Ripple? More Like Tidal Wave!

Now, let's talk wall of water, or compliance violations in this case. The Financial Crimes Enforcement Network (FinCEN), put in place by the United State Office of Treasury, has determined that Ripple is in a heap of trouble, and administered a whopping $700,000.00 in penalties to the California based organization. Ripple, Ripple Labs, Inc., as been hit with a pile of violations, the most unbelievable being the fact that they were not registered as a Money Services Business during the sale of approximately 1.3 Million worth of digital currency. Quite shocking considering they are practically next door to Coinbase (San Francisco), who seems to be doing everything by the book.

Ripples other violations include failure to implement an effective AML compliance program, and failure to report timely, and required, reports to FinCEN (CTR/SAR). Registered MSB organizations must comply with strict AML and BSA compliance, part of which, requires cash transaction reports (CTR's) and suspicious activity reports (SAR's). 

FinCEN director, Jennifer Sasky Calvery, had this to say:

“Virtual currency exchangers must bring products to market that comply with our anti-money laundering laws. Innovation is laudable but only as long as it does not unreasonably expose our financial system to tech-smart criminals eager to abuse the latest and most complex products.” 

...and well, she has said this same shit before, and still people continue to act as if they have no clue, which, by the way, is not an excuse, nor is it a legal defense.  Te BSA as specific law in place stating exactly the fact that, if you "don't know", it is still a crime.

You can read a full list of charges, violations, and other information here, in the FinCEN Statement. 20150505 Ripple Violations

In addition to the $700,000.00 in fines, $450,000.00 was confiscated, part of which will credit towards the $700,000.00, making this likely close to 1 MM in penalties. 

FinCEN Crackdown

Think Ripple got it bad? Jamal Awad from Colorado was cashing checks at a local convenient store (for likely a 2% stake), and was hit wit approximately the same set of charges. His penalty was $75,000.00, and here's the kicker. He was charged in 2015, but the violation happened in 2012, and uncovered by non-other than the Internal Revenue Service (IRS).

You can read that little gem right here, and let's not forget that just a few months ago, at the end of 2014, FinCEN put the wheels in motion seeking to ban a Former MoneyGram executive from the Financial Industry completely.

The IRS and FinCEN, have partnered up on AML, and BSA enforcement, so now you not only have big brother, but you have big sister watching over watching as well.

Combined, at any time, they can enforce an audit called as Title 31, and if you are not prepared, you can find yourself getting hit with the same wall of water that's crashing down on Ripple right now.

Avoiding Penatlies

Depending on which State you are in, you may or may not be required to obtain a License in that state, or be able to wiggle your way out of it, but on a Federal Level (FinCEN), you cannot. FinCEN requires every business that is considered a Money Services Business (MSB), to be come a MSB, and you only have 180 days to do so, and implement an effective AML program with controls in place or you're simply heading for a brick wall, penalties, bankruptcy, or even jail time. 

There are companies, such as xbtBase, out there that specialize in getting traders and related BitCo's registered and complaint, and they can generally help you for a few hundred dollars ranging up to a couple grand depending on how complex your business model is.

It's certainly not recommended to try and do this on your own, un less you really know what you are doing and a professional can help you navigate through FinCEN red tape, and support ongoing compliance. xbtBase, to our knowledge, is the only compliance firm, who is actually a Registered MSB, and deals with Bitcoin, but they all offer registration, compliance, and AML tools.

Ripped Ripple

As for Ripple, we'll see what this does to the organization. It unlikely will cause them to go under, but it certainly might sting a bit. Hopefully, they have learned their lesson.

One final note: We wanted to give you a link to the full release from FinCEN, in an effort to point out the way the government agency publicly makes all of this information available when you are handed a penalty for a compliance violation. In addition to all of the above, you get that to deal with as well.

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