Cryptocurrency AML

All indications point to increased federal scrutiny regarding adequacy of Virtual Currency and Cryptocurrency Platforms’ anti-money laundering (AML) compliance programs. The AML compliance obligations mandated by the BSA now apply to companies involved in the transmission or exchange of convertible virtual currencies (CVCs) as they do to traditional money services business (MSBs).

This includes the requirement to file suspicious activity reports (“SARs”) to alert federal law enforcement of customer transactions that may indicate illicit activity and the requirement to implement and maintain an effective anti-money laundering program targeted at identifying and mitigating the risk that the company’s services will be exploited by criminals.

Regulators now require virtual currency firms to implement compliance programs that are adequately tailored to the specific AML risks posed by digital assets. They must assess their risk of exposure to money laundering and terrorist financing and have adequate processes in place to mitigate those risks.

We expect increased scrutiny of virtual currency platforms as the regulatory regime develops. It is imperative that companies stay proactive by implementing AML and KYC programs robust enough to satisfy regulatory requirements under BSA.