FinCEN Updates

Federal Bank Regulatory Agencies and FinCEN Improve Transparency of Risk-Focused BSA/AML Supervision

Contact
Steve Hudak 703-905-3770
Immediate Release

WASHINGTON – As a result of a working group established by the U.S. Department of the Treasury’s Office of Terrorism and Financial Intelligence and the Federal depository institutions regulators, the Financial Crimes Enforcement Network (FinCEN) and its regulatory partners today issued a joint statement as part of continuing efforts to improve transparency into their risk-focused approach to Bank Secrecy Act (BSA)/anti-money laundering (AML) supervision. The risk-focused approach enables federal agencies to better tailor examination plans and procedures based on the unique risk profile of each bank. 

“The risk-based approach to supervision enables banks to devote their compliance resources towards the areas of greater risk, making it more difficult for illicit actors to abuse our financial system,” said Sigal Mandelker, Treasury Under Secretary for Terrorism and Financial Intelligence. “The statement highlights the continued work by Treasury and its regulatory partners to enhance the effectiveness and efficiency of our anti-money laundering regime.”

The statement outlines common practices for assessing a bank’s money laundering/terrorist financing risk profile, assisting examiners in scoping and planning the examination and initially evaluating the adequacy of the BSA/AML compliance program. Using this approach, the agencies generally are able to allocate more resources to higher-risk areas and fewer resources to lower-risk areas when conducting BSA/AML examinations. The statement does not establish new requirements, and also notes that having a risk-based compliance program enables a bank to allocate compliance resources commensurate with its risk. 

“We recognize that not all financial institutions share the same risk profile, but we are working to ensure that regulators are following common processes for assessing compliance. Proper management of money laundering and terrorist financing risk helps to safeguard our financial system, promotes national security, and protects our people from harm,” said FinCEN Director Kenneth A. Blanco. “This joint statement emphasizes our risk-based approach to supervision, and intends to help provide greater clarity to banks and the public on the expectations of Federal bank regulatory agencies.”

This statement was developed by a working group aimed at improving the effectiveness and efficiency of the BSA/AML regime. Members include the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and FinCEN.

Today’s joint statement is the third statement resulting from the working group. 



Minus the footnotes:

Joint Statement on Risk-Focused Bank Secrecy Act/Anti-Money Laundering Supervision

Introduction

July 22, 2019

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency (collectively, the federal banking agencies), and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) are issuing this joint statement to emphasize their risk-focused approach to examinations of banks’ Bank Secrecy Act1/anti-money laundering (BSA/AML) compliance programs. This statement is being issued as part of a broader effort to reinforce and enhance the effectiveness and efficiency of the BSA/AML regime.2 This statement is intended to improve transparency into the risk- focused approach used for planning and performing BSA/AML examinations and does not establish new requirements. Further, this statement aligns with the federal banking agencies’ long-standing practices for risk-focused safety and soundness examinations.3

Under existing statutory requirements, specifically section 8(s) of the Federal Deposit Insurance Act and section 206 of the Federal Credit Union Act, the federal banking agencies have prescribed regulations requiring each bank4 to establish and maintain procedures reasonably designed to assure and monitor compliance with the requirements of the BSA (collectively, these procedures form the basis of each bank’s “BSA/AML compliance program”).5 In addition, pursuant to these statutes, the federal banking agencies review banks’ BSA/AML compliance programs during each examination cycle.6

BSA/AML Compliance Programs and Risk Profiles

To assure that BSA/AML compliance programs are reasonably designed to meet the requirements of the BSA, banks structure their compliance programs to be risk-based and to identify and report potential money laundering, terrorist financing, and other illicit financial activity. A risk-based compliance program enables a bank to allocate compliance resources commensurate with its risk. A bank’s well- developed risk assessment is a critical part of sound risk management and assists examiners in

understanding the bank’s risk profile. Banks determine the levels and types of risks that they will assume.7 Banks that operate in compliance with applicable law, properly manage customer relationships and effectively mitigate risks by implementing controls commensurate with those risks are neither prohibited nor discouraged from providing banking services.8 As the federal banking agencies have previously stated, banks are encouraged to manage customer relationships and mitigate risks based on customer relationships rather than declining to provide banking services to entire categories of customers.9

Federal banking agency examiners evaluate the adequacy of a bank’s BSA/AML compliance program relative to its risk profile, and that bank’s compliance with applicable laws and regulations. Examiners review risk management practices to evaluate and assess whether a bank has developed and implemented effective processes to identify, measure, monitor, and control risks. The federal banking agencies and FinCEN recognize that banks vary in focus10 and complexity, and that these differences create for each bank a unique risk profile. Accordingly, the scope of BSA/AML examinations varies by bank.

