Crypto firms can't skirt AML compliance: Fincen chief
WASHINGTON — The head of the Financial Crimes Enforcement Network had a blunt message Monday for fintech firms that offer users anonymity: Anti-money-laundering laws apply to you just like everyone else.
“The expectation is that you will comply with existing regulation,” Fincen Director Kenneth Blanco told the audience at a fintech event at the Georgetown University Law Center.
His comments appeared to target cryptocurrency operators and other firms that could enable anonymous users to engage in criminal behavior. The remarks came as Facebook has drawn ample scrutiny over its plans to offer its proposed Libra stablecoin.
Blanco, who did not discuss Libra specifically, said an AML program is a prerequisite for any new payments provider trying to get off the ground. Earlier this month, Fincen issued a joint statement with the Securities and Exchange Commission and Commodity Futures Trading Commission reminding firms involved with "digital assets" that they are subject to the Bank Secrecy Act.
"Your BSA obligations are still going to be there," Blanco said Monday. "Whether you're stablecoin, centralized, decentralized — [it] doesn’t matter. You’ll still have to be able to comply."
The remarks come less than a month after Blanco criticized fintech companies for turning a blind eye to the role financial data aggregation is playing in the growing area of synthetic identity fraud.
Blanco was frank in his assessment of newer firms' claims that they face obstacles in conducting an AML program.
“Don’t tell me you can’t figure out how to comply. Come on. Give me a break,” he said. “You may not want to, but that’s a totally different reason. Totally different issue. But the expectation is that you will and that you can. We know you can.”
Although Blanco said he did not want to talk about Facebook’s Libra or any other specific company, he did weigh in on the perception that stablecoins were distinct from other types of cryptocurrency. As far as Fincen is concerned, he said, there is no distinction.
“I don’t see stablecoins as different from any other cryptocurrency. You have to look at what the vulnerabilities are,” Blanco said.
Blanco’s concern seemed to be trained squarely at anonymous payments mechanisms that could obscure criminal activity. He invoked the opioid crisis and human trafficking as two areas where cryptocurrency could provide cover for anyone involved in illicit activity. A key objective of AML policy, he said, should be transparency about who is involved in a payments transaction.
"There is a reason you want to know ... the person on the other side of that transaction — they might be dealing in some kind of illicit activity," he said. "Whether it’s opioids ... or human smuggling on the other side ... you want to know who that person is.
"It ain’t that hard. All we’re asking for is name, address, account number, transaction, recipient, and amount. It ain’t hard. So when you tell me you don’t know who’s on the other side, you’ve got a big problem. Because you are required to know, and that is what our expectation is going to be."