Ripple Labs Inc., the creators of Ripple Protocol, known for their cryptocurrency and virtual currency exchange services has been slapped with a $700,000 fine by the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) for flouting anti-money laundering regulations and operating without proper registration. FinCEN along with Northern District of California’s US Attorney’s Office on investigation found that the company was involved in money services business and selling virtual currency without registering with FinCEN.
Ripple Labs Inc. along with its wholly owned subsidiary XRP II, LLC, seems to have willfully violated the articles of Bank Secrecy Act and ignored anti-money laundering regulations. The company escaped criminal charges by entering into a settlement agreement with FinCEN involving forfeiture of $450,000 towards partial fulfillment of the $700,000 fine and implementation of remedial measures to achieve compliance in the future.
The risk of money laundering and using the laundered money for illicit activities has always been one of the concerns regarding bitcoin. Governments across the world have already put stringent anti-money laundering regulations in place for banks and financial institutions to follow. These regulations have been implemented to check corruption and prevent the laundered money from being used to fund terrorist organizations. Any circumvention from existing AML and KYC regulations may not only invite trouble from the authorities but can compromise national security too.
This incidence involving Ripple and FinCEN also proves that the authorities are constantly monitoring the developments happening in the cryptocurrency space.
As per the agreement between FinCEN and Ripple, in addition to compliance with AML/CFT regulations, the company is bound to conduct XRP and Ripple trade only through a registered Money Services Business (MBS). Ripple will also be subjected to external audits every two years until 2020 and the company has to go back into the records and report any suspicious transactions on the platform in the past three years.
The Ripple Protocol is also expected to undergo few changes in the coming days. In order to avoid such issues, it is advisable for other companies in the cryptocurrency space to ensure that they are meeting all the requirements as stated by the law and any other applicable regulations.