Crypto ATM’s: A Growing Hub for Fraud and Illicit Activity Warns FinCEN
Virtual currency kiosks, often referred to as cryptocurrency ATM’s, have become a convenient means for consumers to buy and sell cryptocurrencies like Bitcoin, Ethereum, and other mainstream crypto-coins. The development of these outlets have spurred greater investment into the crypto market during the current bull-run, helping to bridge the gap between virtual currencies and real-world tangibility which has remained one of the primary deterrents to mainstream adoption to date. However, the increasing accessibility and prevalence of crypto kiosks across the United States and many other developed countries has also culminated in them becoming a prime target for scammers and criminals. From varying cases of fraud costing Americans collective billions to their use in money laundering directly by criminal organizations and cartels, these kiosks are at the center of a rising wave of new-age financial crime, prompting lawmakers and regulators across the United States to take action to combat their misuse.
In 2023, the FBI reported that cryptocurrency fraud cost Americans alone approximately $5.6 billion, a 45% increase from the previous year. A significant portion of this massive figure was correlated to the misuse of virtual currency kiosks. The methods used by fraudsters in many of the successful fraud cases run through these devices are often far from sophisticated, perhaps lending to their believability. Whereas traditional ATM’s enable customers to withdraw or deposit cash from a bank account, convertible virtual currency (CVC) kiosks enable customers to buy, and in some cases sell, CVC from a CVC wallet or exchange.1 The most common fraud method using these platforms involves bad actors directing their unsuspecting victims to deposit cash at a crypto ATM under false pretenses, with these machines then converting the fiat currency into cryptocurrency before sending it to the scammer’s crypto wallet. Although the blockchain technologies backing cryptocurrencies create a public and permanent record of transactions, criminals employ various methods to obscure the flow of their funds. With respect to crypto ATM’s, once the victim’s funds are transferred into someone’s crypto wallet, they become nearly impossible for law enforcement to track – allowing the criminal operations to continue and the scope of their illicit activity to grow. All told, in 2024 alone, the FBI’s Internet Crime Complaint Center recorded over 10,956 complaints related to crypto ATM’s, with victim losses totaling approximately $246.7 million – a 31% rise from 2023.1
In response to this growing issue, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a notice last week, urging financial institutions to increase their awareness on the misuse of these kiosks and to report suspicious activity linked to them. In their alert, FinCEN – the agency tasked with collecting and analyzing information about financial transactions to combat domestic and international money laundering, terrorist financing, and other financial crimes – highlighted the use of crypto ATM’s not only in fraud, but also in money laundering by transnational criminal organizations.
Over the past several years, both European and U.S. investigations have discovered that crypto ATM’s have been used by professional money laundering organizations (PMLO’s) for purposes of converting cash proceeds of illicit drug sales into crypto before ultimately transferring those proceeds into cartel-affiliated crypto wallets. In Mexico, unregistered crypto ATMs have proliferated in small businesses, providing cartels a new avenue to launder money, with these “mystery” kiosks operating without proper oversight and creating further difficulties with regulating this technology. Non-compliant kiosk operators have further exacerbated the issues in tracing illicit financial activity spawning from use of crypto ATM’s, with many found in the U.S. failing to register as money services businesses (MSBs) – in spite of this being a requirement under Bank Secrecy Act (BSA) regulations – or failing to implement appropriate anti-money laundering programs altogether, making their machines more vulnerable to abuse. Given the fact that CVC kiosks generate revenue for their operator through the collection of fees, the more traffic received at an ATM can create significant profits for operators. This appears to have lent these operators to be less inclined to perform their appropriate due diligence and thorough money laundering checks as long as funds are continuing to flow in through their devices.
In further investigating misuse of these ATM’s across the country, the U.S. government has found that the infamous Cartel Jalisco Nueva Generación (CJNG) based in Mexico has been leveraging cryptocurrencies for rapid international fund transfers, allowing their operations to continue in spite of staunch sanctions and international investigations into the group’s illicit cross-border activities. CJNG was recently designated as a Foreign Terrorist Organization (FTO) and a Specially Designated Global Terrorist (SDGT) by the United States government, with the cartel active as a major contributor in funneling fentanyl and other illicit drugs into the United States through our southern border. Domestically, state lawmakers are now responding with a wave of regulatory proposals to combat new threats. At least 15 states, including Maryland, North Dakota, and Rhode Island, have introduced bills to limit daily transactions on crypto kiosks, often to a $1,000-$2,000 limit, as well as additional measures to cap fees for operators, mandate consumer warnings, and require more stringent operator registration. New Jersey has proposed the strictest measures of any state to date – a complete ban on crypto kiosks, with fines up to $10,000 for violations. Meanwhile, Spokane, Washington, became the first individual city to prohibit these kiosks entirely as of June 2025, citing a surge in local scams costing residents thousands. Washington state alone reported $141.7 million in losses from these activities in 2023.
Law enforcement and financial crime advocacy groups continue to emphasize the need for stronger protections, particularly for more vulnerable populations including the elderly, who accounted for nearly half of the 5,500 kiosk-related complaints to the FBI in 2023. As the cryptocurrency market grows – with its value increasing to approximately $3.3 trillion over the course of 2025 – policymakers face the challenge of curbing fraud and illicit activity without stifling further investment into this budding market. For now, the rise in virtual currency kiosk-related crimes remains a pressing concern, demanding vigilance from regulators, financial institutions, and consumers alike. FinCEN’s notice details illicit financial typologies associated with CVC kiosks, while also providing red flag indicators to assist banks with the identification and reporting of suspicious activity related to these outlets, while better protecting themselves from potential involvement in illicit activity. This report can be found in its entirety here.
Citations
“FinCEN Notice on the Use of Convertible Virtual Currency Kiosks for Scam Payments and Other Illicit Activity.” Financial Crimes Enforcement Network, U.S. Department of the Treasury, 4 Aug. 2025.