On July 26, 2017, the Financial Crimes Enforcement Network (FinCEN) announced the assessment of a $110, million civil money penalty against BTC-e, or Canton Business Corporation (BTC-e) for "willfully violating U.S. anti-money laundering (AML) laws."
FinCEN worked in coordination with the U.S. Attorney's Office for the Northern District of California. According to official documents, Russian national Alexander Vinnik was indicted along with BTC-e "in the Northern District of California under 18 U.S.C. §§ 1956, 1957, and 1960 for money laundering, conspiracy to commit money laundering, engaging in unlawful monetary transactions, and the operation of an unlicensed money transmitting business." Vinnik was arrested earlier today in Greece on a U.S. warrant. FinCEN assessed a $12 million penalty against Vinnik for his "role in the violations."
Acting director of FinCEN Jamal El-Hindi warned that the organization will hold accountable foreign-located money transmitters and virtual currency exchangers doing business with the U.S. when they willfully violate U.S. AML laws. He said:
"This action should be a strong deterrent to anyone who thinks that they can facilitate ransomware, dark net drug sales, or conduct other illicit activity using encrypted virtual currency. Treasury's FinCEN team and our law enforcement partners will work with foreign counterparts across the globe to appropriately oversee virtual currency exchangers and administrators who attempt to subvert U.S. law and avoid complying with U.S. AML safeguards."
FinCEN played a role with law enforcement with respect to the seizure of BTC-e and the arrest of Vinnik. Furthermore, the Internal Revenue Service-Criminal Investigation Division, Federal Bureau of Investigation, United States Secret Service, and Homeland Security Investigators cooperated in the conduct of the investigation.
BTC-e is said to have "embraced the pervasive criminal activity conducted at the exchange" by obtaining sparse accounts of customer identities, limited to email addresses, passwords, and usernames. According to the report, users regularly engaged in conversations discussing criminal activity on the exchange's chat, and "BTC-e's customer service representatives offered advice on how to process and access money obtained from illegal drug sales on dark net markets like Silk Road, Hansa Market, and AlphaBay."
In addition, BTC-e is also accused of processing transactions involving stolen funds between 2011 and 2014 from MtGox, including 300,000 bitcoin transactions traceable directly to theft. FinCEN said it identified at least $3 million worth of transactions tied to ransomware attacks as well, such as "Cryptolocker" and "Locky." BTC-e is also tied to conducting transactions through the former money laundering site Liberty Reserve—the sites shared a customer base.
FinCEN reports "BTC-e has conducted over $296 million in transactions of bitcoin alone and tens of thousands of transactions in other convertible virtual currencies." Regardless of the region it served, FinCEN maintains that BTC-e was required to comply with U.S. AML laws, regulations, and practices.
This is the second time supervisory action has been taken in response to an exchanger of virtual currency by FinCEN and the first time it has taken action against a foreign-based Money Services Business.