Crypto exchanges failing to meet AML obligations

Financial institutions are failing to comply with rules governing anti-money laundering (AML) and countering the financing of terrorism (CFT), the Director of the US Financial Crimes Enforcement Network (FinCEN) has stated.

Speaking at the 2018 Chicago-Kent Block Legal Tech Conference last week, Kenneth A. Blanco said all virtual currency businesses – whether they are an individual peer-to-peer exchanger of one virtual currency or a large, multi-national trading platform – must comply with AML/CFT obligations. Several institutions, however, only employ compliance staff and take appropriate steps to meet their regulatory requirements after they have received notice of a FinCEN examination.

“Let this message go out clearly today: This does not constitute compliance,” Blanco said. “Compliance does not begin because you may get caught, or because you are about to be discovered. That is not a culture that protects our national security, our country, and our families. It is not a culture we will tolerate.”

Blanco claimed FinCEN’s efforts to bolster firms’ compliance programmes have had a positive effect, with the number of Suspicious Activity Reports (SARs) soaring to over 1,500 per month. “By helping us identify and investigate this illicit activity, the industry can focus on legitimate applications and innovations, and stamp out negative perceptions of virtual currency as the coinage of the dark web and bad actors,” he stated.

Blanco said virtual currencies are an innovative example of how companies are giving customers greater access to financial services. But he warned that like any payment system, it has the potential to be exploited for money laundering and other illicit finance.

“FinCEN will aggressively pursue individuals and companies who do not take their obligations under US law seriously, whether by targeting victims or enabling those who do,” he concluded.