Risk-Focused Examinations

The federal banking agencies conduct risk-focused BSA/AML examinations, and tailor examination plans and procedures based on the risk profile of each bank. Common practices for assessing the bank’s risk profile include:

• leveraging available information, including the bank’s BSA/AML risk assessment, independent testing or audits, analyses and conclusions from previous examinations, and other information available through the off-site monitoring process or a request letter to the bank,

• contacting banks between examinations or prior to finalizing the scope of an examination, and

• considering the bank’s ability to identify, measure, monitor and control risks.

The information gained from assessing the bank’s risk profile assists examiners in scoping and planning the examination and initially evaluating the adequacy of the BSA/AML compliance program. The federal banking agencies generally allocate more resources to higher-risk areas, and fewer resources to lower-risk areas. For example, the pre-examination request list is tailored to the bank’s risk profile, complexity, and planned examination scope. Examiners review a bank’s BSA/AML risk assessment and independent testing to assess the bank’s ability to identify, measure, monitor, and control risks. Risk assessments and independent testing that properly consider and test all risk areas (including products, services, customers, and the geographic locations in which the bank operates and conducts business) are used in determining the examination procedures and transaction testing that should be performed.The risk-focused approach reflected in this statement forms the foundation for the information, instructions, and procedures communicated to examiners through the Federal Financial Institutions Examination Council BSA/AML Examination Manual.11

Conclusion

Risk-focused BSA/AML examinations consider a bank’s unique risk profile. Examiners use risk assessments and independent testing when planning and conducting examinations. Examiners assess the adequacy of a bank’s BSA/AML compliance program during each examination cycle. The extent of examination activities necessary to evaluate a bank’s BSA/AML compliance program generally depends on a bank’s risk profile and the quality of its risk management processes to identify, measure, monitor, and control risks, and to report potential money laundering, terrorist financing, and other illicit financial activity.

Links:

FinCEN Press Release

Joint Statement

Statement by FinCEN Director Kenneth A. Blanco in Support of Yesterday’s Anti-Terrorism Financing Actions by Argentina and Its Financial Intelligence Unit

Immediate Release

“Yesterday, Argentina’s Unidad de Informaciὀn Financiera de la República Argentina (UIF-AR) took courageous actionto freeze assets belonging to the Hezbollah terrorist organization and list them on a public registry pursuant to a new law just instituted by the Marci government of Argentina to designate, sanction, and publicly list terrorist organizations along with the individuals and entities connected to them. I commend Argentina’s strong and unbreakable resolve to take action against terrorism and suppress terrorist financing.

The people of the United States and the people of Argentina share a tragic pain.  Argentines and Americans know the suffering that comes from the loss of loved ones due to cowardly terrorist acts.  On the twenty-fifth anniversary of the devastating Asociación Mutual Israelita Argentina (AMIA) bombing in Argentina that cost the lives of 85 innocent people and left 500 injured, the UIF-AR has taken bold action to seek justice and ensure that terrorists face dire consequences.  Both of our nations have learned the hard lesson that financial vigilance and effective regulations can save lives and keep our people safe. 

FinCEN is proud of the work we are doing together with our Argentine partners, including our collaboration to assist and support the UIF-AR’s action against the Hezbollah-linked ‘Clan Barakat,’ a criminal organization infamous for its suspected involvement in smuggling, counterfeiting, extortion, drug trafficking, arms trafficking, money laundering, and terrorist financing.  We continue to value our strong partnership and shared commitment to fight terrorism and the financing that supports it.”



Link:

FinCEN Notice

FinCEN Holds Fifth Annual Awards Program to Recognize Importance of Bank Secrecy Act Reporting by Financial Institutions

Contact
Office of Public Affairs, 703-905-3770
Immediate Release

WASHINGTONFinancial Crimes Enforcement Network (FinCEN) Director Kenneth A. Blanco hosted the fifth annual FinCEN Director’s Law Enforcement Awards Program today, during which he recognized the efforts of several law enforcement agencies that used Bank Secrecy Act (BSA) reporting to successfully pursue and prosecute criminal investigations. The BSA’s recordkeeping and reporting requirements help to create a financial trail that law enforcement agencies use to track criminals, their activities, and their assets.  

“The cases recognized today make clear that BSA data is critical in the fight against financial crime,” said Sigal P. Mandelker, Under Secretary for Terrorism and Financial Intelligence. “I commend the award recipients and their agencies. Their use of this information demonstrates the value of the financial industry’s continued partnership and commitment.”

