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Home > Statutes & Regulations > Bank Secrecy Act
Regulatory Efficiency and EffectivenessFinCEN is continuously engaged in ensuring that we carry out our mission as administrator of the Bank Secrecy Act (BSA) in the most efficient and effective manner possible. In furtherance of these goals, FinCEN has been conducting outreach with representatives from a variety of industries that fall under BSA regulatory requirements. Regulatory Efficiency and Effectiveness: Taking A "Fresh Look" Upon joining FinCEN as the Director in 2007, James H. Freis, Jr. announced that he was going to "take a fresh look" at the way FinCEN carries out its mission as administrator of the Bank Secrecy Act, including a review of the regulatory framework with a focus on ensuring that requirements on covered financial industries are efficient in their application, yet remain extremely effective in their service to law enforcement investigators, FinCEN analysts, and regulatory examiners to safeguard the financial system from the abuses of terrorist financing, money laundering, and other financial crime. On May 16, 2007, he presided over his first meeting of the Bank Secrecy Act Advisory Group (BSAAG) and previewed his commitment to enhanced dialogue with all of FinCEN's stakeholders to pursue greater efficiency and effectiveness. FinCEN Announces First Steps Towards Efficiency and Effectiveness On June 22, 2007, FinCEN launched the first regulatory efficiency and effectiveness initiatives. Prior to the launch, then-Secretary Paulson was briefed on certain aspects of FinCEN's analytical capabilities, including its recent Mortgage Fraud, and Domestic Shell Company reports. He also received a detailed briefing from FBI counterterrorism officials concerning their use of the BSA information and the wealth of investigatory value that they find in CTR and SAR filings. Representatives from trade groups representing thousands of financial services providers also received similar briefings from FinCEN and the FBI. Senior executives from the American Bankers Association, America's Community Bankers, Credit Union National Association, Financial Services Roundtable, Independent Community Bankers of America, Institute of International Bankers, National Association of Federal Credit Unions, National Money Transmitters Association, and The Clearing House Association attended. After those briefings, the Secretary joined the trade group representatives for a discussion of the initiatives. Other federal regulatory agencies including the Office of Thrift Supervision, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration and the Internal Revenue Service sent representatives to attend the announcement and provided their support to FinCEN's initiatives. FinCEN's Regulatory Efficiency and Effectiveness Initiatives Under the first of four initiatives, FinCEN is commencing a joint effort with the federal bank regulators to ensure that financial institutions and regulators treat compliance obligations in a manner that helps to avoid expenditures that are not commensurate with actual risk. And in an effort to address many of the issues dealing with the oversight of and access to banking by Money Services Businesses (MSBs), FinCEN is working with the IRS, state regulators and federal functional regulators to develop developing MSB examination materials. In addition, FinCEN will craft a more narrow definition of MSBs. FinCEN has also begun work on its own new chapter of the Code of Federal Regulations to ensure that a financial institution will only need to look in two places to identify its regulatory responsibilities. FinCEN has also committed to providing the affected industries with written feedback within 18 months from the effective date of new regulations, such as the final rule concerning Casino Recordkeeping and Reporting Requirements, or changes to existing regulations. As part of its efforts to provide more value in the feedback products that it produces for the financial industry, FinCEN also released the eighth version of The SAR Activity Review By the Numbers which provides enhanced graphics and visualization tools on a state-by-state basis. The 43 states with which FinCEN has MOUs also received individual packages with more detailed-focus on BSA filings within their states. For more information, please see the Bank Secrecy Act Effectiveness and Efficiency Fact Sheet. Other Actions Supporting Regulatory Efficiency and Effectiveness July 2007 On July 19 the federal financial regulatory agencies issued the Interagency Statement on Enforcement of Bank Secrecy Act/Anti-Money Laundering Requirements, setting forth the agencies' policy for enforcing specific anti-money laundering requirements of the Bank Secrecy Act (BSA) and aiming both to provide greater consistency among the agencies in enforcement decisions in BSA matters and to offer insight into the considerations that form the basis of those decisions.
August 2007 On August 6 The Financial Crimes Enforcement Network (FinCEN), the Board of Governors of the Federal Reserve System and the Department of Justice announced $65 million in joint and concurrent enforcement actions against American Express Bank International (AEBI) of Miami, Florida and American Express Travel Related Services Company, Inc., a money services business, located in Salt Lake City, Utah, for violations of the Bank Secrecy Act (BSA). FinCEN Director James H. Freis, Jr. said these actions "serve as another example of collaboration by federal agencies to apply a consistent approach to Bank Secrecy Act enforcement."
