Compliance Blog

Written by Shari R. Pogach, Regulatory Paralegal 

The Financial Crimes Enforcement Network (FinCEN) recently released two administrative rulings, FIN-2014-R011 and FIN-2014-R012 on virtual currency transactions.  FinCEN’s rulings find that all virtual currency payment systems and trading platforms are money transmitters so must comply with Bank Secrecy Act (BSA) rules and regulations.  As money transmitters or money services businesses, companies providing virtual currency payment systems and trading platforms are required to “comply with all risk management, risk mitigation, recordkeeping, reporting and transaction monitoring requirements corresponding to such status.”

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The U.S. Immigration and Customs Enforcement’s (ICE) Office of Public Affairs announced that ICE, Homeland Security Investigations (HSI) and the FBI have arrested the operator and owner of a black market Silk Road 2.0 website designed to buy and sell illegal drugs and other unlawful goods over the Internet.  Since about December 2013, Blake Benthall, 26, aka “Defcon” has operated the underground website used to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to buyers throughout the world, as well as to launder millions of dollars generated by these unlawful transactions. As of September 2014, Silk Road 2.0 was generating sales of at least approximately $8 million per month.

Silk Road 2.0 was created approximately five weeks after the government’s October 2013 seizure of the website known as “Silk Road” and the arrest of its alleged owner and operator, Ross William Ulbricht aka “Dread Pirate Roberts.”  Silk Road 2.0 was virtually identical to the original Silk Road website in the way it appeared and functioned. Like its predecessor, Silk Road 2.0 operated exclusively on the Tor network and required all transactions to be paid for in bitcoins in order to preserve its users’ anonymity and evade detection by law enforcement. 

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Have you heard about the new digital currency, Murraycoin, which borrows the face of comedian and actor, Bill Murray?  Launched in January, the Murraycoin website states that Murraycoin is a decentralized peer-to-peer currency enabling worldwide instant payments and is six times faster than Bitcoin.   The intent is to raise money for charity, educate the population on the use and advantages of cryptocurrency, and to have fun. It was thought using his likeness would raise awareness of digital currency since most people know of Bill Murray and like him. Although Mr. Murray has not specifically objected to the use of his name or likeness, he also has not endorsed the digital currency.   Although Bitcoin’s price has dipped to below $350, it’s still worth more than one Murraycoin, one is worth less than five cents.

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According to multiple news sources, U.S. prosecutors have opened a money laundering investigation into a member of Russian President Vladimir Putin’s inner circle. The U.S. Attorney’s Office for the Eastern District of New York is probing whether billionaire Russian gas trader Gennady Timchenko transferred funds related to allegedly corrupt deals in Russia through the U.S. financial system.  Timchenko was among the first Russians to face sanctions imposed following Russia's annexation of Crimea from Ukraine in March and later over Moscow's wider role in the crisis in Ukraine. Prosecutors are probing transactions in which the Geneva-based commodities firm Timchenko co-founded, Gunvor Group, purchased oil from Russia’s OAO Rosneft and later sold it to third parties.  Although the transactions predate the financial sanctions, transfers of funds related to the transactions could constitute illegal money laundering if the funds were found to have originated from illicit activity such as, for example, irregular sales of state assets like oil.