FinCEN Sees Crypto Industry Complying with Financial Regulations

FinCEN’s Encouraging Trends in Crypto Compliance

During a recent conference, Kenneth A. Blanco, director of the Financial Crimes Enforcement Network (FinCEN), provided a positive outlook on the compliance of the cryptocurrency sector with regulatory requirements. He stated that the industry’s alignment with FinCEN’s regulations on money transmission services is improving, and it seems crypto businesses are becoming more responsible citizens in the financial realm.

Increased Reporting: A Crypto Success Story

Since the issuance of FinCEN’s guidance in May 2019, there’s been a noticeable surge in Suspicious Activity Reports (SARs) from crypto businesses. Blanco shared that out of a total of 11,000 SARs received, about 7,100 or two-thirds of those came from the crypto sector. This is a remarkable leap from the pre-guidance days when crypto-related filings were much lower, accounting for only around half of total SARs.

Understanding Crypto Oversight

The spike in reports indicates that crypto entities are starting to understand their obligations under the United States Bank Secrecy Act, demonstrating a proactive approach to compliance. Filters like ‘red flags’ from FinCEN are being internalized by businesses, leading to more thorough reporting practices.

Scams Targeting Vulnerable Populations

Amidst this compliance progress, Blanco cautioned about rising scams specifically targeting novice cryptocurrency users and the elderly. This demographic is unfortunately more susceptible to fraudulent schemes, often stemming from unregistered overseas money service businesses.

Types of Fraud

• Scams exploiting lack of crypto literacy
• Crime syndicates leveraging darknet market wallets

Blanco emphasized that the increase in crypto transactions linked to scams is alarming and demands attention from the industry.

Call to Action for Financial Institutions

He encouraged crypto businesses that haven’t yet adhered to FinCEN’s guidance to reassess their operations. “If the answer is no to whether you are reporting suspicious activity, perhaps it’s time to consider your exposure to cryptocurrency,” he advised passionately.

Future of Compliance

His remarks resonate with a broader trend observed in the enforcement community, where increasing scrutiny and regulation is becoming the norm. Blanco reiterated that the legislative environment is evolving, as seen when the U.S. House of Representatives recently passed a bill mandating a study on emerging technologies, including blockchain, within FinCEN.

Conclusion: A Work in Progress

In conclusion, while the trajectory of compliance is on the upswing, the road ahead for FinCEN and the cryptocurrency industry is still fraught with challenges. Continuous effort is required to ensure that the increase in SAR filings translates into genuine compliance and enhanced consumer protection.