The Financial Crimes Enforcement Network (FinCEN) announced on August 8 the issuance of a final rule implementing a key provision of Section 312 of the USA PATRIOT Act, clarifying the risk-based procedures that U.S. financial institutions should use in tailoring their enhanced due diligence to assess the risks of some foreign banking relationships. September 2007 The Financial Crimes Enforcement Network (FinCEN), the Office of the Comptroller of the Currency (OCC) and the U.S. Department of Justice announced on September 17 $31.6 million in joint and concurrent enforcement actions against Union Bank of California, N.A. (Union Bank) of San Francisco, California for violations of the Bank Secrecy Act (BSA). Union Bank consented to payment of the civil money penalties, which will be satisfied by a single payment of $10 million to the U.S. Department of the Treasury. Union Bank also consented to issuance of a Cease and Desist Order by the OCC. The Department of Justice issued a Deferred Prosecution Agreement and an accompanying $21,600,000 forfeiture in connection with charges that Union Bank failed to maintain an effective anti-money laundering program. "Today's action against Union Bank demonstrates the successful efforts of federal agencies to apply a coordinated and consistent approach to Bank Secrecy Act enforcement," said FinCEN Director James H. Freis, Jr.
U.S. Treasurer Anna Escobedo Cabral visited the Financial Crimes Enforcement Network (FinCEN) on September 27 to announce the launch of outreach materials for Money Services Businesses (MSBs) in seven (7) foreign languages. The outreach materials, which are already available in English, are now available in the following languages: Spanish, Chinese, Vietnamese, Korean, Arabic, Farsi, and Russian. Treasurer Cabral was joined by James H. Freis, Jr., Director of FinCEN, to discuss how these new materials will greatly enhance MSB outreach efforts to the many ethnic communities affected by Bank Secrecy Act requirements. Director Freis also announced the launch of a MSB Registration Renewal Calculator on the msb.gov website aimed at helping MSBs comply with their registration renewal requirements. These two measures are examples of FinCEN's continuing effort to make Bank Secrecy Act ("BSA") compliance more efficient and effective.
October 2007 In a speech on October 9 to the Money Transmitter Regulators Association Annual Conference, Director James H. Freis, Jr., announced the availability of a new reference on common errors seen in Suspicious Activity Reports (SARs). The document, "Suggestions for Addressing Common Errors Noted in Suspicious Activity Reporting," is a compilation of useful information which FinCEN has discovered through its analysis of Money Services Business (MSB) Suspicious Activity Reports but will also be informative to other financial institutions. It provides tips for avoiding common mistakes and suggestions for establishing more efficient and effective anti-money laundering programs. FinCEN expects that SAR filers who are trained on the requirements would have available already the information necessary to complete the SAR properly, meaning that substantial improvements to the SAR filing could be made without significant additional efforts beyond those already undertaken for the investigation and decision to file a SAR. The activities and transactions reported through SARs provide law enforcement and regulatory authorities with useful information to detect and disrupt potentially illegal activities such as money laundering and terrorist financing.
November 2007 In a speech to the Global Gaming Expo on November 14, Director James H. Freis, Jr. announced the release of Frequently Asked Questions (FAQs) for the gaming industry. As part of FinCEN’s commitment to provide feedback to its covered industries, the FAQs are intended to assist the gaming industry with Bank Secrecy Act (BSA) compliance requirements. Effective June 30, 2007, Nevada Gaming Commission Regulation 6A was repealed. As a result, casinos formerly covered under Regulation 6A became responsible for complying with other requirements, including BSA currency transaction reporting and casino recordkeeping requirements. The FAQs address topics such as which gambling establishments are subject to the regulations; guidance on compliance with currency transaction reporting and suspicious activity reporting requirements; and clarification on the recordkeeping and compliance program requirements. While comprehensive, the list is not exhaustive and additional FAQs will be issued in the future. December 2007 FinCEN issued interpretive guidance in early December, regarding automatic teller machines (ATMs). This guidance addressed whether or not a non-bank owner-operator of an ATM that offers a limited range of services would be considered a money services business, and therefore subject to BSA reporting and recordkeeping requirements. An owner-operator of an ATM that only offered customers remote access to their accounts for balance inquiries or withdrawals would not be considered an MSB.
January 2008 FinCEN and the Department of Justice announced on January 28 concurrent actions against a money services business headquartered in California. FinCEN assessed a $12 million civil money penalty against Sigue Corporation and Sigue, LLC for violations of the Bank Secrecy Act. Sigue entered into a deferred prosecution agreement with the Department of Justice for failing to maintain an effective anti-money laundering program. FinCEN’s penalty was deemed satisfied by a portion of Sigue’s $15 million payment to the Department of Justice. “Principals of money services businesses must exercise effective oversight and control over the authorization, transactional activity and operations of their agents to ensure compliance with the BSA and prevent money laundering,” FinCEN Director Freis said. “Operations with sound programs minimize the risk of being misused by criminals and unscrupulous or non-compliant agents."
