Perhaps FinCEN does not consider any SAR "unnecessary", but MSBs are required to report certain things per 31 CFR §1022.320. Reports not required by this regulation could be considered voluntary.
The correspondence between Shrem and co-founder Gareth Nelson made it clear that both co-founder and Shrem viewed the activity of the BTCKing account as suspicious and as exceeding the size of transactions that would qualify for mandatory reporting. Shrem assured Nelson that he'd handle it, but instead, gave BTCKing advice on how to structure such transactions in the future, instead of performing his mandatory (and assumed) duty to report suspicious activity.
From 31 CFR § 1022.320
(2) A transaction requires reporting under the terms of this section if it is conducted or attempted by, at, or through a money services business, involves or aggregates funds or other assets of at least $2,000 (except as provided in paragraph (a)(3) of this section), and the money services business knows, suspects, or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part):
(i) Involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any Federal law or regulation or to avoid any transaction reporting requirement under Federal law or regulation;
(ii) Is designed, whether through structuring or other means, to evade any requirements of this chapter or of any other regulations promulgated under the Bank Secrecy Act; or
(iii) Serves no business or apparent lawful purpose, and the reporting money services business knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.
(iv) Involves use of the money services business to facilitate criminal activity.
Arguably, the activity involved falls under the "illegal activity" in (i) and the "criminal activity in (iv), but even if it doesn't, the "avoid any transaction reporting requirement" in (i) and the "structuring" language in (ii) certainly apply. While there is a lot of ground where this language is arguably ambiguous and there are many situations where it might be difficult to determine whether a certain activity triggered a responsibility to file an SAR, this case is not one of them.
Shrem clearly knew the activities of the BTCKing account were in excess of reporting requirements, and explicitly made his knowledge clear to Nelson. Rather than file an SAR, he allowed the activities to continue under a variety of ruses so transparent that Nelson continued objecting to him allowing them.
Frankly, arguably, they have enough to go after Nelson, too, but he did a much better job covering his ass in his correspondence. Also, perhaps he's been being cooperative, so I'd tread carefully if you've had any questionable dealings with that guy. I find it curious the only paper about him in this case so far is a few mentions of him in the indictment, and wouldn't be surprised in the least if he turns into a witness friendly to the prosecution or is busily hanging out other people to dry to save his own skin. To me, it seems they have, at the very least, enough to slap him with a fine.
Now, I don't think the more serious money laundering case is as clear-cut as the prosecution would have us believe, though. I think it's there more to scare him into pleading to the non-reporting charge or some lesser included offense of the money laundering case.
