High-risk segment merchants increasingly use crypto payment processors to process payments. On Thursday, the U.S. Federal Bureau of Investigation (FBI) cautioned Americans about the risks of using crypto services from companies not registered as Money Services Businesses (MSBs) under federal law. This warning highlights a crucial aspect of the regulatory framework governing financial transactions in crypto.
According to the FBI’s Internet Crime Complaint Center (IC3), Americans should steer clear of crypto services that do not comply with anti-money laundering (AML) regulations and lack proper customer identity verification processes, commonly known as Know Your Customer (KYC). The FBI’s statement pointed out that KYC protocols are essential as they involve collecting critical information such as a customer’s name, date of birth, and address.
The FBI has recently conducted law enforcement operations against cryptocurrency services which were not licensed in accordance with federal law. People who use unlicensed cryptocurrency money transmitting services may encounter financial disruptions during law enforcement actions, especially if their cryptocurrency is intermingled with funds obtained through illegal means.
FBI warning (link)
The FBI stressed the importance of verifying whether a crypto service is registered as an MSB with the U.S. Financial Crimes Enforcement Network (FinCEN). This registration is a key indicator of a company’s compliance with federal regulations. FinCEN provides a tool that allows users to check the registration status of firms, ensuring they operate legally. Notably, established cryptocurrency firms like Coinbase and Kraken (legally known as Payward Financial Inc.) are listed as registered MSBs, affirming their compliance.
The bureau also highlighted recent law enforcement actions against unlicensed cryptocurrency services. The FBI warned that using such services could lead to financial disruptions, especially if law enforcement seizes assets linked to illegal activities. They emphasized that services operating without necessary legal compliance or facilitating illegal transactions are likely targets for law enforcement investigations.
Furthermore, the FBI advised against using cryptocurrency services that do not require KYC information before allowing transactions. They noted that just because an app is available in app stores does not guarantee that it adheres to federal compliance requirements or operates legally.
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If you have information about unregistered or illegally operating payment processors in the crypto and non-crypto sectors, please let us know via our whistleblowing system, Whistle42.