“BSA data is an important part of our national security apparatus and how we protect the people of our nation from criminals, terrorists, and other bad actors,” said FinCEN Director Kenneth A. Blanco. “The successful prosecution of the cases recognized here today demonstrates that the information that financial institutions report to us through their BSA filings makes a difference in the lives of many people every day. It provides leads, helps expand cases, identifies networks of criminals and other bad actors, and often helps to alert the regulatory and law enforcement communities to trends in illicit activity, making our communities safer.”

FinCEN’s annual awards program underscores the importance of a successful partnership between the financial industry that provides BSA information and the law enforcement agencies that use it. Today’s ceremony was held following the conclusion of the Bank Secrecy Act Advisory Group (BSAAG) Plenary. Chaired by the Director of FinCEN, BSAAG is the congressionally-established forum for industry, regulators, and law enforcement to communicate about how law enforcement agencies use BSA reports, and how recordkeeping and reporting requirements can be improved. Representatives from financial industry trade groups assisted in the presentation of each award. 

The program is open to all Federal, state, local, and tribal law enforcement agencies. The seven award categories and the 2019 award recipients are listed below. 

 

Significant Fraud:  Internal Revenue Service-Criminal Investigation (IRS-CI)

This multi-agency investigation began when IRS-CI agents identified sensitive financial information detailing an unusual pattern of transactions, including structured cash withdrawals and a circular pattern of transactions, which appeared to be indicative of renewable identification number fraud. This transaction data detailed numerous suspicious transactions between entities both known and unknown to investigators.

Investigators determined the subjects engaged in a conspiracy to submit false claims to the Internal Revenue Service (IRS) and the Environmental Protection Agency (EPA) for the production of biodiesel fuel. The financial data greatly assisted in identifying multiple entities whose principals were ultimately prosecuted as a result of this investigation.

During the time the scheme was carried out, the IRS offered a $1 tax credit for every gallon of biodiesel produced that met certain specifications and use criteria. The subjects of this investigation fraudulently claimed and received $7.2 million in tax credits when the fuel produced was a lesser grade that did not qualify for the credit. Transaction records helped identify a high volume of cash withdrawals from business accounts, which were atypical for such a business. The data also assisted in identifying operating accounts for the target businesses as well as the disposition of proceeds derived from the fraud scheme.

In addition to tax credits, biodiesel fuel producers are eligible to receive Renewable Identification Numbers (RINs) from the EPA for the production of qualifying biodiesel fuel.  During the period in question, the subjects generated over 14 million RINs when in fact the fuel again did not meet the required specifications and use criteria. Utilizing a RIN broker in New York, the subjects sold the fraudulently obtained RINs for profit to third parties, including a domestic and international ethanol supplier and leading marketer of RINs, for over $20 million. The subjects of the investigation sold much of the mislabeled oil back and forth to each other claiming it was newly produced oil without actually producing new product.

The investigation led to the successful prosecution of nine individuals for various fraud and obstruction offenses. The primary targets of the investigation were each sentenced to 63 months in prison while numerous co-conspirators were sentenced to varying penalties.

 

Cyber Threats:  United States Attorney’s Office-Southern District of New York (USAO-SDNY)

This three-year investigation into an illegal online bitcoin exchange led to the successful prosecution of seven individuals on charges of operating unlicensed money transmitting businesses, as well as fraud, conspiracy, and bribery. Investigators determined that the majority of transactions moving through this exchange were conducted to facilitate illegal activity, such as ransomware schemes or illegal purchases on the dark net.

The primary targets of this investigation founded the exchange in the United States, but conducted significant operations in Russia that allowed users to convert U.S. dollars to bitcoin, and vice versa. Investigators determined that the exchange conducted $12 million in bitcoin transactions without registering as a money services business with FinCEN, obtaining a license in the state of Florida, or conducting any anti-money laundering (AML) operations.

As part of the group’s efforts to evade scrutiny, the targets took control of a small credit union by bribing the CEO to relinquish operational control and allow the group to select new board members. After gaining control of the credit union, the targets conducted over $60 million in Automated Clearing House (ACH) transactions on behalf of the exchange and several other money transmitters and payday lenders. The excessive ACH activity, lack of AML controls, and other violations led the credit union to become insolvent and cease operations in that same year.

A high volume of sensitive financial information was instrumental in identifying the payment processing accounts used by the exchange as well as the co-conspirators associated with the account creation and operation. The financial data also revealed that the exchange’s operators utilized a payment infrastructure in Azerbaijan to process credit and debit card transactions on behalf of their customers. This information allowed investigators to issue subpoenas to obtain a full accounting of the exchange’s operating accounts and transactions.

