The U.S. Justice and Treasury departments announced today that a San Francisco-based virtual currency company has agreed to resolve criminal and civil investigations by paying $700,000 and taking measures to improve its compliance with federal laws.
Ripple Labs Inc., formerly known as OpenCoin, was founded in San Francisco in 2012. It provides an Internet-based currency exchange service for use by banks and money transfer companies, carried out with a virtual currency known as XRP.
A statement of facts included with the two settlement agreements describes XRP as “the second-largest cryptocurrency by market capitalization, after Bitcoin.”
The facts statement agreed to by both sides says that Ripple Labs and a subsidiary, XRP II, violated the federal Bank Secrecy Act at various times in 2013 and 2014 by failing to establish adequate measures to prevent the service from being used for money laundering.
The statement also says Ripple Labs and the subsidiary failed to register as a money services business with the Treasury Department until six months after a registration requirement went into effect in March 2013.
In the civil agreement with the Treasury Department’s Financial Crimes Enforcement Network, Ripple Labs agreed to pay a fine of $700,000.
In a second agreement with the Justice Department, the company agreed to forfeit $450,000 to resolve a related criminal investigation. The forfeiture payment will be credited to the fine payment, so that the company’s total liability is $700,000.
The company also agreed to improve its compliance with federal laws, the monitoring of its transactions and staff training.
Financial Crimes Enforcement Network Director Jennifer Calvery said in a statement, “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,” she said.
Ripple Labs spokeswoman Monica Long said the firm, which she described as “an early company in an emerging, undefined financial technology category,” has been cooperating with the investigations.
“We’ve been consistent in our message of supporting a compliant and healthy Ripple ecosystem. We have not willfully engaged in criminal activity, nor has the company been prosecuted,” Long said in a statement.
Julia Cheever, Bay City News