On April 16, the United States Financial Crimes Enforcement Network (FinCEN) imposed a $35,000 civil money penalty on Eric Powers, who operated as a peer-to-peer exchanger of convertible virtual currency, for willfully violating registration, program, and reporting requirements of the Bank Secrecy Act’s (BSA). In particular, FinCEN stated that Powers “failed to register as a money services business (MSB), had no written policies or procedures for ensuring compliance with the BSA, and failed to report suspicious transactions and currency transactions.”
According to FinCEN, Powers advertised his intent to purchase and sell bitcoin on the Internet, and “completed transactions by either physically delivering or receiving currency in person, sending or receiving currency through the mail, or coordinating transactions by wire through a depository institution.” Powers, however,
processed numerous suspicious transactions without ever filing a SAR, including doing business related to the illicit darknet marketplace “Silk Road,” as well as servicing customers through The Onion Router (TOR) without taking steps to determine customer identity and whether funds were derived from illegal activity.
In addition, FinCEN stated that Powers conducted more than 200 transactions involving the physical transfer of more than $10,000 in currency, but
failed to file a single CTR. For instance, Mr. Powers conducted approximately 160 purchases of bitcoin for approximately $5 million through in-person cash transactions, conducted in public places such as coffee shops, with an individual identified through a bitcoin forum. Of these cash transactions, 150 were in-person and were conducted in separate instances for over $10,000 during a single business day. Each of these 150 transactions necessitated the filing of a CTR.
Powers, who cooperated with FinCEN, agreed to the $35,000 penalty and to “an industry bar that would prohibit him from providing money transmission services or engaging in any other activity that would make him a ‘money services business’ for purposes of FinCEN regulations.”
Note: This resolution is noteworthy because it is the first instance in which FinCEN brought an enforcement action against a peer-to-peer virtual currency exchanger, and the first instance in which FinCEN penalized a virtual-currency exchanger for failure to file CTRs. While the amount of the money penalty against Powers is miniscule in comparison to the $110 million fine that FinCEN imposed against virtual-currency exchange BTC-e, it indicates that FinCEN is prepared to pursue enforcement actions against virtual-currency exchangers for failure to comply with the full spectrum of BSA requirements.