FinCEN Updates

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

Updated FinCEN Advisory Warns Against Continued Corrupt Venezuelan Attempts to Steal, Hide, or Launder Money 

Contact
Public Affairs, 703-905-3770
Immediate Release

WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) today issued an updated advisory to alert financial institutions of continued widespread public corruption in Venezuela and the methods Venezuelan senior political figures and their associates may use to move and hide proceeds of their corruption. In addition to outlining the corrupt looting of Venezuela’s government-sponsored food distribution program, the advisory provides and updates a number of financial red flags to assist in identifying and reporting suspicious activity that may be indicative of corruption. 

“Corrupt Maduro insiders continue to seek illicit revenue streams, even as the Venezuelan people and economy sink deeper into despair. We are alerting financial institutions that the Maduro regime is using sophisticated schemes, including the diversion of humanitarian assistance, to evade sanctions and maintain its grip on power,” said Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence. “The international financial community must be vigilant to prevent exploitation by corrupt regime insiders and their enablers, including front companies and foreign financial institutions that continue to prop up this illegitimate regime.”

“The Venezuelan people are being preyed upon by the illegitimate Maduro regime and their allies and acolytes, who are starving the Venezuelan people, depriving them of medical care, and using them as tools to support the regime’s thirst for money and power,” said FinCEN Director Kenneth A. Blanco. “The Venezuelan people are suffering an epic tragedy the proportions of which are rarely, if ever, seen in the Western hemisphere because of the greed and corruption by the illegitimate Maduro regime. The United States will not allow our financial system to be abused for the benefit of foreign kleptocrats trying to stash their secret fortunes and buy homes, yachts, and airplanes in the United States and create ever more wealth for the Maduro regime’s inhumane purposes. This money rightfully belongs to the people of Venezuela. FinCEN and its financial institution partners will continue to work together to cut off the flow of dirty money.”

On January 23, 2019, the United States recognized the President of the Venezuelan National Assembly, Juan Guaidó, as the Interim President of Venezuela and the legitimate leader of the Venezuelan people. The illegitimate regime of former Venezuelan president Nicolas Maduro has engaged in massive corruption through state-owned enterprises and offshore third parties. In recent years, financial institutions have reported increased activity with suspected links to Venezuelan public corruption, including government contracts. 

FinCEN is warning of the misuse of Venezuela’s government-sponsored food distribution program called Los Comités Locales de Abastecimiento y Producción (“Local Supply and Production Committees”) which is commonly referred to as the “CLAP program.” CLAP was created in 2016 for the publicly stated purpose of providing subsidized food rations to Venezuelan citizens. The illegitimate former Maduro regime is using the CLAP program to provide subsidized food to its supporters, withhold food from ordinary Venezuelan citizens and those critical of the regime, and enrich corrupt regime insiders and their allies through embezzlement, price manipulation, and trade-based money laundering schemes using front and shell companies. 

The Maduro regime also has experimented with the use of digital currency to circumvent sanctions and generate revenue. It has developed a digital currency called the “petro” and reportedly continues to develop new tokens. In 2018, the Russian bank Evrofinance Mosnarbank emerged as the primary international financial institution willing to finance the petro. In March of 2019, Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Evrofinance Mosnarbank for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of, Petroleos de Venezuela S.A. (PdVSA). Financial institutions are reminded that Executive Order (E.O.) 13827 prohibits U.S. persons from any involvement in the petro digital currency.

Financial institutions should take risk-based steps to identify and limit any exposure they may have to funds and other assets associated with Venezuelan public corruption fueled by the Maduro regime. However, financial institutions should be aware that normal business and other transactions involving Venezuelan nationals and businesses do not necessarily represent the same risk as transactions and relationships identified as being connected to the former Venezuelan regime.

What is different in this version of the advisory?

These updates to the 2017 Venezuela Advisory primarily:

(1) renew the description of public corruption in Venezuela;

(2) add information regarding example U.S. Government actions;

(3) describe how corrupt Venezuelan senior political figures exploit a Venezuelan government- administered food program by directing overvalued, no-bid contracts to co-conspirators that use an over-invoicing trade-based money laundering (TBML) scheme that can involve (i) front4 or shell5 companies to layer and obfuscate financial transactions; (ii) non-dollar denominated accounts; and (iii) nested accounts in an attempt to evade sanctions and anti- money laundering and countering the financing of terrorism (AML/CFT) controls;

(4) highlight the attempt to use digital assets, specifically digital currency, to evade sanctions and AML/CFT controls by the corrupt illegitimate regime of Nicolas Maduro; and

(5) provide revised financial red flags to assist in identifying and reporting to FinCEN suspicious activity that may be indicative of corruption by Venezuelan senior political figures, including (i) the abuse of Venezuelan government contracts, particularly those from non-official Venezuelan government accounts located in jurisdictions outside Venezuela and (ii) transactions for the purchase of high value assets, such as aircraft and real estate6 that are not commensurate with the official salaries of the corrupt Venezuelan senior political figures making the purchase.

