Regulatory Update: FinCEN Affirms Its Regulatory Framework for Virtual Currencies and a New Warning of Threats Posed by Virtual Currency Misuse

FinCEN issued the following two notices that reaffirms its longstanding position on digital currencies:

FIN-2019-G001 – Guidance Notice – Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies.  “The Financial Crimes Enforcement Network (FinCEN) is issuing this interpretive guidance to remind persons subject to the Bank Secrecy Act (BSA) how FinCEN regulations relating to money services businesses (MSBs) apply to certain business models.”

FIN-2019-A003 -Advisory Notice – Advisory on Illicit Activity Involving Convertible Virtual Currency “FinCEN is issuing this advisory to assist financial institutions in identifying and reporting suspicious activity concerning how criminals and other bad actors exploit convertible virtual currencies (CVCs) for money laundering, sanctions evasion, and other illicit financing purposes, particularly involving darknet marketplaces, peer-topeer (P2P) exchangers, foreign-located Money Service Businesses (MSBs), and CVC kiosks. Virtual currencies, particularly CVCs, are increasingly used as alternatives to traditional payment and money transmission systems. As with other payment and money transmission methods, financial institutions should carefully assess and mitigate any potential money laundering, terrorist financing, and other illicit financing risks associated with CVCs. This advisory highlights prominent typologies and red flags associated with such activity and identifies information that would be most valuable to law enforcement, regulators, and other national security agencies in the filing of suspicious activity reports (SARs).”