As part of an increased emphasis on the importance of feedback, FinCEN issued guidance on the application of correspondent account rules, in addition to three separate rulings.
February 2008 During a speech to the Florida International Bankers Association, Director Freis further emphasized FinCEN’s commitment to providing feedback to the financial institutions subject to the BSA. “The sound public policy choices made over time relating to our BSA regulatory regime reaffirm the significance of an effective partnership between the government and private sector that Congress intended,” Freis said. “We both have essential roles to play as we work together to fight money laundering, terrorist financing and other illicit activity.”
FinCEN issued the latest edition of The SAR Activity Review – By the Numbers, a feedback product published twice a year as a companion piece to The SAR Activity Review – Trends, Tips & Issues.
Every issue of The SAR Activity Review contains case examples in which Bank Secrecy Act (BSA) data supported law enforcement investigations. Law enforcement officials use BSA records to help investigate a variety of crimes, including tax evasion, narcotics trafficking and identity theft. FinCEN has released an archive of all of the case examples that have been published in the current and previous editions of The SAR Activity Review. The list is organized according to type of BSA form used in the investigation, type of industry involved, and type of violation committed.
The cases described in the archive demonstrate the usefulness of BSA reports to law enforcement. FinCEN is committed to ensuring that requirements on covered financial industries are efficient in their application, yet remain extremely effective in their service to law enforcement investigators. As the Government Accountability Office (GAO) found in its recent report, Currency Transaction Reports (CTRs) provide unique and reliable information essential to supporting investigations and detecting criminal activity. CTR information contributes to pattern and trend analysis that may be indicative of money laundering and other financial crimes.
March 2008 As part of an increased emphasis on the importance of feedback, FinCEN issued guidance to both the insurance industry and the jewelry industry. Director Freis gave a keynote speech March 10 at the Jewelers Vigilance Committee’s AML Seminar, where he announced the release of guidance to U.S. dealers and retailers in precious metals, stones and jewels. The guidance is intended to clarify the criteria this industry may use when evaluating a foreign supplier.
FinCEN’s guidance for insurance companies is intended to clarify their BSA/AML responsibilities.
April 2008 Director Freis addressed members of the insurance industry at the American Council of Life Insurers’ Anti-Money Laundering and Critical Infrastructure Committee on April 2. He discussed BSA/AML issues facing the industry, and announced the release of a new FinCEN report assessing the first year of mandatory suspicious activity filings for the insurance industry.
FinCEN also released another strategic analytical report. On April 3, FinCEN issued an update to its November 2006 mortgage loan fraud assessment, based upon analysis of SARs provided by the financial industry. The previous study examined a statistical sample of SARs reporting mortgage fraud filed between April 1996 and March 2006. The updated study continues the analysis through March 2007. FinCEN announced April 23 a proposal to simplify significantly the current requirements for depository institutions to exempt their eligible customers from currency transaction reporting. In a Notice of Proposed Rulemaking and request for comments, FinCEN is seeking to amend the BSA regulation allowing depository institutions to exempt certain persons from the requirement to report transactions in currency in excess of $10,000, in accordance with the Government Accountability Office’s (GAO’s) recent recommendations and FinCEN’s independent research on the underlying issues.
FinCEN and the Office of the Comptroller of the Currency announced April 28 the assessment of concurrent civil money penalties, each $15 million, against the New York branch of United Bank for Africa, PLC, for violations of the Bank Secrecy Act. Without admitting or denying the allegations, the branch consented to the payment of the civil money penalties, which will be satisfied by a single payment of $15 million to the U.S. Department of the Treasury. "A financial institution that recklessly disregards its obligations under the Bank Secrecy Act and continues to operate without an effective anti-money laundering program, despite repeated warnings and a business focus on areas of recognized high risk, should expect to be penalized,” FinCEN Director Freis said. “The severity of this joint enforcement action is reflective of just such conduct. This is not a case of interpretation of technical issues or about minor lapses in compliance."
May 2008 On May 1, FinCEN released a report on money laundering methods and trends in the residential real estate industry. The latest in a series of reports based upon analysis of SARs, it is intended to help raise awareness of the vulnerability and assist financial institutions to better recognize risk, and thus provide better information to law enforcement in order to combat criminal activity. FinCEN’s report identifies several transactional typologies and associated illicit activities that may be perpetrated by individuals or groups seeking to launder funds via residential property transactions. FinCEN also issued both the latest editions of The SAR Activity Review – Trends, Tips & Issues and its companion piece, The SAR Activity Review – By the Numbers.
