FinCEN Director Warns of Financial Crime Involving Virtual Currency During the COVID-19 Pandemic


The Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Department of the Treasury, is “keeping a close eye on financial crime involving virtual currency as the COVID-19 pandemic opens new avenues for exploitation,” Law360 reports.  In his remarks at the Consensus Blockchain Conference on May 13, 2020,  FinCEN Director Kenneth Blanco expressed that the COVID-19 crisis has led to the emergence of new cyber-focused illicit schemes often targeting vulnerable individuals and companies.  For example, Director Blanco noted that FinCEN and law enforcement “have seen reports of cybercriminals leveraging COVID-19 themes as lures” to those seeking “healthcare information and products or are contributing to relief efforts.”  He also noted that “[m]any prevalent scams involving virtual currency payments exploit COVID-19, from extortion, ransomware, and the sale of fraudulent medical products, to initial coin offering investment scams, which will likely continue to grow during the pandemic.”  
 
Director Blanco’s address emphasized the need for cooperation between the government and the private sector to combat financial crime, and explained that virtual currency companies play a central role in the identification of cybercrime, as “FinCEN has observed that cybercriminals predominantly launder their proceeds and purchase the tools to conduct their malicious activities via virtual currency.”  He noted that the industry has the opportunity and the “obligation [] to help identify these illicit criminal networks in [] suspicious activity reporting to FinCEN, so that FinCEN can aggregate and analyze this information to identify red flags, permitting industry to spot risks.”  Director Blanco implored the industry to heed this obligation, explaining that “[d]uring this time of crisis where our people could be more at risk and more vulnerable than ever, we, all of us, have a duty and responsibility to use our abilities, tools, and talents to protect others and ensure the stability of this ecosystem that we are creating and that depends on trust.”  
 

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Katherine M. Lenahan is a Partner in the New York office of Faruqi & Faruqi, LLP and focuses her practice on securities litigation.

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