In May 2019, FinCEN issued an Advisory on Illicit Activity Involving Convertible Virtual Currency which noted: The spike in unregistered cryptocurrency exchange SARs corresponds with the timing of key events in the crypto space.įirst, FinCEN and other regulators heightened the expectation that cryptocurrency firms register as MSBs. 2018 SAR Insights: Suspicious Activity Reports Annual Analysis by Alison Jimenez Why did Unregistered Cryptocurrency Exchange SARs skyrocket? In fact, 87% of the Unlicensed or Unregistered MSB SARs were filed by MSBs in Santa Clara County and San Francisco County, CA. It wasn’t your corner convenience store MSB filing these SARs, it was MSBs located in Silicon Valley. One possible explanation is the crack-down on virtual currency exchanges as unlicensed MSBs. SAR filings doubled from 633 to 1,275 for Unlicensed or Unregistered MSBs. Licensed and registered MSBs made it their mission in 2018 to root out unlicensed MSBs. I first noted this sharp uptick in DSA’s 2018 SAR Insights: Annual SAR Filings.Īnalysis by Dynamic Securities Analytics, Inc. The graph below shows the exponential growth in SARs filed by registered MSBs about unregistered MSBs through October 2021. 65,000+ Unregistered MSB SARs filed in 2021įinCEN SAR Stats reports 65,397 Suspicious Activity Reports (SARs) were filed through December 2021 by MSBs against “Unregistered or Unlicensed MSBs”.
Moreover, unregistered cryptocurrency exchanges SARs are filed at a much lower rate by banks and securities firms. The bad news is that the horde of unregistered cryptocurrency exchanges are likely non-compliant with AML obligations. The good news is that the registered cryptocurrency exchanges are detecting unregistered cryptocurrency exchanges. The Take-Away: Cryptocurrency exchanges filed thousands of unregistered cryptocurrency exchange SARs in 2021. ** UPDATE: 65,397 Unregistered MSB SARs filed through December 2021 by San Francisco MSBs.**
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