The US Federal Bureau of Investigation (FBI) has issued a cautionary alert to Americans regarding the utilization of cryptocurrency money-transmitting services that lack registration as Money Services Businesses (MSBs) in compliance with US federal law.
In accordance with 31 USC § 5330 and 31 CFR §§ 1010 and 1022, these laws mandate adherence to anti-money laundering requirements.
In a statement released by the FBI’s Internet Crime Complaint Center (IC3), individuals are urged to refrain from engaging with crypto services provided by entities not registered as MSBs under federal law and not adhering to anti-money laundering (AML) regulations.
The FBI stressed the importance of exercising caution to avoid inadvertently using non-compliant services.
For instance, the FBI advised avoiding crypto money-transmitting services that neglect to collect Know Your Customer (KYC) information from customers when mandated. KYC information typically includes personal details such as name, date of birth, and address, among others. Furthermore, the mere presence of an app in an app store does not guarantee its legality or compliance with federal requirements.
Additionally, before using a crypto money-transmitting service, the FBI recommended verifying its registration as an MSB with the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). FinCEN provides a website where users can verify a company’s registration status. Notable cryptocurrency firms such as Coinbase and Kraken (operating legally as Payward Financial Inc.) were identified using this tool.
The statement highlighted recent law enforcement actions conducted by the FBI against cryptocurrency services operating without proper licensing in accordance with federal law. Users of unlicensed cryptocurrency money-transmitting services may encounter financial disruptions during such operations, particularly if their cryptocurrency becomes commingled with funds acquired through illicit means.
Using a service that fails to fulfill its legal obligations may result in individuals losing access to their funds following law enforcement actions against these entities.
US Government’s Crackdown on Crypto Mixers
The US government has intensified its crackdown on crypto mixers in recent years. Following the Axie Infinity hack in May 2022, the Treasury Department’s Office of Foreign Asset Control (OFAC) imposed sanctions on Blender.io.
In October of the same year, addresses linked to the Tornado Cash mixer were added to the list of Specially Designated Nationals, effectively prohibiting US residents from utilizing the service. Despite legal challenges, this decision stood, leading to the arrests of all three co-founders of Tornado Cash by August 2023.
In October 2023, the Treasury’s Financial Crimes Enforcement Network proposed labeling crypto mixers as a “primary money laundering concern” after the Hamas attack on Israel. Recently, the US Department of Justice (DOJ) apprehended the founders and CEO of Samourai Wallet, a prominent privacy-focused Bitcoin wallet and mixer, on charges of laundering “more than $100 million in criminal proceeds.”
Further actions ensued as the DOJ collaborated with law enforcement agencies in Portugal and Iceland to apprehend one of Samourai Wallet’s founders. Additionally, the DOJ seized Samourai’s web servers and domain and issued a seizure warrant on the Google Play Store for its mobile app.
