The Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury, has issued a warning to financial institutions about the increasing risks associated with convertible virtual currency (CVC) kiosks. This advisory comes in response to a noticeable uptick in scams and criminal activities linked to these kiosks.
CVC kiosks allow consumers to access cryptocurrencies, which are digital currencies secured through cryptographic techniques and operate on blockchain technology. While they provide a legitimate avenue for cryptocurrency transactions, they have also attracted misuse, including fraud and money laundering, particularly connected to organizations involved in drug trafficking.
FinCEN emphasized that the risks surrounding kiosk operations are heightened when operators do not adhere to legal obligations under the Bank Secrecy Act (BSA). The current landscape illustrates how criminals are increasingly leveraging these advanced technologies to defraud unsuspecting victims. FinCEN’s director emphasized the commitment to protect genuine businesses and consumers while encouraging financial institutions to play a key role in preventing such illicit activities.
One alarming trend highlights that many scams, such as tech support and impersonation schemes, disproportionately impact older adults. These individuals are often manipulated into withdrawing cash and depositing it into kiosks as part of elaborate fraud schemes. The agency’s advisory aligns with the national focus on anti-money laundering and counter-terrorism financing efforts.
In response to these challenges, the notice outlines several “red flags” to assist institutions in identifying suspicious transactions involving crypto kiosks. Indicators may include frequent transactions occurring in different locations, behaviors inconsistent with a customer’s usual patterns, and transactions involving third parties accompanying users to the kiosks.
Moreover, FinCEN has reminded institutions of their responsibilities under the BSA, including the requirement to report suspicious activities promptly when there are indications of criminal behavior linked to kiosk transactions. This alignment is part of a larger initiative by the Treasury to ensure that regulatory frameworks evolve in tandem with emerging financial technologies. FinCEN has committed to continuous support and guidance for institutions managing the complexities of digital asset services while navigating potential risks.