Crypto ATMs fueling criminal activity, Treasury warns

The U.S. Treasury Department is urging financial institutions to keep an eye out for criminal activity in connection to cryptocurrency ATMs, which are increasingly being used to carry out scams and money laundering.

In a notice released Monday, the Department’s Financial Crimes Enforcement Network (FinCEN) warned that the massive increase in the number of crypto ATMs — convertible virtual currency kiosks — has been accompanied by a spike in the number of operators who fail to comply with anti-money laundering rules. 

The machines are typically found in commercial spaces like gas stations and grocery stores, and allow customers to buy cryptocurrency in exchange for cash.  

Last year, the FBI’s internet crime complaint center received nearly 11,000 complaints related to the kiosks, and observed victim losses of about $246.7 million from scams involving ATMs. According to data cited by FinCEN from the website Coin ATM Radar, reported Bitcoin ATMs in the U.S. have increased from 4,250 at the start of 2020 to 30,647 as of August 4. 

Many operators of ATMs fail to register with FinCEN as money services businesses despite being legally required to do so under the Bank Secrecy Act, the Treasury said. 

“CVC kiosks operated by non-compliant operators are especially vulnerable to abuse by scammers and other criminals,” the agency said, with criminals specifically seeking out kiosks without strong controls.

Most commonly, the ATMs are used to carry out tech and customer support scams targeting senior citizens, who are given detailed instructions on how to find the machines and where to deposit the newly acquired cryptocurrency. 

According to FinCEN, ATM operators should be aware of red flags, such as a customer sending multiple payments “just below the suspicious activity reporting (SAR) threshold” from multiple kiosks, and customers with no transaction histories making substantial deposits. 

Other financial institutions should also be on the lookout for customers who take out a significant amount of money and indicate they are taking it to a crypto ATM, as well as those who conduct significant transactions at a kiosk. 

FinCEN’s warnings around crypto ATMs coincide with calls to increase oversight of their use. In February, Sen. Dick Durbin (D-IL) introduced a bill that would require kiosk operators to register and disclose ATM locations to the Treasury Department and offer detailed receipts making it possible to trace transactions. 

Under the proposed law, new customers would be subject to transaction limits and offered refunds for fraudulent transactions. 

In July, New Zealand banned all crypto ATMs in the country, while Australia recently introduced new regulations on operators to address fraud, like spending limits and enhanced know-your-customer checks.