The U.S. Treasury Department disclosed its first enforcement action against a peer-to-peer cryptocurrency exchanger Thursday, fining a California man $35,000 for violating the Bank Secrecy Act and barring him from transmitting funds.
Eric Powers, a resident of Kern County who advertised his exchange service on online forums, “willfully” failed to register as a money services business, establish an anti-money laundering program and report suspicious funds from December 2012 to September 2014, the department’s Financial Crimes Enforcement Network, or FinCEN, claimed in an 11-page assessment.
His violations stem from more than 1,700 peer-to-peer transactions in which he either delivered or accepted cash for bitcoins in person or through the mail, or coordinated wire transfers to complete those exchanges.
The 150 total in-person exchanges, which Powers and his clients made in “coffee shops and other public places,” totaled more than $5 million on their own, according to FinCEN, and each required the filing of a currency transaction report.
“Powers participated in online discussions pertaining to AML [anti-money laundering] compliance, including specific conversations about registering as an MSB [money services business], which demonstrate his awareness of the relevant BSA requirements,” the bureau claimed in the assessment.
FinCEN did not further identify Powers, the target of the penalty, but the assessment references a related federal case that required him to pay more than $100,000 and relinquish 237.5 bitcoins.
A Facebook profile for “Eric D. Powers” links to a Dec. 13, 2017 article by News Punch entitled “Keanu Reaves: Bitcoin Will Destroy The ‘New World Order‘” and lists Bakersfield, California—the seat of Kerns County—as a place of residence.
Eric D. Powers and a spokesman for FinCEN did not respond to requests for comment by press time.
FinCEN linked the addresses of his bitcoin wallets to more than 100 transactions with clients “doing business” on Silk Road, an online black market that U.S. officials seized in October 2013 for brokering sales and purchases of drugs and other illicit goods and services for a commission.
Powers also conducted three transactions with a client who had discussed alternative online black markets with news outlets after the demise of Silk Road, according to FinCEN.
“A basic search on the internet for the customer’s screen name revealed identifying information for the customer, including the customer’s name, yet this information was not listed in Mr. Powers’ records,” the bureau claimed.
U.S. regulators expect financial institutions to search for news articles that may reflect adversely on a client, and take steps to mitigate any compliance risks that may arise as a result.
FinCEN also cited Powers’ handling of 53 transactions for two clients whose email addresses included The Onion Router, or TOR, as a domain. According to FinCEN, the use of TOR, an anonymizing service, “may be a strong indicator of potential illicit activity” in the absence of “additional due diligence” on the client in question, as well as on his or her source of funds.
“In addition, on one occasion, Mr. Powers offered to exchange convertible virtual currency [cryptocurrency] for fiat currency, knowing that the fiat currency constituted the proceeds of illegal activity,” the bureau found in the assessment.
The penalty confirms that federal regulators monitor peer-to-peer exchanges, including the thousands of individuals and firms suspected of trading without a license, said Jim Angleton, president of financial services firm Aegis FS in Miami.
It also promises to prompt individuals who conduct peer-to-peer exchanges to either register with FinCEN or exit the industry, Angleton said, adding that peer-to-peer exchange websites may also come under pressure to vet those who use their forums to conduct business.
Contact Daniel Bethencourt at firstname.lastname@example.org
|Topics :||Anti-money laundering , Money Services Businesses , Cryptocurrencies|
|Source:||U.S.: FinCEN , U.S.: Department of Treasury|
|Document Date:||April 18, 2019|