Links:

FinCEN Notice

FinCEN Advisory

FinCEN Penalizes Peer-to-Peer Virtual Currency Exchanger for Violations of Anti-Money Laundering Laws

Immediate Release

WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) has assessed a civil money penalty against Eric Powers for willfully violating the Bank Secrecy Act’s (BSA) registration, program, and reporting requirements.  Mr. Powers failed to register as a money services business (MSB), had no written policies or procedures for ensuring compliance with the BSA, and failed to report suspicious transactions and currency transactions.

Mr. Powers operated as a peer-to-peer exchanger of convertible virtual currency.  As “money transmitters,” peer-to-peer exchangers are required to comply with the BSA obligations that apply to MSBs, including registering with FinCEN; developing, implementing, and maintaining an effective AML program; filing Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs); and maintaining certain records.

“Obligations under the BSA apply to money transmitters regardless of their size,” said FinCEN Director Kenneth A. Blanco.  “It should not come as a surprise that we will take enforcement action based on what we have publicly stated since our March 2013 Guidance—that exchangers of convertible virtual currency, such as Mr. Powers, are money transmitters and must register as MSBs.  In fact, there were indications that Mr. Powers specifically was aware of these obligations, but willfully failed to honor them.  Such failures put our financial system and national security at risk and jeopardize the safety and well-being of our people, as well as undercut responsible innovation in the financial services space.”

Mr. Powers advertised his intent to purchase and sell bitcoin on the internet.  He completed transactions by either physically delivering or receiving currency in person, sending or receiving currency through the mail, or coordinating transactions by wire through a depository institution. Mr. Powers processed numerous suspicious transactions without ever filing a SAR, including doing business related to the illicit darknet marketplace “Silk Road,” as well as servicing customers through The Onion Router (TOR) without taking steps to determine customer identity and whether funds were derived from illegal activity.

Mr. Powers conducted over 200 transactions involving the physical transfer of more than $10,000 in currency, yet failed to file a single CTR.  For instance, Mr. Powers conducted approximately 160 purchases of bitcoin for approximately $5 million through in-person cash transactions, conducted in public places such as coffee shops, with an individual identified through a bitcoin forum.  Of these cash transactions, 150 were in-person and were conducted in separate instances for over $10,000 during a single business day.  Each of these 150 transactions necessitated the filing of a CTR.

FinCEN notes that this is its first enforcement action against a peer-to-peer virtual currency exchanger and the first instance in which it has penalized an exchanger of virtual currency for failure to file CTRs.  FinCEN also notes that since his infractions, Mr. Powers has cooperated with FinCEN efforts.  In addition to paying a $35,000 fine, Mr. Powers has agreed to an industry bar that would prohibit him from providing money transmission services or engaging in any other activity that would make him a “money services business” for purposes of FinCEN regulations.



Links:

FinCEN Press Release

Assessment of Civil Monetary Penalty

On Friday, FinCEN issued an advisory based on the latest FATF pronouncements. It says, in part:

On February 22, 2019, the Financial Action Task Force (FATF) updated its list of jurisdictions with strategic anti-money laundering and combatting the financing of terrorism (AML/CFT) deficiencies. The changes may affect U.S. financial institutions’ obligations and risk-based approaches with respect to relevant jurisdictions.

The Financial Crimes Enforcement Network (FinCEN) is issuing this advisory to inform financial institutions of updates to the FATF list of jurisdictions with strategic AML/CFT deficiencies. Financial institutions should be aware of these changes, which may affect their obligations and risk-based approaches with respect to these jurisdictions. The advisory also reminds financial institutions of the status and obligations involving these jurisdictions, in particular the Democratic People’s Republic of Korea (DPRK) and Iran.

As part of the FATF’s listing and monitoring process to ensure compliance with its international AML/CFT standards, the FATF identifies certain jurisdictions as having strategic deficiencies in their AML/CFT regimes. These jurisdictions are named in two documents: (1) the “FATF Public Statement,” which identifies jurisdictions that are subject to the FATF’s call for countermeasures and/or enhanced due diligence (EDD) because of their strategic AML/CFT deficiencies; and (2) “Improving Global AML/CFT Compliance: On-going Process,” which identifies jurisdictions that the FATF has determined to have strategic AML/CFT deficiencies. On February 22, 2019, the FATF updated both documents with the concurrence of the United States. Financial institutions should consider these changes when reviewing their obligations and risk-based policies, procedures, and practices with respect to the jurisdictions noted below.

Link:

FinCEN Advisory

FinCEN Assesses $14.5 Million Penalty against UBS Financial Services for Anti-Money Laundering Failures

WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) today announced an assessment against UBS Financial Services, Inc. (UBSFS) for willful violations of the Bank Secrecy Act (BSA).

