The Financial Crimes Enforcement Network (FinCEN), in one of a kind move, has imposed the first financial penalty of $60 million on Larry Dean Harmon, the creator and operator of the popular bitcoin mixing tools Helix and Coin Ninja.
Crypto mixing tools are used to morph the origin of a transaction, where the tool mixes several transactions to make them more private and harder to trace. These tools are often used by criminals and scammers who have acquired digital assets by illegal means and often use these tools to launder the money.
FinCEN, a bureau of the US Treasury Department, focuses on keeping a check on money laundering. National Security has never before imposed a financial penalty on any firm or services associated with the decentralized space. However, Harmon is already facing criminal charges for money laundering and allegedly helping AlphaPay move over $300 million worth of bitcoin between 2014-17.
Coin Mixing Tools have been in use for quite some time now, and there are many proponents for these tools claiming privacy concerns to be the biggest reason behind the use of such tools. However, the US Department of Justice deemed these illegal, especially when used for hiding criminal transactions.
As per a 2019 FinCEN clarification, Coin mixers are required to be registered with the FinCEN and must adhere to”maintain an anti-money laundering compliance program” along with transaction records. The clarification also requires coin mixer operators to report any suspicious activity or transactions facilitated via their tool.
Harmon Failed to Adhere With FinCEN Guidelines For Coin Mixers
FinCEN revealed that Harmon failed to adhere to the regulatory guidelines given for coin mixing tools. In its report, FinCEN mentioned that Harmon failed to register the Helix mixing tool, which he operated between 2014 to 2017. The report said,
“The investigation demonstrated that Mr. Harmon deliberately disregarded his obligations under the [Bank Secrecy Act] BSA and implemented practices that allowed Helix to circumvent the BSA’s requirements.
This included a failure to collect and verify customer names, addresses, and other identifiers on over 1.2 million transactions.”
FinCEN also alleged that Harmon failed to collect any data and actively deleted even the minimal customer data they collected. It was also revealed that Harmon was very well aware that some of his clients included narcotics traffickers, counterfeiters, and fraudsters.
The first financial penalty imposed by FinCEN could have a lasting impact on other such tools and service providers, which in turn might lead to stricter regulation or even a complete ban on such tools.