The Treasury Department’s Financial Crimes Enforcement Network assessed a $110 million civil penalty Wednesday against BTC-e for willfully violating U.S. anti-money laundering laws.
It was FinCEN’s first enforcement action against a foreign-located Money Services Business or MBS doing business in the United States.
Russian national Alexander Vinnik, one of the operators of BTC-e, was arrested in Greece this week. FinCEN fined him $12 million for his role in the violations.
BTC-e is an internet-based money transmitter that handles Bitcoin, Litecoin, Namecoin, Novacoin, Peercoin, Ethereum, and Dash. It’s one of the world’s biggest virtual currency exchanges by volume.
BTC-e handled transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking, FinCEN said.
Jamal El-Hindi, FinCEN’s acting director, said: “We will hold accountable foreign-located money transmitters, including virtual currency exchangers, that do business in the United States when they willfully violate U.S. anti-money laundering laws.”
FinCEN said it “acted in coordination” with the DOJ, IRS-Criminal Investigation Division, FBI, U.S. Secret Service, and Homeland Security Investigations.
Among other violations, BTC-e failed to obtain required information from customers beyond a username, a password, and an e-mail address, according to FinCEN.
“Instead of acting to prevent money laundering, BTC-e and its operators embraced the pervasive criminal activity conducted at the exchange,” FinCEN said.
BTC-e’s customer service representatives offered advice about how to process and access money obtained from illegal drug sales on dark net markets like Silk Road, Hansa Market, and AlphaBay, according to FinCEN.
BTC-e also processed over 300,000 Bitcoin transactions involving funds stolen between 2011 and 2014 from Bitcoin exchange Mt. Gox, FinCEN said.
FinCEN said it identified at least $3 million of facilitated transactions tied to ransomware attacks such as “Cryptolocker” and “Locky.”
BTC-e also shared customers and conducted transactions with the now-defunct money laundering website Liberty Reserve.
FinCEN said BTC-e has conducted over $296 million in transactions of Bitcoin alone and tens of thousands of transactions in other convertible virtual currencies.
Some of the transactions were between customers and recipients located within the United States, FinCEN said.
Although BTC-e hid its location and ownership, FinCEN said the company was “required to comply with U.S. AML laws and regulations as a foreign-located [Money Services Business] including AML program, MSB registration, suspicious activity reporting, and recordkeeping requirements.”
FinCEN’s July 26, 2017 civil enforcement action against BTC-e is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog.
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