Compliance: FinCEN issues guidance, advisory on virtual currency

May 13, 2019

The Treasury’s Financial Crimes Enforcement Network (FinCEN) issued guidance and an advisory relating to virtual currencies last week, affirming its regulatory frameworks and warning of threats posed by virtual currency misuse. CUNA’s latest CompBlog entry looks into the materials.

The materials apply to virtual currencies and Convertible Virtual Currencies (CVC), defined as a type of virtual currency that has equivalent value as currency, or acts as a substitute for currency, making it a type of “value that substitutes for currency.”

FinCEN notes that since money transmission involves “acceptance and transaction of value that substitutes for currency by any means,” CVC transactions will be subject to FinCEN regulations.

According to FinCEN, the guidance was released in response to questions from financial institutions, law enforcement and regulators regarding the regulatory treatment of Convertible Virtual Currencies.

The guidance does not establish any new regulatory expectations. It consolidates current FinCEN regulations, guidance and administrative rulings that relate to money transmission involving virtual currency, and applies the same interpretive criteria to other common business models involving CVC.

FinCEN’s rules define certain businesses or individuals involved with CVCs as money transmitters subject to the same registration requirements and a range of anti-money laundering, program, recordkeeping, and reporting responsibilities as other money services businesses.

The “Advisory on Illicit Activity Involving Convertible Currency” (FIN-2019-A003) is designed to assist financial institutions identifying and reporting suspicious activity related to criminal exploitation of CVCs. It highlights:

  • Risks posed by virtual currencies due to its nature;
  • Types of abuse that can be perpetrated around the use of virtual currencies;
  • Reg flag indicators of the abuse of virtual currencies;
  • What information, presented in a Suspicious Activity Report, is helpful to law enforcement when investigating potential illicit conduct; and
  • A reminder of regulatory obligations for U.S. financial institutions regarding SARs and illicit CVC activity.

In addition to the CompBlogCUNA’s Compliance Community contains discussion boards and a number of other resources for credit union compliance professionals around the country.