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Home > Statutes & Regulations > Bank Secrecy Act
Regulatory Efficiency and EffectivenessTo view or print PDF content, download the free Adobe Acrobat Reader. FinCEN 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 MSB examination materials (FinCEN completed the BSA/AML Examination Manual for Money Services Businesses in December 2008). 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.
November 2008 As part of its efforts to provide more value in the feedback products created for the financial industry, FinCEN released the 11th issue of the SAR Activity Review - By the Numbers. In the first six months of 2008, the total volume of SARs within the Bank Secrecy Act database increased five percent, compared to the corresponding six-month period in 2007. The first two quarters of 2008 reiterated the continuing trend upward of mortgage loan fraud and identity theft. These two summary characterizations are ranked sixth and ninth by depository institutions, respectively. Similarly, during the same period, reported instances of terrorist financing continued to decline, as they have every year since 2004. December 2008 In early December, FinCEN announced a final rule simplifying the current requirements for depository institutions to exempt their eligible customers from currency transaction reporting. In finalizing and issuing the rule, FinCEN is amending the BSA regulation that allows depository institutions to exempt certain persons from the requirement to report transactions in currency in excess of $10,000. As the Government Accountability Office highlighted in its February 2008 report, CTRs provide unique and reliable information essential to supporting investigations and detecting criminal activity.
Upholding FinCEN’s commitment to provide feedback to its regulated industries within 18 months of the effective date of new rules or changes to existing regulations, FinCEN released an assessment of CTRs filed by casinos between July 1, 2006 and June 30, 2008. FinCEN reported in its new study that the number of CTR-Cs filed by casinos fell by more than a third after FinCEN reduced reporting requirements on certain categories of transactions that it had determined do not pose a significant risk for money laundering, terrorist financing or tax evasion.
In direct support of FinCEN’s commitment to working with the IRS, state regulators, and Federal functional regulators to address many issues dealing with MSB oversight and MSBs’ access to banking services, FinCEN announced the release of examination materials for MSBs. The manual provides guidance to officials examining MSBs for compliance with the requirements of the BSA. Several organizations collaborated on this manual to ensure consistency in the application of BSA requirements, including: the IRS, state agencies responsible for MSB regulation, the Money Transmitter Regulators Association (MTRA), the Conference of State Bank Supervisors (CSBS), and FinCEN. The manual aims to enhance BSA examiners’ ability to perform risk-based examinations of MSBs, provide a resource to enhance the consistency of BSA examination procedures, provide a summary of BSA compliance requirements and exam procedures to the MSB industry, and facilitate the efficient allocation of exam resources between federal and state BSA regulators.
January 2009 FinCEN continues to work with Federal regulators, members of the financial industry, and law enforcement to increase the efficiency and effectiveness of BSA regulations. Following the release of the examination manual for MSBs, FinCEN and the IRS held a national conference call to help MSBs better understand BSA requirements and examination expectations. FinCEN also collaborated with the Commodity Futures Trading Commission (CFTC) to enter into an agreement for the exchange of information to coordinate efforts and maximize resources in discharging the agencies’ statutory obligations under the Commodity Exchange Act (CEA) and the BSA. The collective goal of the agencies is to ensure that CFTC-regulated entities – particularly futures commission merchants and introducing brokers – have in place anti-money laundering programs that comply with the BSA and its implementing regulations. An additional goal is to ensure that terrorist financing, money laundering, and other financial crimes – including violations of the CEA – are identified, deterred, and interdicted.
February 2009 As a resource for financial institutions to help address questions frequently asked by their customers, FinCEN issued an educational pamphlet on the CTR reporting requirement. The pamphlet, which can be provided to customers, uses plain language to explain the CTR reporting requirement to those who may not be familiar with a financial institution’s obligations under the BSA. For example, the pamphlet explains that large currency transactions are not illegal, and that financial institutions are required to obtain information from their customers when these transactions do occur. The pamphlet does not alter in any way a financial institution’s BSA reporting requirements and explains that if a customer attempts to break up, i.e. “structure,” transactions in order to evade the CTR reporting requirement there are potential civil and criminal consequences.
