Kenneth Blanco, director of the US Financial Crime Enforcement Network (FinCEN), warned banks that they should seriously consider their cryptocurrency exposure.
At the Virtual 2020 ACAMS Anti-Money Laundering Conference held in Las Vegas this week, Blanco discussed the obligation of banks to implement effective anti-money laundering (AML) policies.
The current FinCEN regulations (FIN-2019-A003) stipulate that all financial institutions are responsible for identifying and reporting suspicious activities related to how criminals and other bad actors use bank card verification to check money laundering, evade sanctions and other illegal financing purposes. For many banks, it is still unclear how virtual currencies affect their institutions.
The director emphasized that banks need to review their anti-money laundering policies and procedures, especially those related to cryptocurrency. He also said: “If the bank does not consider these issues, it will be obvious when the inspectors come to visit.”
“It needs to be clear that exchanges are not the only institutions with cryptographic risks. These risks are not unique to money service companies or virtual currency exchanges. Banks must also consider their cryptocurrency exposure. This is where your examiner and FinCEN will be You will be asked questions when evaluating the effectiveness of your anti-money laundering program.”
According to a 2019 study by CipherTrace Labs, a crypto analysis company, 8 of the 10 major retail banks in the United States have transactions with illegal cryptocurrency service companies (MSB). These MSBs accept cash payments in exchange for cryptocurrencies, which essentially operate as unregistered P2P exchanges.
In addition, many P2P exchanges do not have anti-money laundering (AML) or know-your-customer (KYC) plans, which brings extensive money laundering risks to banks and other financial institutions.
For a long time, banks have been criticized for failing to maintain robust AML and KYC plans. The International Association of Investigative Journalists (ICJI) reported that banks have confirmed that more than $2 trillion of processed transactions are suspicious and should be frozen. The number of suspicious amounts not recognized by the bank may be many times higher.