During the semi-annual plenary meeting of the Bank Secrecy Act Advisory Group on May 14, 2008, Director Freis announced the launch of FinCEN’s redesigned website. The enhanced website emphasizes FinCEN’s commitment to providing quality feedback and useful information to both the users and providers of Bank Secrecy Act (BSA) information. Informational content was extensively reorganized and supplemented to provide a more user-friendly, informative, and educational communications tool. "We have listened to the suggestions and comments from our partners in the financial industry and we have implemented the changes that they have requested to make a better website," said Director Freis. "Efficient, effective, and timely communication is vital to achieving our common mission of protecting the financial system." June 2008 Risk Scoping Evaluation Commitment Secretary Henry M. Paulson, Jr. visited FinCEN on June 22, 2007, to launch the Bank Secrecy Act regulatory efficiency and effectiveness initiative. The first portion of this initiative focused on enhancing the risk-based approach to Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) examination, in keeping with the evolution of our risk-based system, through the development of new tools and guidance. Our Approach We reached out to study how different regulatory agencies approach risk scoping, holding meetings with the Federal banking agencies to better understand how they identify risks through the scoping process and direct their examination resources appropriately. We have also looked internationally to see how our foreign counterparts approach the challenges of a risk-based system. This collaborative exchange of information about risk scoping tools and processes presented an understanding of the strengths of various approaches, providing opportunities to identify short-term enhancements with a view towards longer-term possibilities. Results This evaluation has identified several ways to enhance the risk-based approach to BSA/AML examination by leveraging opportunities for IT modernization and increased, risk-focused analysis. For example, we evaluated tools and processes that allow examiners to analyze information and patterns in BSA data from a specific institution to help identify areas that may require closer review, and we jointly identified ways to enhance these tools that will foster more effective use. Incorporating this type of information as part of the pre-examination scoping process enables the banking agencies to more accurately identify areas to focus examination resources. In addition, we have identified ways that FinCEN can increase our analytical support to those responsible for ensuring compliance with the BSA by providing products to regulatory partners that provide useful information on macro-level risks. These results build upon the successes of Federal banking agencies’ and FinCEN’s efforts to ensure a more consistent approach to conducting BSA/AML examinations through the FFIEC BSA/AML Examination Manual. We are working together to provide examiners with additional objective information to aid them in the risk scoping process, with a view towards concentrating both examiner and financial institution resources where risks are greatest, which will help to avoid expenditures by the government and the institutions that are not commensurate with actual risk. Looking Ahead Our review of this process has helped confirm the importance of certain key elements that are necessary to implement an effective risk-based approach: high-quality information tools and processes to highlight this information, and BSA/AML examination flexibility that focuses resources on areas of highest risk. In addition, we have identified possible ways that we may be able to extend information gained through this process to the non-bank context. We are committed to striving to continually looking for opportunities to enhance the risk-based approach. This is not a one-time initiative, but rather is a long-term commitment to continuous improvement. We have taken important steps down this road, and we invite a continued dialogue with industry on how we can work together to continue to achieve our common goals. July 2008 In keeping with its efforts to make BSA filing requirements more secure, efficient, and effective, FinCEN announced its intention to retire the BSA Magnetic Media Filing Program. Current Magnetic Media filers must transition to BSA Electronic Filing (E-Filing) no later than December 31, 2008.
August 2008 Supporting its commitment to provide feedback to the financial institutions subject to the reporting and recordkeeping requirements of the BSA, FinCEN issued guidance to the casino and card club industry. This guidance is intended to assist casinos and card clubs with the reporting of suspicious activity, and contains examples of circumstances or "red flags" that may indicate the presence of money laundering, terrorist financing, and related financial crimes.
September 2008 FinCEN issued interpretive guidance to clarify whether a person who conducts transactions in currency or other commodities is a money services business, for purposes of complying with the BSA and its implementing regulations.
In late September, Director Freis attended the Florida Bankers Association’s Town Hall Meeting in Tampa, Florida, where he gave a keynote address, focused on the connection between fraud and money laundering, and the value of BSA reports. “We know that no bank executive wants a fraudster in the bank, trying to profit at the expense of the bank or a customer – that’s common sense,” Director Freis said. “And we know that no reputable financial institution wants money laundering taking place within their business, not just because of the reputational risk, but because serving criminals is not part of a solid long-term business strategy. This is why Secretary Paulson has been noted for saying that those who run our nation’s financial institutions feel strongly about protecting the integrity of the financial system and want no part of illegal activity. … I want to emphasize that financial institutions can benefit by leveraging their fraud resources with their AML efforts and starting to take advantage of the significant efficiencies that I see being available through this leverage.”