The following day, FinCEN issued another informational resource – its latest analysis of depository institution SARs reporting mortgage fraud as a category of suspicious activity. The report showed SARs filed on suspected mortgage fraud increased 44 percent in the 12 months ending in June 2008, compared with the prior year. March 2009 Consistent with two important purposes of the BSA – promoting financial institutions’ efforts to detect and report money laundering and terrorist financing, as well as ensuring the confidentiality of a SAR or any information that would reveal the existence of a SAR – FinCEN announced proposals to permit the certain financial institutions to share a SAR, or information that would reveal the existence of the SAR, with an affiliate provided that affiliate is subject to a SAR regulation issued by FinCEN or the Federal Banking Agencies. FinCEN has proposed revised rules and new guidance that permit certain affiliates of depository institutions, as well as broker-dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities, to share SARs within a corporate organizational structure for purposes consistent with Title II of the BSA. “The rule and guidance … helps to ensure that critical information is appropriately shared and reaffirms our commitment to protect this sensitive information,” said FinCEN Director James H. Freis, Jr. in announcing details of a new SAR sharing plan. “FinCEN recognizes the need to remove regulatory inefficiencies that detract from providing timely and accurate information to law enforcement. We will continue to pursue this shared goal with our regulatory, industry, and law enforcement partners.”
In another example of its commitment to provide affected industries with written feedback within 18 months from the effective date of a new regulation or significant change to an existing regulation, FinCEN released a report on the impact of final rules concerning Special Due Diligence Programs for Certain Foreign Accounts. On August 9, 2007, FinCEN issued a final rule implementing the enhanced due diligence provisions of Section 312, requiring that covered financial institutions apply risk-based procedures to the accounts of three categories of foreign banks. The 2007 rule supplemented the Special Due Diligence Final Rule published on January 4, 2006, which implemented due diligence requirements for correspondent accounts for foreign financial institutions. As FinCEN attempts to provide additional feedback to the industry on changes to our regulations and/or trends we find in overall BSA filings, we encourage financial institutions to respond with reactions and comments to these products. FinCEN provides these reports so that financial institutions can improve the effectiveness and efficiency of their BSA and general fraud programs, and strives to make these products as beneficial to industry as possible.
Continuing its focus on the analysis of SARs regarding mortgage fraud, FinCEN released a report showing the connection between mortgage fraud and other financial crime. FinCEN’s fourth mortgage loan fraud report shows that subjects reported for suspected mortgage loan fraud also may be involved in other financial crimes, such as check fraud, money laundering, stock manipulation, and structuring to avoid currency transaction reporting requirements. From depository institution SARs, FinCEN identified approximately 156,000 mortgage fraud subjects, and found that 2,360 were reported for suspicious activity in 3,680 of the other SAR types. "This study analyzes the possible interrelationship of illicit activity occurring across different financial sectors. Criminal actors may attempt to exploit any vulnerability to commit fraud and launder money through a range of financial institutions," Director Freis said. "The interconnected nature of suspicious activity across multiple financial sectors covered by FinCEN's Bank Secrecy Act regulations underscores the immense value of combining insights from the different sectors for the purpose of detecting and thwarting criminal activity."
Also in March, FinCEN joined a multi-agency task force to deter, detect, and investigate fraud and abuse. The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) announced March 11 the formation of a task force designed to deter, detect, and investigate instances of fraud in the Term Asset-Backed Securities Loan Facility (TALF) program. FinCEN will be a participant in this task force along with law enforcement and regulatory agencies. FinCEN will commit its unique authorities and capabilities to ensure that the financial industry remains vigilant and provides law enforcement with the lead information needed to aggressively root out fraud while promoting legitimate economic activity and growth.
April 2009 As part of Secretary Geithner’s April 6 announcement of a major interagency effort to combat foreclosure rescue scams, FinCEN issued an advisory to help financial institutions spot questionable loan modification schemes and report that information to law enforcement. The advisory provides “red flags” for financial institutions that may indicate a loan modification or foreclosure rescue scam. In addition, FinCEN will coordinate the Treasury Department’s targeting effort to deter fraudulent activity and combat fraudulent loan modification schemes. FinCEN, working with its partners from the law enforcement and the regulatory community, will utilize information provided by the financial industry, and other information supplied by participating agencies, to identify possible loan modification fraud suspects for civil and criminal investigations, and help law enforcement agencies coordinate their efforts to bring wrongdoers to justice. This initiative also will streamline efforts to ensure that the resources of multiple investigative and prosecutorial agencies are focused in the most efficient way.