Transaction data and financial account information also assisted investigators in determining that the exchange was partially owned by an individual who led a large-scale international criminal enterprise that was responsible for the theft of personal data of over 100 million U.S. individuals from a U.S. financial institution. Investigators discovered that the exchange was used to launder a significant amount of the illicit proceeds acquired by this criminal organization.

The prosecution led to the successful conviction of six individuals, two of whom went to trial. In addition to prison sentences ranging from one to six years, the defendants were also fined, ordered to pay significant forfeitures, and ordered to pay restitution to the National Credit Union Administration (NCUA) for the losses incurred in connection with the liquidation of the credit union. 

 

SAR Review Team:  Immigration and Customs Enforcement-Homeland Security Investigations (ICE-HSI)

This investigation was initiated by HSI investigators from the El Paso High Intensity Financial Crime Area Financial Task Force after identifying funnel activity in a set of account and transaction data. The initial dataset identified an individual with a stated occupation as “student/homemaker” who was utilizing their account to funnel cash deposits from North Carolina to Texas. Investigators analyzed additional financial data to assist with identifying multiple co-conspirators and determined these subjects were members of a large Mexican Transnational Criminal Organization (TCO). This TCO was responsible for trafficking cocaine from Mexico through Texas for distribution in North Carolina. The criminally derived funds were subsequently laundered through the U.S. financial system and moved back to Mexico.

Investigators cross-referenced information uncovered in sensitive financial information with the border crossing histories of their subjects, which resulted in the identification of multiple co-conspirators. Additional inquiries were conducted on these co-conspirators, all of whom had a history of similar funnel account activity as the original subject.

Multiple traffic stops in Texas, Tennessee, and Arkansas resulted in the discovery of a high volume of cash, marijuana, and cocaine. In post-arrest interviews, the suspects confirmed the TCO’s operations and their roles in the organization. Based on an analysis of sensitive financial data and Grand Jury information, investigators determined that over $650,000 in cash was funneled through U.S. financial institutions and over $1.4 million in bulk cash was smuggled out of the United States into Mexico over a 12-month period. In addition to the movement of cash, investigators estimated that approximately 200 kilograms of cocaine was smuggled from Mexico to North Carolina.

This investigation led to the arrest and prosecution of 11 members of this Mexican TCO for money laundering and drug trafficking violations. Their prison sentences range from nine months to ten years.

 

State and Local Law Enforcement:  Wilmette Police Department

The Wilmette Police Department in Wilmette, Illinois developed an investigation into a stolen property fencing ring on the west side of Chicago.  The criminal group operated out of small stores and actively accepted stolen goods in exchange for cash. The organizers recruited heroin addicts to steal specified goods from area stores. This case was significant due to its regional impact and coordination with multiple local and federal law enforcement agencies to include the Chicago Police; Homeland Security Investigations; the U.S. Department of Agriculture; and the Cook County State’s Attorney, as well as numerous private retailers.

Wilmette PD investigators identified the organizers of this group and sensitive financial information was analyzed to help gauge the extent of the fraudulent activity and generate investigative leads. The initial data analysis showed a substantial volume of transactions indicative of fraud and money laundering. Several businesses were identified in the financial data that appeared to be operated by straw owners in an attempt to conceal the true beneficiaries from law enforcement.

Undercover operations and other covert surveillance techniques led to the discovery of a higher-level criminal operation than originally suspected. Investigators discovered that this group was also involved in Supplemental Nutrition Assistance Program (SNAP) fraud, regularly processing fraudulent SNAP transactions at the target locations. The verified loss to the government attributed to this criminal group was nearly $6 million.

The targets of this investigation laundered their illicit funds through numerous financial institutions, often by structuring cash deposits and withdrawals through both business and personal accounts. They often used third parties to conduct the transactions on their behalf through teller windows and ATMs.

This case concluded with the execution of search warrants on five target locations and one vehicle, resulting in the discovery of over $150,000 in stolen merchandise, a firearm, and numerous other pieces of evidence tying the targets to the criminal operation. Four subjects were charged, three businesses were closed, and seizure proceedings were initiated on over $140,000 in bulk currency and criminally derived property.  

 

Third Party Money Launderers:  Internal Revenue Service-Criminal Investigation (IRS-CI)

This multi-agency investigation included representatives from several U.S. and Mexican law enforcement agencies to include IRS-CI; Homeland Security Investigations; the Federal Deposit Insurance Corporation, Office of Inspector General; the Mexican Tax Administration Service; the Mexican Secretary of Finance and Public Credit; and the Mexican Financial Intelligence Unit. Their collaborative efforts led to the identification of significant fraud in Mexico and the use of the U.S. financial system to facilitate a Trade Based Money Laundering (TBML) and Mexican Value Added Tax (VAT) fraud scheme. The U.S. investigative team, led by IRS-CI, analyzed a high volume of sensitive financial data to uncover the laundering of over $100 million of illicit funds that were transferred through the U.S. financial system.

