FinCEN Confirms Larger Interest In Bitcoin Companies After Fining Ripple Labs

The news was delivered during a keynote speech at the 2015 West Coast Anti-Money Laundering Forum, one of the largest AML industry conferences in the United States. Calvary said with help from delegated Bank Secrecy Act examiners from the Inland Revenue Service, FinCEN recently launched “a series of supervisory examinations of businesses in the virtual currency industry.”

“As with our BSA supervision of other parts of the financial services industry, these exams will help FinCEN determine whether virtual currency exchangers and administrators are meeting their compliance obligations under the applicable rules. Where we identify problems, we will use our supervisory and enforcement authorities to appropriately penalize non-compliance and drive compliance improvements,”
— – Jennifer Shasky Calvary,  Director of Financial Crimes Enforcement Network (FinCEN)

The announcement was made a day after FinCEN, with the help of US Attorney’s Office in the Northern District of California, fined digital currency company Ripple Labs $700,000 – in the first civil enforcement action against a virtual currency exchange. The fine was for several violations of the Bank Secrecy Act by a subsidiary of Ripple Labs committed in 2013 and 2014.

In addition to the fines, the digital currency company will have to “undertake certain enhanced remedial measures that should prove helpful to their continued development as a regulated member of industry.” The company will also participate in a three-year review of their records, to find potentially overdue reporting of suspicious activity.

Many have wondered what the fines and penalties levied against Ripple could mean for other digital currency companies, especially the large and growing Bitcoin industry.

Ripple Labs Aftermath

The fines against Ripple were not just the first of their kind but also a shock to the larger digital currency industry, and according to many legal and regulatory experts there likely won’t be any grace period for bitcoin companies either. "FinCEN clearly has the intention to hold entities responsible from the time they flip the switch to turn on their business model," said Carol Van Cleef, co-chair of the global payments practice group at the law firm Manatt, Phelps & Phillips in an interview with American Banker."Compliance is expected from the beginning; they make a big point of the fact that [Ripple Labs] was operating for a period of time without being properly registered as an MSB."

"Fincen is only beginning its enforcement examination process of MSBs in the digital currency space; as with any industry in the first round of compliance examinations, we’re likely to see a number of companies being cited for compliance shortcomings,"
— – Carol Van Cleef