Furthering efforts to carry out the administration of the BSA in the most efficient and effective manner possible, FinCEN transferred all resources for money services businesses to the "financial institutions" section of its Web site. MSBs now will find all BSA information related to their industry in one place on www.fincen.gov. This change consolidates information for all industries subject to BSA reporting and recordkeeping requirements to a single Web site.
Also in April, FinCEN and the Office of the Comptroller of the Currency (OCC) announced the assessment of concurrent civil money penalties, each $5 million, against the New York Branch of Doha Bank, Doha, Qatar, for past violations of the BSA. The Branch, without admitting or denying the allegations, consented to payment of the civil money penalties, which were to be satisfied by a single payment of $5 million to the U.S. Department of the Treasury.
At the end of April, FinCEN issued guidance to enable depository institutions to more easily determine and document certain business customers' eligibility for exemption from currency transaction reporting. In December 2008, FinCEN announced a final rule simplifying requirements for depository institutions to exempt their eligible customers from such reporting. The guidance is expected to both ease compliance with applicable regulatory requirements and enhance supervisory consistency. This step complements other changes made by FinCEN in 2008 to the CTR regulations, designed to increase the efficiency of the reporting process, including promoting exemptions for reporting that is less valuable to law enforcement.
May 2009 In May, FinCEN issued a letter ruling, responding to the question of whether a "non-listed" insurance company "serves as a financial institution" and is therefore an "ineligible business" pursuant to 31 C.F.R. § 103.22(d)(6)(viii). FinCEN determined that any use of the term "financial institution" in 31 C.F.R. § 103.22 refers to the regulatory definition in 31 C.F.R. § 103.11(n). Because insurance companies do not fall within the regulatory definition of "financial institution," they are eligible for exemption.
In direct support of its BSA Efficiency and Effectiveness Initiative to craft a more narrow definition of MSBs, FinCEN announced a Notice of Proposed Rulemaking (NPRM) designed to make the determination of which businesses qualify as MSBs more straightforward and predictable. FinCEN is proposing to revise the MSB definition by describing with more clarity the types of financial activity that will subject a business to the BSA implementing rules. This proposal will incorporate past FinCEN rulings and policy determinations into the regulatory text and will make it easier for MSBs to determine their responsibilities.
FinCEN also released the latest edition of the SAR Activity Review - Trends, Tips and Issues. This edition focuses on the securities and futures industry, and addresses several noteworthy topics. Articles in the Trends & Analysis section include an assessment of SARs filed by the securities and futures industry by FinCEN's Office of Regulatory Analysis, as well as information from staff of the Securities and Exchange Commission (SEC) on how to file SARs, the SEC's use of SARs, and the consequences to regulated institutions for failure to file. An article by staff from the SEC and FINRA (Financial Industry Regulatory Authority) looks at how securities regulators review SARs during examinations. June 2009 Following the conclusion of the Egmont Plenary in Doha, Qatar, Director Freis announced that FinCEN had signed three MOUs with the financial intelligence units (FIUs) of Bermuda, Serbia, and Ukraine, which will further improve cooperation between each of these nations and the United States in the global effort to fight financial crimes. FIUs were created as countries around the world developed systems to address the global threats of money laundering and illicit finance. They offer law enforcement agencies around the world an important avenue for information exchange. As the FIU of the United States, FinCEN recently elevated its Office of International Programs to become its own division within the bureau to bring significant efficiency to its international operations. Also during the plenary, Director Freis discussed the concept of SAR sharing as a way to help promote the incentives of transnationally active institutions to manage risks in an efficient way.
