The US Federal Bureau of Investigation (FBI) has issued a warning to Americans regarding the use of cryptocurrency transfer services that are not registered as money services businesses (MSBs) under US federal law.
These laws are outlined in 31 USC § 5330 and 31 CFR §§ 1010 and 1022 and require compliance with anti-money laundering requirements.
FBI urges caution when using cryptocurrency services
Before using unlicensed cryptocurrency services, #FBI advises users to check whether the service is registered as a money transfer business with the U.S. Treasury Department. Click here for details https://t.co/DZPLrfKlYp pic.twitter.com/1kvf7WHqEl
— FBI (@FBI) April 25, 2024
in a statement released The FBI's Internet Crime Complaint Center (IC3) said Thursday that encryption provided by entities that are not registered as money service businesses (MSBs) under federal law and do not comply with anti-money laundering (AML) regulations It urged individuals to avoid the service.
The FBI emphasized the importance of taking precautions to avoid inadvertently engaging with non-compliant services.
For example, the FBI recommended avoiding cryptocurrency money transfer services that do not collect know-your-customer (KYC) information from customers when required. KYC information typically includes personal information such as name, date of birth, and address. Additionally, an app's mere presence in an app store does not guarantee its legality or compliance with federal requirements.
Additionally, the FBI recommended that individuals verify their registration as an MSB with the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) before using cryptocurrency transfer services. FinCEN provides a website where users can check the registration status of companies. Prominent cryptocurrency companies such as Coinbase and Kraken (legally operating as Payward Financial Inc.) were identified when using this tool.
The statement highlighted recent law enforcement actions by the FBI against virtual currency services operating without proper licensing in accordance with federal law. Users of unauthorized cryptocurrency transfer services may face financial turmoil during such operations, especially if cryptocurrencies are mixed with funds obtained through illegal means.
Use of services that do not comply with legal obligations may result in law enforcement actions against these entities and individuals may be unable to access their funds.
US government tightens crackdown on virtual currency mixers
Law enforcement agencies advised avoiding services that openly promote illegal purposes and using caution when using virtual currency platforms that are known to be used by criminals for money laundering activities.
The US government has been cracking down on virtual currency mixers in recent years. Following the Axie Infinity hack in May 2022, the Department of the Treasury's Office of Foreign Assets Control (OFAC) imposed sanctions on Blender.io.
In October of the same year, addresses linked to the Tornado Cash mixer were added to the list of Specially Designated Nationals, effectively banning US residents from using the service. Despite facing legal challenges, the decision stands and all three Tornado Cash co-founders will be arrested by August 2023.
In October 2023, the Treasury Department's Financial Crimes Enforcement Network proposed classifying virtual currency mixers as a “major money laundering concern” following Hamas attacks on Israel.Most recently, the U.S. Department of Justice (DOJ) heading By arresting the founder and CEO of Samurai Wallet, a prominent privacy-focused Bitcoin wallet and mixer. They were charged with laundering “more than $100 million in proceeds of crime.”
Further actions followed, including the Department of Justice working with law enforcement in Portugal and Iceland to arrest one of Samurai Wallet's founders. Additionally, the Department of Justice seized Samourai's web servers and domains and issued a warrant of seizure on the Google Play Store for the company's mobile apps.
