On Tuesday, Alexander Vinnik, a Russian citizen suspected of leading a money laundering operation, was arrested in Greece for accumulating more than $4 billion (£3 billion) of bitcoin without following anti-money laundering (AML) protocols and regulations, and allegedly laundering those funds for customers involved in crimes ranging from computer hacking to drug trafficking. Bitcoin was the first digital currency to successfully use cryptography to keep transactions secure and pseudonymous, and the fact that bitcoins can be purchased and spent anonymously using digital wallets with unique addresses makes using conventional financial regulatory means difficult. Thankfully, transactions are recorded on a public ledger called blockchain which allows authorities to trace and follow the coins.
The Financial Crimes Enforcement Network (FinCEN) has announced a civil money penalty assessment of $12 million against Vinnik as the operator of BTC-e, a digital currency exchange headquartered in Russia, for his role in “money laundering, conspiracy to commit money laundering, engaging in unlawful monetary transactions, and the operation of an unlicensed money transmitting business.” Additionally, as FinCEN’s first enforcement action against a foreign-located Money Services Business (MSB) doing business in the United States, it has fined BTC-e $110,003,312 for “willfully violating U.S. anti-money laundering (AML) laws” and failing to obtain required information from its customers beyond a username, password and email address.
BTC-e is an internet based money transmitter as well as the oldest virtual currency platform known within crypto-currency markets for its lack of standards for checking users’ identities and, according to a FinCEN filing, “BTC-e has quickly become the virtual currency exchange of choice for criminals looking to conduct illicit transactions or launder illicit proceeds, all of which BTC-e failed to report both to FinCEN and law enforcement.” BTC-e’s blatant acceptance of the criminal activity conducted using its exchange is evidenced by BTC-e’s customer service representatives offering advice to customers on how they can process and access money obtained from illegal drug sales on dark net markets such as Silk Road, Hansa Market, and AlphaBay.
Vinnik has been described by Greek police as an “international mastermind of a crime organization” and BTC-e has been out of service since his arrest although BTC-e claims that it will be back up and running within 5-10 days.
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