Through data analysis, investigators learned that large sums of money originating from Mexico were transferred through bank accounts of shell companies in Mexico and the United States. The wire transfers sent through these accounts resembled pass-through activity because the funds moved through the accounts with only a small percentage taken out for business expenses. After reviewing bank, business, and shipping records, and interviewing bank employees, investigators determined this activity was part of a large-scale TBML scheme.

Investigators learned that two of the main conspirators were professional third party money launderers for the Sinaloa cartel, and one was also a former shareholder of several financial institutions in Mexico and utilized these financial institutions to help make their illegal activity appear to be legitimate international trade in cell phones. Multiple co-conspirators located across the United States established shell companies and bank accounts in Mexico and the United States; rented virtual offices; created websites for their shell companies; and created fictitious invoices and import/export documents to provide to U.S. Customs officials.

The co-conspirators utilized shell companies in Mexico to acquire counterfeit and obsolete cell phones, after which they created fraudulent invoices showing the cell phones as being brand new and indicating that the Mexican VAT had been paid. The cell phones were then exported to co-conspirators in the United States and fictitious invoices and export documents were utilized to inflate the value of the cell phones.

As a result, the co-conspirators were able to obtain fraudulent VAT refunds from the Mexican government. Once the co-conspirators in the United States received the cell phones, they shipped them to an address in the Los Angeles garment district. When the cell phones were exported back to Mexico, they were described on the export documents as toys. The cell phones were eventually shipped back to shell companies in Mexico, and the same cell phones were shipped again between Mexico and the United States in a continuous cycle. Investigators determined that over $100 million USD of illicit funds were transferred through the U.S. financial system in this manner.

The investigative team’s efforts resulted in the arrest of eight individuals, all of whom pled guilty to money laundering, wire fraud, and Customs violations. They received prison sentences ranging from one to seven years. Over $1.1 million was seized, over $21 million in money judgments were ordered, and over $37 million in restitution was ordered to be paid as restitution to Mexico. The cooperative effort of this investigative team led to the dismantling of this TBML organization.

 

Transnational Organized Crime:  United States Attorney’s Office-Southern District of New York (USAO-SDNY)

Members of the Drug Enforcement Administration’s (DEA) Las Vegas District Office initiated this operation that targeted a drug trafficking and money laundering organization operating across the United States, Europe, Asia, South America, and Central America. The case was initiated as a result of sensitive information investigators obtained regarding the money laundering activities of over a dozen individuals. The information indicated that these subjects were responsible for laundering millions of dollars throughout the world, utilizing many different methods to carry out their illicit operations.

Through financial data analysis and surveillance operations, law enforcement investigators learned that this large-scale criminal operation was involved in the distribution of cocaine and heroin, along with laundering the illicit proceeds, both domestically and internationally. As a result of the intercepts associated with several of the targets identified in the financial data, DEA agents seized over 2,500 kilograms of cocaine, 25 kilograms of heroin, 8.5 kilograms of methamphetamines, and over $570,000 in cash in the United States, Colombia, Panama, Dominican Republic, Spain, and Costa Rica. Investigators were also able to link the targets to the Gulf Cartel, Sinaloa Cartel, and Italian criminal organization Ndrangheta.

Further investigative efforts, which included financial data analysis, grand jury subpoena results, search warrants results, and interviews with confidential sources, revealed that this organization engaged in a wide range of techniques and business operations to conduct its criminal activity. Its techniques included structuring, casino gaming schemes, fraudulent investment funds, false invoicing, fictitious business fronts, public corruption, and trade based money laundering schemes. The business operations they utilized included movie companies, jewelry stores, money exchange houses, and armored car companies.

Throughout the course of this multi-year investigation, agents seized more than $5.5 million in currency and assets, including a $750,000 airplane. Coordinated efforts with U.S. and foreign law enforcement agencies and financial intelligence units led to indictments and arrest warrants for numerous members of this criminal organization on various money laundering, narcotics distribution, and conspiracy charges. Several extraditions on additional subjects are pending and several other individuals remain international fugitives. One of the primary targets has already pled guilty and was sentenced to a 30-year prison term and ordered to forfeit $284 million in criminal proceeds. The remaining targets are pending trial.

 

Transnational Security Threats:  Federal Bureau of Investigation (FBI)

During the last three years, the North Korea counterintelligence squad in the Federal Bureau of Investigation (FBI) has been investigating a Singapore-based commodities company, for its connection to sanctioned North Korean banks. The company represented itself as one of the largest privately owned trading firms in Asia, operating a fleet of oil tankers in connection with its marine fuel trading business.

