Compliance

FinCEN Highlights Bitcoin Transactions

Increasingly, watchdogs flag virtual currencies as a component of suspicious activity.

September 01, 2014
KEYWORDS Bitcoin , currency
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The Financial Crime Enforcement Network (FinCEN) released the inaugural SAR Stats Technical Bulletin in July, which examines suspicious activity report (SAR) data.

The SAR Narrative Spotlight of the publication (available at fincen.gov) examined Bitcoin, a type of virtual currency that allows users to conduct transactions peer-to-peer without a central administrator. FinCEN observed a rise in the number of SARs flagging virtual currencies as a component of suspicious activity.

According to the FinCEN bulletin (a successor publication to The SAR Activity Review: By the Numbers), SAR data is crucial in assessing transactions involving bitcoin and other virtual currencies: “SARs filed by the various filing entities provide valuable information to law enforcement related to accounts, ownership, and other identifying information associated with suspicious activity involving bitcoin transactions.”

Financial institutions are likely to see different elements of the same suspicious activity due to their participation in and perspective on the chain of transactions that make up the lifecycle of a user’s purchase, use and sale of bitcoins.

While institutions don’t interact directly with the “bitcoin economy” (e.g., accept deposits in bitcoin, conduct transactions in bitcoin, etc.), they may see cash, ACH, or wire transfer deposits and withdrawals associated with users of virtual currency (even when their participation in the transaction isn’t considered suspicious).

Since each institution observes these transactions and identifies suspicious activity from a unique vantage point, FinCEN also encourages the use of 314(b) information sharing in this context.

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