October 2008 Speaking at an international seminar on anti-money laundering and the counter-financing of terrorism, Director Freis addressed the issue of SAR sharing, and announced FinCEN’s intention to clarify the confidentiality regulations surrounding the issue. “…We will soon be taking two steps to clarify the confidentiality of SARs and at the same time permit certain sharing of SARs within a corporate organizational structure to promote greater enterprise-wide risk management,” Director Freis said. “The first step entails issuing a proposed rule to update our regulations on SAR confidentiality. When finalized, these updates will clarify, among other things, the scope of the statutory prohibition against the disclosure by a financial institution or by a government agency of a SAR or any information that would reveal the existence of a SAR. The second step entails proposing guidance to accompany the new rule change. This guidance will clarify that for certain financial institutions, the sharing of a SAR with a domestic affiliate is consistent with the purposes of the BSA (including the confidentially provisions) and will therefore be permitted. … The issues surrounding SAR sharing are challenging. This point has been reiterated by banks and government officials around the world. FinCEN has been engaging in dialogue with some of our largest financial institutions in the United States, and it is clear that this remains a significant issue for which additional guidance is needed.”
In a speech before the American Bankers Association / American Bar Association annual Money Laundering Enforcement Conference, Director Freis provided feedback on FinCEN’s authority to assess civil money penalties. “Effective enforcement is based on the just and consistent application of the rules and enforcement penalties,” Director Freis said. “Misperceptions about these matters will erode the trust and confidence in our financial system that the BSA seeks to protect. In this regard, FinCEN’s general policy is to reserve civil money penalties for the most significant and systemic violations of the BSA. This is a view that I believe the banking industry shares. While lesser BSA infractions should not be ignored, FinCEN has other vehicles to address these deficiencies outside of the context of enforcement. By way of example, FinCEN’s enforcement statistics reflect that FinCEN penalizes financial institutions rarely, and only when appropriate. To illustrate further, FinCEN has assessed three civil money penalties under the BSA this year, and only one involved a bank. In 2007, FinCEN assessed five civil money penalties, two against banks. To put these figures into context, there are tens-of-thousands of financial institutions subject to the BSA, including over 17,000 depository institutions.”
On October 24, 2008, the Bank Secrecy Advisory Group held its semi-annual plenary meeting. Treasury Secretary Paulson attended, and reminded attendees of the BSAAG’s importance to the security of the financial system. “As representatives of the financial industry, regulatory community, and law enforcement, the advisory group is an important voice in the financial system,” Secretary Paulson said. “We will continue to work as partners to ensure that our financial system is safe, sound, and secure from abuse.”
The Secretary of the Treasury was directed by Congress in 1992 to establish the BSAAG to actively solicit advice on the administration of the Bank Secrecy Act. The BSAAG consists of representatives from state and federal regulatory and law enforcement agencies, financial institutions, and trade groups. It is chaired by the director of FinCEN, and BSAAG membership is solicited via public notice in the Federal Register. The BSAAG also co-chairs publication of The SAR Activity Review—Trends, Tips & Issues. At the October Plenary, Director Freis announced the release of the fourteenth issue. As part of its efforts to make the administration of the BSA more efficient and effective, FinCEN completed a proposal to reorganize regulations under Chapter X of the Code of Federal Regulations (CFR). The proposal would simplify BSA rules and regulations by centralizing them in a new chapter of the CFR, and would streamline the BSA regulations into general and industry-specific parts, ensuring that a financial institution will be able to identify its obligations under the BSA in a more organized and understandable manner. FinCEN’s regulations are currently included in the CFR as Part 103 in Chapter I under “Title 31, Money and Finance: Treasury.” FinCEN is proposing to reorganize and renumber its regulations into a new tenth chapter of Title 31 which would appear as “Title 31 Chapter X – Financial Crimes Enforcement Network.”
In another example of its commitment to efficiency and effectiveness, FinCEN withdrew its proposed AML program rules for unregistered investment companies, commodity trading advisors, and investment advisers. The withdrawals of the proposed program rules have been published in the Federal Register. Given the passage of time since these rules were first proposed in 2002 and 2003, FinCEN determined that it will not proceed with BSA requirements for these entities without publishing new proposals and allowing for industry comments. FinCEN will continue to consider whether, and to what extent, it should impose requirements under the BSA on these entities.
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