FinCEN Director Tells Banks To Look Out For Crypto Fraud

Kenneth A. Blanco, director of the Financial Crimes Enforcement Network (FinCEN), said banks need to be wary of risks with cryptocurrency, according to remarks planned to be given at the ACAMS AML (anti-money laundering) virtual conference on Tuesday (Sept. 29).

FinCEN is focused on various kinds of cyber threats and cybersecurity, Blanco said. The agency has been conducting its “Innovation Hours Program” since May, in which it invites businesses to present new products and services that are being adopted in the finance world.

Blanco said the organization is looking at mitigating risks with virtual currencies.

“These risks are not unique to money services businesses or virtual currency exchangers; banks must be thinking about their crypto exposure as well,” he said, according to the remarks. “These are areas your examiners, and FinCEN, will ask you about when assessing the effectiveness of your AML program.”

He said banks need to ask themselves what baseline controls they have that can identify customers, whether they have institutional or peer-to-peer virtual currency customers, how the institution interacts with new payment types and whether or not it has tools to identify and report suspicious activity.

“All of these questions go back to the policies and procedures in place to mitigate risk,” he said, according to the remarks.

The agency has seen 91,000 suspicious activity reports related to COVID-19 or the pandemic between Feb. 1 and Sept. 12, Blanco said. Banks accounted for a large majority of those reports, with 71 percent of the total. Credit unions accounted for 17 percent, while the Money Service Business (MSB) industry accounted for 5 percent.

FinCEN has observed fraudsters making plans on various dark web forums to attack state unemployment programs, particularly focusing on those with weaker controls, Blanco said. Some of the methods they’re using include fake websites, email scams and fake instructions on how to sign up for things like Paycheck Protection Program (PPP) loans.

FinCEN has warned of pandemic-related scams before, including those pertaining to cryptocurrency.