By Philip Rosenstein

Law360 (May 13, 2020, 9:48 PM EDT) -- The Financial Crimes Enforcement Network is keeping a close eye on financial crime involving virtual currency as the COVID-19 pandemic opens new avenues for exploitation, agency director Kenneth Blanco said Wednesday, indicating the number of virtual currency-related suspicious activity reports received since 2013 has topped 70,000.

The COVID-19 health crisis has led to the emergence of new cyber-focused illicit schemes targeting vulnerable individuals and companies, FinCEN Director Kenneth Blanco said at the Consensus 2020 conference, which was hosted online.

Virtual currency companies play a central role in the identification of cybercrime, as "FinCEN has observed that cybercriminals predominantly launder their proceeds and purchase the tools to conduct their malicious activities via virtual currency," Blanco explained.

Central to Blanco's address was a call for cooperation between the government and the private sectors to combat financial crime.

"Our partnerships with industry are paramount in the virtual currency space," Blanco said. "FinCEN has provided priority information on typologies of illicit virtual currency use to financial institutions through our advisory and FinCEN Exchange programs. FinCEN is also sharing cyber indicators of compromise to help the financial sector detect, report, and defend against cyber activity that may be connected with illicit financial activity."

FinCEN has received over 70,000 suspicious activity reports relating to digital assets since 2013, with over half being filed by virtual currency firms, Blanco outlined.

Blanco spoke about growing concerns that virtual currency businesses located outside the United States are seeking to do business in the country without adhering to anti-money laundering, registration and reporting requirements, among others.

Wednesday's comments mirror a recent release from the Financial Action Task Force about the global impact of COVID-19 on financial crime. FATF, a global watchdog that sets international standards for combating money laundering, published its report at the beginning of May, detailing various risks businesses are facing in light of COVID-19 as a result of widespread business closures and a general policy shift to focus on the health crisis.

Those risks include an increase in the incidence of fraud, including the impersonation of officials and the proliferation of investment scams; increased cybercrime; and an increase in the "misuse of online financial services and virtual assets to move and conceal illicit funds," the FATF report stated.

"During this time of crisis where our people could be more at risk and more vulnerable than ever, we, all of us, have a duty and responsibility to use our abilities, tools, and talents to protect others and ensure the stability of this ecosystem that we are creating and that depends on trust," Blanco said on Wednesday.

Blanco also touched on the implementation of the FATF travel rule, which aims to combat money laundering by imposing requirements on "virtual asset service providers," such as cryptocurrency exchanges, to collect information about individuals involved in cryptocurrency transactions.

"FinCEN is optimistic about the growth of various cross-sector organizations and working groups focusing on developing international standards and solutions addressing the travel rule," Blanco said, adding that FinCEN believes the virtual asset industry will adhere to the new rules.

FinCEN has also been providing clarity around anti-money laundering requirements and requirements for the combating of terrorist financing as those obligations relate to COVID-19 relief initiatives. FinCEN relaxed some requirements on disclosures following the passage of economic relief measures through Congress.

--Editing by Daniel King.

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