FinCEN (Financial Crimes Enforcement Network)

FinCEN is the commonly used name for the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury. It regulates "money transmitters," a term which includes cryptocurrency trading platforms.
== Background ==
FinCEN is authorized by the Bank Secrecy Act (BSA), the series of laws originating in 1970 that direct the Treasury to combat money laundering. FinCEN was established within the Treasury in 1990 with the mission to support the "detection, investigation and prosecution of domestic and international money laundering and other financial crimes." In 1994, FinCEN was given regulatory responsibilities. It was recognized as an official bureau of the Treasury by Congress in the USA Patriot Act of October 2001.
In July 2011, FinCEN adopted extensive modifications of and additions to its regulations, among which was the addition of the words "other value that substitutes for currency" to the definitions of "money service businesses" and "money transmitter." In March 2013, FinCEN established that it was regulating cryptocurrencies alongside other money transactions.
FinCEN consists of six divisions: Intelligence, Enforcement, Policy, Liaison, Technology, and Management Divisions.
== Cryptocurrency Regulations ==
Like all other money service businesses, money transmitters that deal in cryptocurrencies must register with the Treasury and renew their registrations biannually. They must maintain a current list of their agents, although their agents do not themselves need to register unless they dual trade. The regulations apply only to persons who engage in money service or money transmission activities as a business.
FinCEN announced in March 2018 that issuers of ICOs are money transmitters and that they, as well as ICO exchanges, need to comply with FinCEN regulations for money service businesses. Persons dealing with ICOs that are registered with the U.S. Securities and Exchange Commission are exempt.
FinCEN's first action against an unregistered money transmitter, Eric Powers, was disclosed on April 18, 2019. Powers had held himself forward on Craigslist, an Internet service and product bulletin board, as being in the business of exchanging U.S. currency for bitcoin and vice versa. FinCEN complained that in addition to not registering, Powers also did not file suspicious activity or other reports with FinCEN.
On June 27, 2019, four members of the U.S. House of Representatives - Emanuel Cleaver, II (D-MO), Trey Hollingsworth (R-IN), Bill Foster (D-IL) and French Hill (R-AR) - held a briefing with Kenneth Blanco, head of FinCEN, to discuss Facebook's cryptocurrency, Libra. The discussion was part of a larger discussion about how artificial intelligence (AI) and machine learning could potentially limit illicit money laundering activities.
In September 2019, the U.S. House of Representatives passed a bill called the "Advancing Innovation to Assist Law Enforcement Act," which would require FinCEN to carry out a study to determine if "AI, digital identity technologies, blockchain technologies, and other innovative technologies can be further leveraged to make FinCEN’s data analysis more efficient and effective," how FinCEN can utilize these emerging technologies, and to assess the current developmental status of these technologies. The bill was referred to the U.S. Senate for consideration.
During October 2019's DC FinTech Week, Blanco told attendees that cryptocurrency as well as other financial start-ups must adhere to the BSA's anti-money laundering rules.
On September 29, at the virtual 2020 ACAMS anti-money laundering Conference in Las Vegas, Blanco said during a discussion about the obligation of banks to implement effective AML systems that banks must assess their cryptocurrency risk exposure, saying that "[cryptocurrency] exchanges are not the only ones with crypto risk exposure," and that these risks "are not unique to money services businesses or virtual currency exchanges." 
FinCEN published proposed new rules for money service businesses, including cryptocurrency trading platforms, to report large transactions (over $10,000) and to create and keep records of customer identities and transaction details for transactions above $3,000. The proposed rules largely mimicked then current requirements for banks and other money service businesses to collect, maintain and report transaction data for cash transactions. The notice of proposed rulemaking included 24 questions targeted toward the industry. The most controversial aspect of the notice of proposed rulemaking was that it provided only 15 days for public comment.
== Beneficial Ownership ==
Beneficial Ownership refers to the regulatory framework established by the Financial Crimes Enforcement Network (FinCEN) to identify and report information about individuals who ultimately own or control companies operating in the United States. This framework is primarily governed by the Corporate Transparency Act (CTA) and the Customer Due Diligence (CDD) Rule, aimed at enhancing transparency and combating illicit financial activities.
The concept of beneficial ownership is integral to global efforts to prevent money laundering, tax evasion, and other financial crimes. In the U.S., the CTA was enacted in 2021 to address these issues by requiring certain entities to report beneficial ownership information (BOI) directly to FinCEN. The CDD Rule, effective since May 11, 2018, mandates that financial institutions collect BOI as part of their due diligence processes to ensure they have adequate knowledge of their customers.
The CTA's requirements became effective on January 1, 2024. This legislation requires "reporting companies" to disclose information about their beneficial owners to FinCEN. The rule defines a beneficial owner as any individual who exercises substantial control over a reporting company or owns at least 25% of its ownership interests.
Under the CTA, reporting companies must file BOI reports with FinCEN. These reports include details such as the beneficial owner's name, birthdate, address, and a unique identifying number from an acceptable identification document. The BOI reporting rule is one of several rulemakings planned to fully implement the CTA.
The CDD Rule requires financial institutions to collect similar information for their due diligence processes when opening new accounts. However, the information collected under CDD is primarily intended for the institution's internal use to prevent illicit activities.
== References ==
Category:regulators
Category:cryptocurrency
Category:enforcement
Category:CryptoMarketsWiki
Category:Customer Due Diligence Rule
Category:Corporate Transparency Act
Category:Finance
Category:Regulation
Category:Anti-Money Laundering
Category:Corporate Transparency
Category:U.S. Department of the Treasury