money service business reporting requirements

FinCEN Crypto Reporting Requirements for MSBs

Crypto Money Service Businesses

The Financial Crimes Enforcement Network (FinCEN) in the United States imposes specific reporting requirements on money service businesses (MSBs) that engage in transactions involving cryptocurrency. These requirements were developed to prevent money laundering, terrorist financing, and other illicit activities. There are two primary reporting functions.

Currency Transaction Reports

A Currency Transaction Report (CTR) is a form used by financial institutions and certain businesses to report transactions involving cash or cash equivalents that exceed a certain threshold. The purpose of the CTR is to assist government authorities, primarily FinCEN, in identifying potential money laundering, terrorist financing, and other financial crimes. MSBs are obligated to file Currency Transaction Reports for any transactions involving cryptocurrency that exceed $10,000 in a single day.

The key features of a Currency Transaction Report typically include:

  1. Threshold: The reportable threshold for a CTR is set by the regulatory authorities. In the U.S., financial institutions must file a CTR for any cash transaction exceeding $10,000 in a single business day.
  2. Information: The CTR form collects information about the transaction, such as the date, time, and location of the transaction, the parties involved, and the nature of the transaction. Additionally, the form requires identification details of the individual conducting the transaction.
  3. Filing: Financial institutions and businesses subject to CTR reporting must file the report with the appropriate regulatory agency, such as FinCEN in the U.S., within a specified timeframe after the covered transaction.
  4. Purpose: CTRs are primarily used by government agencies and law enforcement to monitor and track large cash transactions that may indicate potential money laundering or other illicit activities. The information gathered from CTRs helps authorities detect patterns of suspicious financial activity and investigate possible criminal behavior.

A CTR is typically filed by the Money Service Business through the BSA portal, but you can find a sample report here.

Note further that If multiple transactions occur within a single business day and the total value of those transactions exceeds $10,000, the MSB must file a CTR. The transactions are aggregated to determine if the reporting threshold has been met.

MSBs must file CTRs with the Financial Crimes Enforcement Network (FinCEN) within 15 calendar days after the transaction.

Suspicious Activity Reports

A Suspicious Activity Report (SAR) is a report filed by money service businesses and certain businesses with FinCEN to alert them of suspicious or potentially unlawful financial transactions or activities. If an MSB detects any suspicious activities involving cryptocurrency transactions, they must file a Suspicious Activity Report with FinCEN.

SARs are filed when a financial institution or business detects transactions or activities that raise suspicion of potential money laundering, fraud, terrorism financing, or other criminal conduct. Financial institutions and businesses must file SARs when they have reason to believe that a transaction or a series of transactions totals $5,000 or more (or any amount if the business deems it suspicious). The specific timeframe for the initial filing can vary but is typically within 30 days from the date the suspicious activity was detected. In some cases, where the financial institution or business believes there is an immediate threat of loss due to the suspicious activity, an expedited filing may be necessary.

The elements of a Suspicious Activity Report Include:

  1. Filer Information: This section includes details about the financial institution or business filing the SAR, such as the name, address, contact information, and the filer’s role in the organization.
  2. Subject Information: The subject information identifies the individual or entity involved in the suspicious activity. This includes the subject’s name, date of birth, address, and other identification details, such as Social Security Number (SSN) or Taxpayer Identification Number (TIN).
  3. Date and Time of Suspicious Activity: The SAR should specify the date and time when the suspicious activity was detected or occurred.
  4. Description of Suspicious Activity: This section provides a comprehensive narrative describing the suspicious transaction or activity that raised concerns. The narrative should be detailed enough to convey the nature of the suspicious behavior to law enforcement and regulatory authorities.
  5. Transaction Details: If applicable, the report should include specific details of the transactions involved in the suspicious activity, such as transaction amounts, dates, sources of funds, recipients, and any other relevant information.
  6. Supporting Documentation: SARs may include relevant documents, records, or transactional evidence supporting the suspicion of illegal or questionable activity. This can include account statements, wire transfer records, and any communication related to the suspicious transaction.

Note that there is a “right” way to compile a Suspicious Activity Report. Rather, the filer should use the BSA portal and provide as much detail as possible.

Conclusion

While not legal tender in the United States, cryptocurrency is to be treated as such by money service businesses engaged in crypto transactions – exchanges, wallet providers, custodians, OTC traders, etc. It is important for an MSB to maintain a compliance program that ensures the timely filing of CTR and SAR reports as the failure to do so can result in fines and other penalties.

Be sure to reach out should you have any questions.

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About Adam Tracy

Adam Tracy is a payments expert and entrepreneur who specializes in payment systems, blockchain technology, digital currencies, and other emerging technologies. He is the founder of Blockrunner, LLC that provides consulting services to clients in the blockchain, payments and cryptocurrency arenas.

Tracy has been involved in the payments industry as an attorney, consultant and entrepreneur since 2005, while he was become an expert in blockchain and cryptocurrency since its advent in 2013. Tracy has worked with a wide range of clients, including startups, established businesses, and investor – both in the United States and worldwide. He has advised clients on a wide range of compliance, legal and operational issues related to payment transfer systems, crypto token generation and architecture, cryptocurrency exchanges, regulatory licensing, smart contracts, and other blockchain applications.

In addition to his consulting work, Tracy has founded several companies in the payments, blockchain and cryptocurrency space, including a digital asset hedge fund, licensed electronic money institution and a blockchain-based tokenization platform. He is also a proponent of decentralized finance (DeFi) and has been involved in various DeFi projects.

Tracy is also a frequent speaker and writer on blockchain and cryptocurrency topics. He has been featured in a wide range of publications, including Forbes, Hollywood Reporters, CNBC, Reuters, CoinDesk, and Bitcoin.com.

Find Adam: https://linktr.ee/adamtracy

Blockrunner, LLC., is a financial services match-making marketplace and consulting company. We are not a bank, FI/NBFI, Payment Service Provider, deposit taking institution, trust, or money services business of any kind. We are not regulated by any financial regulator. Banking, Payment, Processing, and Licensing services are provided by our participating members. This website is for informational purposes only and does not constitute legal advice. If you need legal advice, please consult a licensed attorney in your jurisdiction.

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