FinCEN Penalizes Crypto P2P Currency Exchanger for Non Compliance (Golding & Golding)

FinCEN Penalizes Crypto P2P Currency Exchanger for Non Compliance (Golding & Golding)

FinCEN Penalizes Crypto P2P Currency Exchanger for Non Compliance

Cryptocurrency may be subject to various different IRS and other laws, rules and regulations — depending on who is handling the virtual currency — and what is the nature of the transaction is

And, while the IRS requires investors, sellers, and collectors of cryptocurrency to pay tax and report on all things cryptocurrency — the IRS is just one government faction that may be breathing down taxpayer necks.

IRS & FinCEN Cryptocurrency (The Problem)

The problem is twofold: First, during its infancy stages, cryptocurrency was primarily used for illicit purposes. Mainly as a form of black-market, darkweb currency on sites such as Silk Road (still one of the best episodes of American Greed ever produced.)

Second, is that the main purpose for many traders of cryptocurrency is to remain anonymous — which is directly apposite to the government’s purpose of financial transparency.

The U.S. Government hates anonymity. Like a nosy neighbor, the IRS, FinCEN and DOJ want to know everything they can about your cryptocurrency.

  • How is it stored?
  • Did you ever sell or exchange it?
  • Do you hold cryptocurrency overseas?

What is FinCEN?

FinCEN is the Financial Crimes Enforcement Network. FinCEN is responsible for overseeing global financial transactions, with a focus on reducing crime.

As provided by FinCEN:

“FinCEN is a bureau of the U.S. Department of the Treasury. The Director of FinCEN is appointed by the Secretary of the Treasury and reports to the Treasury Under Secretary for Terrorism and Financial Intelligence.


FinCEN’s mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.


FinCEN carries out its mission by receiving and maintaining financial transactions data; analyzing and disseminating that data for law enforcement purposes; and building global cooperation with counterpart organizations in other countries and with international bodies.”

FinCEN Forms

One common form you may have read about is the FBAR (Foreign Bank Account Reporting aka Report of Foreign Bank and Financial Account). Technically, the FBAR is a FinCEN Form, called FinCEN 114.

You can find a recent Forbes article featuring Mr. Sean M. Golding, Board Certified Tax Law Specialist, Board Certified Tax Law Specialist Lawyer, which details the recent updates (pros and cons) of reporting cryptocurrency on an annual FBAR and FATCA.

But, it is not just the owners of cryptocurrency who have to watch their backs.

What is a Peer-to-Peer (P2P) Virtual Currency Exchanger?

A Peer-to-Peer Virtual Currency Exchanger is a money transmitter. In a recent case came down on a person responsible for facilitating more than 200 transactions.

As provided buy FinCEN

Defendant conducted over 200 transactions involving the physical transfer of more than $10,000 in currency, yet failed to file a single CTR. 


For instance, Defendant conducted approximately 160 purchases of bitcoin for approximately $5 million through in-person cash transactions, conducted in public places such as coffee shops, with an individual identified through a bitcoin forum. 


Of these cash transactions, 150 were in-person and were conducted in separate instances for over $10,000 during a single business day.  Each of these 150 transactions necessitated the filing of a CTR.

Is a P2P Virtual Currency Exchanger Illegal?

No, BUT, the proper precautions and procedures must be maintained. In this instance, FinCEN determined that the person violated the BSA (Bank Secrecy Act) by not properly registering as a Money Transmitter of an MSB (Money Services Business).

Since Defendant never registered, he never completed the other requirements, such as:

  • Registering with FinCEN
  • Developing, implementing, and maintaining an effective AML program
  • Ffiling Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs); and
  • Maintaining certain records.

How Much was the FinCEN Penalty?

The Penalty was $35,000 and Defendant agreed to an industry bar that would prohibit him from providing money transmission services or engaging in any other activity that would make him a “money services business” for purposes of FinCEN regulations.

At Risk for FinCEN or IRS Penalties?

Simple. FinCEN also provided that “[S]ince his infractions, [Defendant] has cooperated with FinCEN efforts. Typically, this could mean Defendant has already provided information to FinCEN, which could then be shared with the IRS or DOJ.

If you have unreported foreign, overseas and/or offshore cryptocurrency, you may consider getting into offshore compliance before it is too late.

Golding & Golding, A PLC

We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.