On January 18, 2023, the Financial Crimes Enforcement Network (FinCEN) issued an order prohibiting certain transmittals of funds by any covered financial institution involving Bitzlato Limited (Bitzlato), a convertible virtual currency (CVC) exchanger. FinCEN determined that Bitzlato is a financial institution operating outside of the United States and identified it to be a “primary money laundering concern in connection with Russian illicit finance” due to “(1) its facilitation of deposits and funds transfers by Russian ransomware groups or affiliates… and (2) its facilitation of transactions with Russian darknet markets on behalf of both darknet customers and darknet vendors.”
The FinCEN order is the first to be issued pursuant to section 9714(a) of the Combating Russian Money Laundering Act as amended by section 6106(b) of the National Defense Authorization Act for Fiscal Year 2022. Section 9714 permits FinCEN to declare certain institutions, types of transactions, or certain accounts to be instruments of Russian money laundering. Section 9714 authorizes the FinCEN to require “domestic financial institutions” (including credit unions) to:
- Take one or more “special measures” as described 31 U.S.C. 5318A(b), commonly known as section 311 of the USA PATRIOT Act, which includes certain recordkeeping and reporting requirements; or
- Prohibit or impose certain conditions upon “certain transmittals of funds… by any domestic financial institution… if such transmittal of funds involves” an institution deemed to be a “primary money laundering concern in connection with Russian illicit finance.” These funds include convertible virtual currency.
Financial institutions, including credit unions, will now have to make sure their transactions do not involve transmittals to foreign institutions or accounts that have been designated as a primary Russian “money laundering concern” by FinCEN. As described in the Order, financial institutions are prohibited from engaging in a transmittal of funds from or to Bitzlato, or from or to any account or CVC address administered by or on behalf of Bitzlato. To learn more about section 9714 and to view the full FinCEN order and frequently asked questions, please visit the links below.
Imposition of Special Measure Prohibiting the Transmittal of Funds Involving Bitzlato