The FBI, the Department of Justice, and the Department of the Treasury investigations revealed millions of dollars in commodities contracts for North Korea using concerted efforts to obfuscate payment origins, structure transactions to avoid regulatory scrutiny, and evade financial sanctions.

FBI investigators opened the case after extensive financial analysis and reporting from other intelligence agencies. Building on the sensitive financial information, investigators issued federal grand jury subpoenas to multiple U.S. banks and utilized search warrants results and pen registers to identify companies making payments to the subject company on behalf of the sanctioned North Korean banks. In addition, the FBI obtained email search warrants for several of the actors in the company’s network. These warrants revealed a high volume of communications between North Korean banks, North Korean procurement agents, third-party suppliers, and shipping companies in the region. Also contained in the email communications were extensive communications between co-conspirators arranging the purchases and sales of commodities through the subject company on behalf of sanctioned North Korean banks. These individuals used a network of front companies located in China and Southeast Asia to process U.S. dollar transactions of which the company’s U.S. dollar account was the ultimate beneficiary.

As the Department of the Treasury’s OFAC also had a keen interest in the network, FBI and OFAC officials coordinated efforts to announce OFAC designations and indictments of the subjects of these investigations. The FBI and DOJ investigations resulted in the indictments of the company’s director and his primary co-conspirator on fraud, money laundering, conspiracy, and violations of the International Emergency Economic Powers Act. OFAC sanctioned two entities, one individual, and two vessels. Finally, OFAC’s press release emphasized that many of these activities were highlighted in the November 2, 2017 Advisory on North Korea’s Use of the International Financial System published by the Financial Crimes Enforcement Network.

Link:

FinCEN Press Release

FinCEN Announces Its Innovation Hours Program

Contact
Steve Hudak, 703-905-3770
Immediate Release

WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) announced today the FinCEN Innovation Hours Program to better shape and inform its ongoing engagement with Anti-Money Laundering (AML)/Countering the Financing of Terrorism (CFT) innovators.

The Innovation Hours Program will provide financial technology (FinTech) and regulatory technology (RegTech) companies and financial institutions the opportunity to present their new and emerging innovative products and services to FinCEN. Technology demonstrations should highlight how these innovations work and how financial institutions might use them. FinCEN expects to hold events in the Washington D.C. metro area, as well as some regional events that focus on financial services-related innovation.

Primary consideration for requests for Innovation Hours will be given to entities that are at the operational stage. Companies interested in meeting with FinCEN should submit a web request and provide applicable background information about their firm’s business and innovative products. Requests will be accepted on a rolling basis.

The Innovation Hours Program is part of a broader Innovation Initiative at FinCEN that also includes consideration of exceptive relief for pilot programs designed to facilitate innovative solutions to AML/CFT compliance challenges, and ongoing efforts to provide enhanced feedback and information sharing programs.

And here is the detail from the program page (which includes a “Request a meeting” section):

FinCEN’s Innovation Hours Program

Welcome to FinCEN’s Innovation Hours Program.  Private sector innovation, either by new ways of using existing tools or by adopting new technologies, can help financial institutions enhance their anti-money laundering (AML) compliance programs and contribute to more effective and efficient record keeping and reporting under the Bank Secrecy Act (BSA) framework.  Responsible innovation can be an important part of safeguarding the U.S. financial system against new and evolving threats related to money laundering, terrorist financing and other serious financial crimes.  Innovation Hours offers financial institutions, technology providers, and other firms involved in financial services an opportunity to discuss and showcase their innovative products, services and approaches designed to enhance AML and the countering of the financing of terrorism (CFT) efforts.  Innovation Hours will foster a better mutual understanding by the public and private sector of the opportunities and challenges associated with innovating AML/CFT-related products and services in the financial services sector.

For more information about FinCEN’s Innovation Hours Program, including the criteria to participate, please see the Frequently Asked Questions (FAQs)

Link:

FinCEN News Release

Innovation Hours Program page

FinCEN Reissues Real Estate Geographic Targeting Orders for 12 Metropolitan Areas

Contact
Public Affairs, 703-905-3770
Immediate Release

WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) today announced the renewal of its Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used in all-cash purchases of residential real estate.  The purchase amount threshold remains $300,000 for each covered metropolitan area. 

GTOs continue to provide valuable data on the purchase of residential real estate by persons possibly involved in various illicit enterprises.  Reissuing the GTOs will further assist in tracking illicit funds and other criminal or illicit activity, as well as inform FinCEN’s future regulatory efforts in this sector.

Today’s GTOs cover certain counties within the following major U.S. metropolitan areas:  Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle.  

