In testimony to the US Department of the Treasury Senate Committee on Banking, Housing and Urban Affairs Wednesday, January 17, Under Secretary for Terrorism and Financial Intelligence, Sigal Mandelker discussed virtual currencies. According to Mandelker,"Part of our effort to update the AML/CFT regime includes staying ahead of evolving threats. We lead the world in mitigating the illicit finance risks of emerging technologies, such as the use of virtual currencies. We stand at the regulatory and supervisory forefront of this emerging industry. Currently, the United States, Japan, and Australia are among the few countries regulating virtual currency payments/exchange activities, including in particular decentralized convertible virtual currency, for AML/CFT purposes.
To ensure that virtual currency providers and exchangers know the rules and follow them, FinCEN has prioritized engagement with – and examination of – these entities, focusing both on the approximately 100 that have registered with FinCEN as money transmitters as required, as well as those that have not. As part of the examination process, FinCEN, working with delegated Internal Revenue Service (IRS) examiners, has recommended virtual currency providers and exchangers take certain actions to improve their compliance activities.
The effectiveness of this structure depends on compliance by the regulated entities, and so we aggressively pursue virtual currency exchangers and others who do not take these obligations seriously. In July 2017, for example, FinCEN assessed a $110 million fine against BTC-e, an Internet-based, foreign-located money transmitter that exchanges fiat currency as well as the convertible virtual currencies Bitcoin, Litecoin, Namecoin, Novacoin, Peercoin, Ethereum, and Dash. At the time of our action, it was one of the largest virtual currency exchanges by volume in the world and facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking. FinCEN also assessed a fine against Russian national Alexander Vinnik, one of the operators of BTC-e, for his role in the violations.
This action sends a very powerful message that we will hold accountable virtual currency exchangers that violate our AML laws, wherever they are located. We will do so in conjunction with our law enforcement partners and foreign counterparts.
We understand that the EU is finalizing its amendments to its anti-money laundering directive, which will put in place a requirement for EU members to regulate virtual currency exchangers, a significant step. Even with these advancements, there is still a major gap in regulating these entities globally and we are actively engaged with other countries, bilaterally and multilaterally, to encourage them to apply international AML/CFT standards to virtual currency payments."
From the Department of Treasury: https://home.treasury.gov/news/press-releases/sm0251