In a press release from FinCEN, this move was called “the first civil enforcement action against a virtual currency exchanger.”
Ripple Labs willfully violated several requirements of the Bank Secrecy Act (BSA) by acting as a money services business (MSB) and selling its virtual currency, known as XRP, without registering with FinCEN, and by failing to implement and maintain an adequate anti-money laundering (AML) program designed to protect its products from use by money launderers or terrorist financiers.
The irony of this event is strong, since just a couple months ago Ripple stood before the California Assembly and claimed that Ripple was superior to Bitcoin in terms of anti-money laundering compliance. Ripple has time and again billed itself to be the banking industry’s answer to Bitcoin, and more recently than its comments to the California Assembly, it announced a partnership with veteran money transmitter Western Union.
Also read: Can Ripple Labs Track You?
Ripple reached an agreement with the government in which it paid $450,000 up front, leaving $250,000 of its fine to still be paid. By reaching a settlement agreement, the company avoided any criminal charges. The charges sheet against Ripple states that in March and April 2013, when Ripple was selling its pre-mined coins (a fact the document stresses), Ripple was not registered with FinCEN.
Notwithstanding the Guidance [released March 18th], and after that Guidance was issued, Ripple Labs continued to engage in transactions whereby it sold Ripple currency (XRP) for fiat currency (i.e., currency declared by a government to be legal tender) even though it was not registered with FinCEN as an MSB. Throughout the month of April 2013, Ripple Labs effectuated multiple sales of XRP currency totaling over approximately $1.3 million U.S. dollars.
This comes along with heated discussions surrounding the exit of founder Jed McCaleb, who Ripple says is illegally liquidating his sizable Ripple holdings, and lobbied for his funds to be frozen on Bitstamp, a request to which Bitstamp complied.
Ripple has agreed to make corrective changes to its policies in order to be compliant with government regulations. It is the first virtual currency exchanger to face fines at the hands of FinCEN to date, but likely not the last, as many are aware of other exchanges who have operated far more outside the guidelines than this.
Last modified: June 27, 2020 10:40 AM UTC