FinCEN appreciates the continued assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors.

Any questions about the Orders should be directed to the FinCEN Resource Center at FRC@FinCEN.gov . 

A copy of the GTO is available here.

Frequently asked questions regarding these GTOs are available here.

And here are the FAQs:

1) What does the term “residential real property” mean?

For purposes of the GTOs, “residential real property” means real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one to four families.

2) To what extent must a Covered Business verify information about the Beneficial Owner of a Purchaser?

The GTOs require a Covered Business to collect and report certain identifying information about the Beneficial Owner(s) of the Purchaser in a Covered Transaction. For purposes of the GTOs, a “Beneficial Owner” means each individual who, directly or indirectly, owns 25% or more of the equity interests of the Purchaser. The GTOs provide that the Covered Business must obtain and record a copy of the Beneficial Owner’s driver’s license, passport, or other similar identifying documentation. The Covered Business may reasonably rely on the information provided to it by third parties involved in the Covered Transaction, including the Purchaser or its representatives, in determining whether the individual identified as a Beneficial Owner is in fact a Beneficial Owner.

3) Who is considered a Covered Business’s “agents” for purposes of the GTOs?

A Covered Business’s “agents” refers to people or entities that are authorized by the Covered Business, usually through a contractual relationship, to act on its behalf to provide title insurance underwritten by the Covered Business (or its subsidiaries). FinCEN notes that the recordkeeping and reporting requirements under the GTOs are triggered only when a Covered Business (or its subsidiaries or agents) is involved in a Covered Transaction by providing title insurance underwritten by that Covered Business (or its subsidiaries) in connection with the Covered Transaction.

FinCEN also recognizes that a person or entity may be an independent agent of a Covered Business, and thus may act on behalf of multiple title insurance companies. A Covered Business is responsible for the recordkeeping and reporting requirements under the GTOs only when such agents are acting on its behalf in connection with a Covered Transaction.

4) What methods of payment are covered under Section II.A.2.iv of the GTOs?

Section II.A.2.iv of the GTOs, which lists one of the four criteria that triggers a Covered Transaction, provides: “Such purchase is made, at least in part, using currency or a cashier’s check, a certified check, a traveler’s check, a personal check, a business check, or a money order in any form, a funds transfer, or virtual currency.” Accordingly, payment of at least part of the purchase price using one of these methods, such as virtual currency, a wire transfer, a cashier’s check (sometimes referred to as a “bank check,” “official check,” or “treasurer’s check”), a personal check, a business check, or a certified check, triggers a Covered Transaction, assuming the other three criteria listed in Section II.A.2 are met. With respect to information required to be reported in Field 25.z of the FinCEN Currency Transaction Report, the Covered Business should include the total amount of the purchase price of the Covered Transaction. When reporting a purchase of multiple properties in the same Covered Transaction, report total purchase price in Part II, Field 25.z, and price per property in Field 41 for each property.

5) Is there a de minimis exception regarding the methods of payment covered under Section II.A.2.iv of the GTOs?

No. If any part of the purchase price was made using a method of payment specified in Section II.A.2.iv of the GTOs, then the transaction is considered a Covered Transaction (assuming the other three criteria listed in Section II.A.2 are met). FinCEN expects a Covered Business to take reasonable steps to determine whether any part of the purchase price was made using a method of payment specified in Section II.A.2.iv of the GTOs. FinCEN recognizes that in some instances a small percent of the purchase price of a residential real estate transaction may be held by a third party, such as a real estate agent holding an earnest money deposit. A Covered Business may reasonably rely on information provided to it by such third parties.

6) Who is the “individual primarily responsible for representing the Purchaser”?

The “individual primarily responsible for representing the Purchaser” means the individual authorized by the entity to enter legally binding contracts on behalf of the entity.

7) How long must a Covered Business retain records relating to compliance with the GTOs?

Consistent with the general recordkeeping provisions of the regulations promulgated under the Bank Secrecy Act, a Covered Business must retain all records relating to compliance with the GTOs for at least five years from the last day that the GTOs are effective (including any renewals thereof).

8) How must a Covered Business file a FinCEN Currency Transaction Report?

A sample Currency Transaction Report template is located at this link: https://bsaefiling.fincen.treas.gov/docs/GTO/RealEstate_GTO Template.pdf. (If opening this link in Chrome, please note that you must click the download icon in the top right; once downloaded, you may open the PDF using Adobe Reader.) This Adobe PDF template can be saved and reused. Once a Covered Business has filled out the template for a Covered Transaction, the Covered Business will need to log into the BSA E-Filing System, select Report 112–CTR under the “File FinCEN Reports” section, then choose the “Open Existing Report” option, browse to the saved template, and Sign, Save, and Submit the Currency Transaction Report.

