The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued Notice FIN-2025-NTC1, dated August 4, 2025, warning financial institutions about the growing risks associated with convertible virtual currency (CVC) kiosks, also known as cryptocurrency automated teller machines (ATMs), in a major step to strengthen AML and countering the financing of terrorism (CFT) efforts.
These devices, which facilitate the exchange of fiat currency for virtual assets and vice versa, offer consumers a streamlined interface for accessing blockchain-based assets.
However, FinCEN emphasizes that their convenience is increasingly exploited by illicit actors, including fraudsters and transnational criminal organizations (TCOs), to perpetrate scams, launder drug proceeds, and enable other forms of financial crime.
The notice underscores that non-compliant CVC kiosk operators, often failing to adhere to Bank Secrecy Act (BSA) obligations as money services businesses (MSBs), exacerbate these vulnerabilities by neglecting customer identification, transaction monitoring, and suspicious activity reporting requirements.
Convertible Virtual Currency Kiosks
Drawing from Bank Secrecy Act data, open-source intelligence, and insights from law enforcement partners such as the Federal Bureau of Investigation (FBI) and Drug Enforcement Administration (DEA), FinCEN reports a sharp rise in illicit activities linked to CVC kiosks.
In 2024, the FBI’s Internet Crime Complaint Center (IC3) documented over 10,956 complaints involving these kiosks, resulting in victim losses approximating $246.7 million, a 99% surge in complaints, and a 31% increase in losses compared to 2023.
The Federal Trade Commission (FTC) corroborates this trend, noting skyrocketing fraud losses through CVC kiosks.
FinCEN’s analysis further reveals their use in laundering suspected narcotics proceeds, with TCOs like Cartel Jalisco Nueva Generación leveraging CVC for rapid cross-border transfers as an alternative to bulk cash smuggling.
High-risk areas, such as Illinois with its dense kiosk network (approximately 1,626 statewide, including 1,167 in Chicago), have seen interstate travel by individuals to exploit these machines for money laundering, aligning with FinCEN’s AML/CFT National Priorities encompassing fraud, cybercrime, and drug trafficking.
Red Flag Indicators
The notice delves into typologies of illicit finance, particularly scam payments where fraudsters direct victims to CVC kiosks under false pretenses, exploiting the irreversibility of blockchain transactions and high transaction fees (ranging from 7-20%).
Elder fraud emerges as a predominant concern, with FTC data indicating that individuals aged 60 and older are over three times more likely to suffer losses via kiosks, accounting for more than two-thirds of reported fraud dollars.
Common schemes include tech/customer support scams, government impersonation, romance fraud, and emergency cons, often initiated via unsolicited calls, pop-up ads, or emails.
Scammers provide victims with quick response (QR) codes linked to controlled wallets, guiding them through cash withdrawals from traditional accounts such as retirement funds and deposits into kiosks, sometimes structuring transactions to evade currency transaction report (CTR) thresholds or daily limits, a tactic indicative of smurfing.
To aid detection, FinCEN outlines red flag indicators for financial institutions, including customers structuring deposits below suspicious activity report (SAR) thresholds across multiple kiosks, rapid chain-hopping of funds into stablecoins via decentralized finance (DeFi) cross-chain bridges, or multiple users funneling deposits to a single wallet address.
For kiosk operators, non-compliance signals such as unregistered MSB status, opaque fee structures, or failure to implement effective AML programs heighten risks.
The notice reminds institutions of BSA mandates, including SAR filings with the keyword “FIN-2025-CVCKIOSK” in field 2, CTRs for transactions exceeding $10,000, and voluntary information sharing under USA PATRIOT Act Section 314(b).
FinCEN Director Andrea Gacki stated, “Criminals are relentless in their efforts to steal money from victims, and they’ve learned to exploit innovative technologies like CVC kiosks.
The United States is committed to safeguarding the digital asset ecosystem for legitimate businesses and consumers, and financial institutions are a critical partner in that effort. This Notice supports Treasury’s continuing mission to counter fraud and other illicit activities.”
Case studies in the notice, such as the 2021 sentencing of Kais Mohammad for operating an unlicensed CVC kiosk network that laundered millions in Bitcoin for criminals, and a 2024 Arizona scam defrauding a retiree of $1.49 million through kiosk deposits and gold purchases, illustrate enforcement actions.
With CVC kiosks proliferating from 4,128 in 2019 to over 37,342 by 2025 FinCEN urges enhanced vigilance, blockchain analytics for tracing, and compliance to mitigate these threats, reinforcing the ecosystem’s integrity against evolving illicit finance risks.
Find this News Interesting! Follow us on Google News, LinkedIn, and X to Get Instant Updates!
Source link
