On July 26, 2017, the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Treasury Department, levied a $110 million civil penalty against BTC-e Virtual Currency Exchange and a $12 million penalty against its suspected operator, Russian national Alexander Vinnik, for willfully violating the Bank Secrecy Act. The Bank Secrecy Act requires financial institutions to assist the United States government in reporting and preventing suspected money laundering.
A FinCEN assessment alleges that senior leadership at BTC-e willfully failed to implement basic internal controls designed to prevent a money services business from facilitating money laundering. BTC-e failed to collect and verify customer verification information, as well as to implement procedures to identify and report suspicious transactions to authorities. The assessment claims that as a result of these violations the cryptocurrency exchange “attracted and maintained a customer base that consisted largely of criminals who desired to conceal proceeds from crimes such as ransomware, fraud, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.”
Vinnik was arrested on Tuesday in northern Greece and indicted on Wednesday before a grand jury in Northern California. The recently unsealed indictment charges BTC-e and Vinnik with 21 counts, including one count of operation of an unlicensed money service business, one count of conspiracy to commit money laundering, seventeen counts of money laundering, and two counts of engaging in unlawful monetary transactions.
The $110 million fine marks the Treasury Department’s first penalty levied against a foreign-located money services business. According to a Department of Justice press release, Acting FinCEN Director Jamal El-Hindi stated that the FinCEN bureau “will hold accountable foreign-located money transmitters, including virtual currency exchangers, that do business in the United States when they willfully violate U.S. AML laws.”