FinCEN issued a Notice of Proposed Rulemaking (NPRM) that would replace a mutual fund requirement to file IRS/FinCEN Form 8300 - Report of Cash Payments Over $10,000 Received in a Trade or Business - with a requirement to file FinCEN Form 104 (CTR), which is standard for financial institutions. Both forms document a transaction in currency above $10,000, but differ in some technical aspects. If adopted, this proposal will bring the mutual fund industry into greater conformity with the rest of the financial industry, which currently files CTRs. It promotes efficiency and effectiveness by reducing paperwork for mutual funds, and helping FinCEN more directly identify suspicious activity involving money laundering and fraud. To make the change, FinCEN is proposing to include mutual funds within the general definition of "financial institution" in rules implementing the BSA.
FinCEN also issued guidance to financial institutions to clarify information sharing under section 314(b) of the USA PATRIOT Act. Section 314(b) permits participating financial institutions, upon providing notice to FinCEN, to avail themselves of a statutory safe harbor from civil liability for sharing information with one another to identify and report activities that they suspect may involve possible terrorist activity or money laundering. The guidance clarifies the scope of permissible information sharing covered by the section 314(b) safe harbor provision.
July 2009 In early July, FinCEN issued an advisory on apparent structuring by casino patrons and personnel. Structuring - the breaking up of transactions for the purpose of evading BSA reporting or recordkeeping requirements - is unlawful and involves potential civil and criminal penalties. FinCEN had received information from law enforcement and regulatory authorities that raised concerns about the current level of compliance with the obligations to guard against structuring. The BSA requires casinos to implement a compliance program, file reports, and maintain certain records. A casino's compliance program must be reasonably designed to manage the risk of illicit activity and ensure compliance with BSA requirements, including an obligation to detect and report evidence of structuring violations on FinCEN Form 102, Suspicious Activity Report by Casinos and Card Clubs.
As part of its efforts to provide more value in the feedback products created for the financial industry, FinCEN released the 12th issue of the SAR Activity Review - By the Numbers. The report shows a continued overall rise in SAR filings, including an increase in depository institution filings related to all seven areas of suspected fraud listed on the SAR form. In 2008, the total volume of all SARs filed revealed a 3 percent increase as compared to a 16 percent increase the prior year. SARs filed by depository institutions increased by 12.85 percent as compared to 2007. The report also revealed that of the 20 different violation types tracked, seven of the categories relate specifically to fraud and all seven showed an increase in SAR filings during the year. While these categories represent one-third of the possible violation types, they accounted for nearly half of the increase in total SAR filings from 2007 to 2008, with all of the fraud categories seeing double-digit increases in percentage of filings in 2008. These categories were: check fraud, mortgage loan fraud, consumer loan fraud, wire transfer fraud, commercial loan fraud, credit card fraud, and debit card fraud. Following the release of By the Numbers, Director Freis addressed the Association of Certified Fraud Examiners at its annual fraud conference. In his speech, Director Freis told fraud examiners that their interests in deterring, detecting, holding accountable, and seeking restitution from those who perpetrate fraud are directly aligned with FinCEN's mission. He also accepted the association's Cressey Award for achievement in the detection and deterrence of fraud.
Furthering its efforts to root out fraud and protect the integrity of the global financial system, FinCEN issued advance notice of proposed rulemaking to solicit public comment on a wide range of questions pertaining to the possible application of anti-money laundering program and SAR regulations to non-bank residential mortgage lenders and originators. In April, the Department of the Treasury and FinCEN coordinated an inter-agency effort with the U.S. Department of Justice (DOJ), the Department of Housing and Urban Development (HUD), the Federal Trade Commission (FTC), and state officials to announce new initiatives to target foreclosure rescue scams and loan modification fraud. These initiatives are helping to coordinate information and resources across agencies to maximize targeting and efficiency in fraud investigations, alert financial institutions to emerging schemes, step up enforcement actions and educate consumers to help those in financial trouble avoid becoming the victims of a loan modification or foreclosure rescue scam. This coordinated effort combined with the announcement that FinCEN is considering applying AML program and SAR regulations to non-bank residential mortgage lenders and originators comes when millions of vulnerable homeowners are seeking assistance under the Administration's Making Home Affordable program. These initiatives will help prevent criminal actors from perpetrating predatory schemes. "As primary providers of mortgage finance who generally deal directly with consumers, these lenders and originators are in a unique position to assess and identify money laundering risks and possible mortgage fraud while directly assisting consumers with their financial needs and protecting them from the abuses of financial crime," Director Freis said.
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