FBI Warns Americans Against Using Unregistered Crypto Money Transmitters

The US Federal Bureau of Investigation (FBI) has issued a warning to Americans regarding the use of crypto money-transmitting services that are not registered as Money Services Businesses (MSBs) in accordance with United States federal law. 

These laws, outlined in 31 USC § 5330 and 31 CFR §§ 1010 and 1022, mandate adherence to anti-money laundering requirements.

FBI Urges Caution When Using Cryptocurrency Services

Before using an unlicensed cryptocurrency service, the #FBI advises users to check whether the service is registered as a money-transmitting business with the U.S. Treasury Department. Learn more https://t.co/DZPLrfKlYp pic.twitter.com/1kvf7WHqEl

— FBI (@FBI) April 25, 2024

In a statement released on Thursday by the FBI’s Internet Crime Complaint Center (IC3), individuals are urged to avoid crypto services offered by entities not registered as Money Services Businesses (MSBs) under federal law and failing to adhere to anti-money laundering (AML) regulations.

The FBI emphasized the importance of taking precautionary measures to avoid inadvertently engaging with non-compliant services.

For instance, FBI recommended to steer clear of crypto money-transmitting services that fail to collect Know Your Customer (KYC) information from customers when required. 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, prior to utilizing a crypto money-transmitting service, the FBI recommended individuals verify their registration as an MSB with the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). FinCEN offers a website where users can check a company’s registration status. Notable cryptocurrency firms such as Coinbase and Kraken (operating legally as Payward Financial Inc.) were identified when utilizing the tool.

The statement highlighted recent law enforcement operations conducted by the FBI against cryptocurrency services operating without proper licensing in accordance with federal law. Users of unlicensed cryptocurrency money-transmitting services may face financial disruptions during such operations, particularly if their cryptocurrency becomes commingled with funds acquired through illicit means.

Utilizing a service that fails to fulfil its legal obligations may result in individuals losing access to their funds following law enforcement actions against these entities.

US Government Intensifies Crackdown on Crypto Mixers

The law enforcement agency advised the avoidance of services that openly advertise themselves for illegal purposes and the exercise of caution when using cryptocurrency platforms known to be utilized by criminals for money laundering activities.

The US government has escalated 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 facing 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 labelling crypto mixers as a “primary money laundering concern” in the aftermath of the Hamas attack on Israel. Just recently, the US Department of Justice (DOJ) made headlines by apprehending the founders and CEO of Samourai Wallet, a prominent privacy-focused Bitcoin wallet and mixer. They were charged with laundering “more than $100 million in criminal proceeds.”

Further actions followed as the DOJ collaborated with law enforcement agencies in Portugal and Iceland to arrest 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.

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