Links:

FinCEN Press Release

Real Estate Geographic Targeting Order

FAQs

FinCEN Issues Spanish Language Version of Advisory FIN-2019-A002, Warning Against Continued Corrupt Venezuelan Attempts to Steal, Hide, or Launder Money 

 

The Financial Crimes Enforcement Network (FinCEN) today made available in Spanish its advisory (FIN-2019-A002), which warns against continued corrupt Venezuelan attempts to steal, hide, or launder money. The advisory was issued in English on May 3, 2019. FinCEN is issuing this Spanish language version to make it more widely accessible.

 

News Release (Spanish):  https://www.fincen.gov/news/news-releases/aviso-actualizado-de-fincen-advierte-contra-los-continuos-intentos-corruptos-de

Advisory (Spanish):  https://www.fincen.gov/resources/advisories/fincen-advisory-fin-2019-a002-spanish

 

News Release (English):  https://www.fincen.gov/news/news-releases/updated-fincen-advisory-warns-against-continued-corrupt-venezuelan-attempts

Advisory (English):  https://www.fincen.gov/resources/advisories/fincen-advisory-fin-2019-a002

 

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FinCEN publica versión en español del aviso FIN-2019-A002, que advierte sobre los intentos continuos y corruptos de Venezuela de robar, ocultar o lavar dinero  

 

La Red Contra los Delitos Financieros (FinCEN, por sus siglas en inglés) publicó en español hoy su aviso (FIN-2019-A002), para alertar a las instituciones financieras sobre la continua corrupción pública generalizada en Venezuela y advertir contra los continuos intentos corruptos de robar, esconder o lavar dinero. El aviso se emitió en inglés el 3 de mayo de 2019. FinCEN está emitiendo esta versión en español para que sea más accesible.

 

Comunicado de Prensa: https://www.fincen.gov/news/news-releases/aviso-actualizado-de-fincen-advierte-contra-los-continuos-intentos-corruptos-de 

Aviso: https://www.fincen.gov/resources/advisories/fincen-advisory-fin-2019-a002-spanish

 

New FinCEN Guidance Affirms Its Longstanding Regulatory Framework for Virtual Currencies and a New FinCEN Advisory Warns of Threats Posed by Virtual Currency Misuse

Contact
Public Affairs, 703-905-3770
Immediate Release

WASHINGTON—To provide regulatory certainty for businesses and individuals engaged in expanding fields of financial activity, the Financial Crimes Enforcement Network (FinCEN) today issued the following guidance, Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (CVC). The guidance is in response to questions raised by financial institutions, law enforcement, and regulators concerning the regulatory treatment of multiple variations of businesses dealing in CVCs.

FinCEN today also issued an Advisory on Illicit Activity Involving Convertible Virtual Currency to assist financial institutions in identifying and reporting suspicious activity related to criminal exploitation of CVCs for money laundering, sanctions evasion, and other illicit financing purposes. The advisory highlights prominent typologies, associated “red flags,” and identifies information that would be most valuable to law enforcement if contained in suspicious activity reports.

“Treasury is committed to helping financial institutions better detect and prevent bad actors from exploiting convertible virtual currencies for money laundering, sanctions evasion, and other illicit activities.” said Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence. “The comprehensive advisory FinCEN issued today highlights the risks associated with darknet marketplaces, peer-to-peer exchangers, unregistered money services businesses, and CVC kiosks and identifies typologies and red flags to help the virtual currency industry protect its businesses from exploitation.”

“FinCEN was the first financial regulator to address virtual currency and the first to assign obligations to related businesses to guard against financial crime,” said FinCEN Director Kenneth A. Blanco. “The money transmitter definition we published in 2011 and the guidance we issued in 2013 clarifying how that definition applies to transactions involving virtual currency have proven to be exceptionally durable. Our regulatory approach has been consistent and despite dynamic waves of new financial technologies, products, and services, our original concepts continue to hold true. Simply stated, those who accept and transfer value, by any means, must comply with our regulations and the criminal misuse of any methodology remains our fundamental concern.”

Today’s guidance does not establish any new regulatory expectations. It consolidates current FinCEN regulations, guidance and administrative rulings that relate to money transmission involving virtual currency, and applies the same interpretive criteria to other common business models involving CVC. FinCEN’s rules define certain businesses or individuals involved with CVCs as money transmitters subject to the same registration requirements and a range of anti-money laundering, program, recordkeeping, and reporting responsibilities as other money services businesses.

Links:

FINCEN Press Release

Guidance (Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies)

FinCEN Advisory on Illicit Activity Involving Convertible Virtual Currency