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FinCEN detail on its Civil Monetary Penalty

From today’s CMP assessment of $60,000,000 on Larry Dean Harmon:

IV. CIVIL MONEY PENALTY
FinCEN determined that Mr. Harmon, in his roles with Helix and Coin Ninja, willfully violated the BSA and its implementing regulations, as described in this ASSESSMENT and Attachment A, and that grounds exist to assess a civil money penalty for these violations.11 FinCEN determined that the maximum penalty in this matter is $209,144,554.12
FinCEN may impose a civil money penalty of $57,317 for each willful violation of AML program requirements assessed on or after October 10, 2019.13 The BSA states that a “separate violation” of the requirement to establish and implement an effective AML program occurs “for each day that the violation continues.”14 The authorized penalty for each violation of MSB registration requirements assessed on or after October 10, 2019 is $8,457.15 The BSA states that “each day” a violation of the failure to register as a MSB continues “constitutes a separate violation.”16 FinCEN may impose a penalty not to exceed the greater of the amount involved in the transaction (but capped at $229,269) or $57,317 for each willful violation of SAR requirements assessed on or after October 10, 2019.17

V. CONSIDERATION OF PENALTY FACTORS
On February 6, 2020, FinCEN provided Helix with a written pre-assessment notice that included a draft ASSESSMENT and Statement of Facts (the “PAN package”). The PAN package provided Helix with FinCEN’s charges outlining violations of
the BSA and its implementing regulations, the factors taken into consideration in determining whether to assess a civil money penalty and the proposed civil money penalty amount, and instructions on how to respond to these charges. Helix responded, through counsel, on March 6, 2020 denying that it operated as a MSB and requesting more time to respond to FinCEN’s Statement of Facts. FinCEN provided Helix
with multiple opportunities to respond to the PAN package. To date, over eight
months since FinCEN issued its PAN package, Helix has not provided any additional information or documentation responding to the allegations or considerations contained in FinCEN’s PAN package. As such, FinCEN concludes that Helix has decided not to submit any new facts or explanations for consideration. In light of this, FinCEN has considered the following factors in determining the disposition of this matter:

  1. Nature and seriousness of the violations and harm to the public. The violations outlined in this ASSESSMENT are considered by FinCEN to be of a serious and egregious nature. The BSA and its implementing regulations require MSBs
    and money transmitters such as Helix to develop and implement a risk-based AML program designed to deter illicit financial activity and report suspicious activity, among other things, in order to assist law enforcement in detecting crimes. In this instance, Helix operated as a MSB in a high-risk industry
    that deals in convertible virtual currencies without developing an AML program and, in fact, provided its services in such a manner that it assisted and facilitated illicit financial activity. As a sophisticated enterprise, Helix worked in conjunction with darknet marketplaces to launder illicit bitcoin proceeds and actively marketed its services as an anonymity-enhancing service to launder bitcoin from illicit activity. For example, FinCEN observed bitcoin transactions equal to $121,511,877 transferred to darknet-associated addresses by, through, or to Helix.
  2. Impact of violations on FinCEN’s mission to safeguard the financial system. Helix was totally and completely deficient in its compliance with the BSA and its implementing regulations during the entire course of Helix’s operation. FinCEN analysis evidenced that Helix failed to maintain all required elements of an AML program. During the lifespan of the MSB, Helix developed no AML program and was vulnerable to illicit use. In addition to having no AML program, Helix further failed to designate a compliance officer, conduct any AML training for employees, and never conducted an independent test required under law. Rather than collect customer data as part of a viable AML program, Helix asserted that it deleted even the minimal customer information it did collect for all transactions it facilitated. Helix also failed to conduct appropriate suspicious activity monitoring from 2014 through 2017, making it difficult to completely ascertain the number of specific reporting violations that exist. Independent FinCEN analysis of Helix’s public records and analysis of convertible virtual currency blockchains identified at least 245,817 instances in which suspicious transactions took place. Yet, Helix failed to file a single SAR throughout the corresponding time period.
  3. Pervasiveness of wrongdoing within the financial institution. Helix openly flaunted existing regulatory requirements and went out its way to create ways for darknet customers and vendors to avoid law enforcement detection. Helix purposefully created a system to facilitate illicit activity, which was recognized by darknet drug vendors like AlphaBay – a marketplace that integrated Helix into its platform. Rather than institute policies and procedures to comply with the BSA, Helix instead instituted policies and procedures that allowed customers of darknet marketplaces to launder bitcoin through Helix.
  4. History and duration of violations. Helix operated for over three years, from April 2014 to December 2017, without appropriate AML policies and procedures in place. Helix did not implement even basic AML program requirements and specifically sought to launder bitcoin from illegal activity.
  5. Failure to terminate the violations. After Helix closed operations in December 2017, Helix continued to operate another unregistered MSB by creating, controlling, and operating the money transmitter Coin Ninja LLC in 2017, which operated through February 6, 2020.
  6. Financial gain or other benefit as a result of violation. Helix made a significant financial gain in administrator fees from its facilitation of transactions with darknet marketplaces, ransomware, child exploitation websites, and unregistered MSBs. Helix did not expend any resources on compliance with the BSA and its implementing regulations.
  7. Cooperation. Helix agreed to two statute of limitations tolling agreements with FinCEN.
  8. Systemic nature of violations. Helix’s systemic failure to report potentially suspicious activity led to shortcomings that denied potentially critical information to the BSA database for at least a three-year period. FinCEN’s independent investigation found that Helix conducted numerous potentially suspicious transactions with darknet marketplaces, ransomware, unregistered MSBs, and other mixing platforms offering similar money laundering services.
  9. Timely and Voluntary Disclosure of Violations. FinCEN did not consider this as an aggravating or mitigating factor in this matter.
  10. Penalties by Other Government Entities. FinCEN is the sole government regulator with authority to pursue civil violations of the BSA and its implementing regulations for MSBs.18 FinCEN has considered Helix’s indictment in the District of Columbia under 18 U.S.C. § § 1956 and 1960 for conspiracy to launder monetary instruments and the operation of an unlicensed money transmitting business.19

Categories: Anti-Money Laundering Civil Monetary Penalties Enforcement Actions FinCEN Updates Money Services Businesses Virtual Currencies

eric9to5

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