P2P virtual currency transmitter fined for BSA violations

FinCEN has issued an Order for Assessment of Civil Money Penalty in the amount of $35,350 against Eric Powers, an exchanger of convertible virtual currency, for failing to (a) register as an MSB with FinCEN; (b) establish and implement an effective written anti-money laundering (AML) program; (c) detect and adequately report suspicious transactions; and (d) report currency transactions.

According to the FinCEN Order, Between December 6, 2012 and September 24, 2014, Mr. Powers conducted over 1,700 transactions as a money transmitter. He did so as a peer-to-peer exchanger of the convertible virtual currency bitcoin, purchasing and selling bitcoin to and from others. Mr. Powers was not simply a “user” of virtual currency (i.e., someone who obtains and uses convertible virtual currency to purchase real or virtual goods or services for his own benefit). Exchangers of convertible virtual currency, like Mr. Powers, are “money transmitters” as defined in 31 C.F.R § 1010.100(ff)(5),7 as well as “financial institutions” as defined in 31 C.F.R § 1010.100(t), and must comply with BSA regulations.

Through postings made on web fora, such as bitcointalk.org and bitcoin-otc.com, Mr. Powers advertised his intent to purchase and sell bitcoin for others. He completed sales and purchases 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. Internet postings Mr. Powers made also indicate that he would direct transactions at other virtual currency exchangers (such as Mt. Gox) on behalf of his customers. Mr. Powers participated in online discussions pertaining to AML compliance, including specific conversations about registering as an MSB, which demonstrate his awareness of the relevant BSA requirements. Nevertheless, Mr. Powers failed to register—even after FinCEN issued guidance in March 2013 stating that exchangers of convertible virtual currency (such as Mr. Powers) are money transmitters and must register as MSBs.