Last week, the U.S. Attorney’s Office in the Southern District of New York charged two Florida residents, Anthony Murgio and Yuri Lebedev, with several crimes relating to their alleged operation of an “underground bitcoin exchange.” Most concerning for FinTech companies, the complaint included criminal charges for conspiracy to operate an unlicensed money transmitting business, operation of an unlicensed money transmitting business, and willful failure to file a suspicious activity report, in addition to a single money laundering charge.  These charges represent a continuation of a troubling trend of using criminal charges to enforce the Bank Secrecy Act and statutes governing money transmission.

FinTech companies, and virtual currency exchanges in particular, should be concerned about the government’s use of criminal charges to enforce the Bank Secrecy Act and money transmission laws for several reasons:

1. It does not even occur to many small FinTech companies that failing to apply for a money transmitter license could result in arrest and imprisonment, but violating the statue with which Murgio was charged (18 U.S.C. §1960), can result in 5 years’ imprisonment.
2. Similarly, while the Bank Secrecy Act requires the reporting of certain suspicious transactions relevant to a possible violation of law or regulation, there is a great deal of judgment involved in determining whether a transaction is relevant to statutory or regulatory violations.  Getting this determination wrong can be the first step toward the government concluding that there was a willful failure to file a required suspicious activity report.  This also can result in 5 years’ imprisonment (under 31 U.S.C. §§ 5318(g),5322(a) and 31 C.F.R. §1022.320).
3. While this complaint also included more serious money laundering allegations, the use of charges based on the operation of an unlicensed money transmitter business and the failure to file a suspicious activity report can easily establish a precedent for using these charges even in the absence of more serious criminal activity.