FinCEN and its positions on virtual currency businesses may be found on its website.