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FinCEN, Bank Secrecy Act and planned developments.

FCRO Subsection: 
Contributor

Kenneth A. Blanco, Director, FinCEN (The Financial Crimes Enforcement Network, the USA's FIU and a division of the Department of the Treasury) sets out how Bank Secrecy Act data, including "convertible virtual currencies."

How We Use BSA Data

FinCEN grants more than 12,000 agents, analysts and investigative personnel from over 350 unique federal, state, local and tribal agencies across the United States with direct access to this critical reporting by financial institutions.

There are approximately 30,000 searches of the BSA data each day.

Further, there are more than 100 Suspicious Activity Report (SAR) review teams and financial crimes task forces across the country, bringing together prosecutors and investigators from different agencies to review BSA reports.

Collectively, these teams reviewed approximately 60% of all SARs filed.

Each day, FinCEN, law enforcement, regulators and others query this data—that equates to an average of 7.4 million queries per year. Those queries identify an average of 18.2 million filings that are responsive or useful to ongoing investigations, examinations, victim identification, analysis and network development, sanctions development, and U.S. national security activities, among many, many other uses that help protect our nation, deter crime and save lives.

I would like to discuss how this reporting helps us in the convertible virtual currency space. In May of this year, FinCEN issued an advisory and a significant piece of guidance to help explain how rules are applied to the latest developments in financial innovation.

Since FinCEN issued its Convertible Virtual Currencies ("CVC") advisory and guidance, we have seen a significant increase in reporting related to CVC—more than 11,000 SARs in that time. Of these, approximately 7,100 (two-thirds) are from CVC entities including kiosks, exchanges and peer-to-peer exchangers.

I point this out because before our May advisory, reports from CVC entities made up about half of our convertible virtual currency-related filings. But as of November 2019, over 2,100 unique filers have referenced the advisory key terms directly. It is encouraging that CVC entities, dozens of whom had never filed a SAR report prior to the May advisory, are using the warning signs and reporting suspicious activity to us.

I think it is important for all financial institutions to ask themselves whether they are reporting such suspicious activity. If the answer is no, they need to re-evaluate whether their institutions are exposed to crypto-currency.

Let me also share some trends we are seeing in SAR reporting in response to many of the warning signs in the advisory.

FinCEN is seeing an increase in filings from exchanges identifying potential unregistered, foreign-located money services businesses (MSBs), specifically, Venezuela-based peer-to-peer exchangers.

Exchanges also have increased their reporting of customers conducting transactions with CVC addresses linked to darknet marketplaces. Convertible virtual currency kiosk operators also have increased their reporting on activity indicative of scam victims, particularly new customers with limited knowledge of CVC, including the elderly.

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