FinCEN assessed a $14.5 million civil money penalty, of which $5 million will be paid to the U.S. Department of the Treasury and the remainder will be concurrent with penalties for similar or related conduct imposed by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

As described in the assessment, UBSFS failed to develop and implement an appropriate, risk-based anti-money laundering (AML) program that adequately addressed the risks associated with accounts that included both traditional brokerage and banking-like services.  UBSFS failed to implement appropriate policies and procedures to ensure the detection and reporting of  suspicious activity through all accounts—particularly for those accounts that exhibited little to no securities trading.  The firm did not adequately structure its AML program to address the use of securities accounts for the purpose of moving funds rather than trading securities.

“Broker-dealers providing banking-like services must properly mitigate the AML risks associated with this kind of service.  These services enable the flow of funds through mechanisms such as wire transfers, check writing, and ATM withdrawals, creating AML risks that need to be properly addressed,” said FinCEN Director Kenneth A. Blanco.  “Although brokerage firms may provide such services to their clients, those doing so need to apply commensurate diligence to ensure that the firm does not become a conduit for movement of illicit funds creating a haven for criminals and other malign actors to benefit from, and to further, their illicit activity.  For more than a decade, UBSFS failed to implement sufficient policies and procedures that adequately addressed the risks associated with the products and services it offered.”

As a full-service broker-dealer, UBSFS is required to establish and implement an AML program, as well as perform periodic reviews of its correspondent accounts for foreign financial institutions.  FinCEN determined that from 2004 to 2017, UBSFS failed to implement an adequate AML program and failed to implement an adequate due diligence program for foreign correspondent accounts.

UBSFS failed to provide sufficient resources to ensure day-to-day AML compliance.  Inadequate staffing led to a significant backlog of alerts and decreased UBSFS’s ability to timely file suspicious activity reports (SARs).  Law enforcement investigators rely upon SARs to recognize and pursue financial criminals and other bad actors to protect our national security and our people from harm.  Allowing a backlog of transaction alerts and delays in filing SARs stifles the ability of law enforcement agents to fulfill this critical national security mission.

Over several years, UBSFS processed through certain of its brokerage accounts hundreds of transactions that exhibited red flags associated with shell company activity.  UBSFS failed to adequately monitor foreign currency-denominated wire transfers—amounting to tens of billions of dollars—that were conducted through its commodities accounts and retail brokerage accounts.  UBSFS’s AML monitoring system failed to capture critical information about these foreign currency-denominated wires, including sender and recipient information and the country of origin and destination.  As a result, it was unable to identify and investigate potentially suspicious transactions based on the presence of important risk factors, such as jurisdiction and the involvement of politically exposed persons.  Financial institutions must fully evaluate and identify the specific AML risks of the business and services they offer to their customers so they can proactively develop and implement an appropriate AML program to mitigate those risks.

FinCEN recognizes that UBSFS has made significant investments in BSA/AML staffing and technology, demonstrating its commitment and ability to correct the issues listed in the assessment through significant remedial efforts, including an upgraded AML surveillance monitoring system, enhanced oversight of its AML monitoring, enhanced training for AML compliance staff, and the implementation of a new quality assurance system.

FinCEN acknowledges its close coordination with the SEC and FINRA in the settlement of this action.

Links:

FinCEN News Release

Enforcement Action

FBAR Filing Requirement for Certain Financial Professionals

FinCEN Notice 2018-1

Extended Filing Date Related to Notice 2017-1

The Financial Crimes Enforcement Network (FinCEN) is announcing a further extension of time for certain Report of Foreign Bank and Financial Accounts (FBAR) filings in light of the notice of proposed rulemaking (NPRM) FinCEN issued on March 10, 2016, which proposes to revise the regulations implementing the Bank Secrecy Act (BSA) regarding FBARs.1 Specifically, one of the proposed amendments would expand and clarify the exemptions for certain U.S. persons with signature or other authority over foreign financial accounts. This proposed amendment seeks to address questions raised regarding the filing requirement and its application to the individuals with signature authority over, but no financial interest in, certain types of accounts as outlined in FinCEN Notice 2017-1.

On December 22, 2017, FinCEN issued Notice 2017-1 to extend the filing date for FinCEN Form 114 – FBAR2 for certain individuals with signature authority over but no financial interest in one or more foreign financial accounts to April 15, 2019. FinCEN has previously issued identical extensions that applied to similarly situated individuals.3 As noted in these previous Notices, FinCEN received questions that required additional consideration with respect to the exemptions addressed in these Notices. As stated above, the proposed amendments in the NPRM seek to address these exemptions. Because the proposal is not yet finalized, FinCEN is further extending the filing due date to April 15, 2020, for individuals whose filing due date for reporting signature authority was previously extended by Notice 2017-1.4 This extension applies to the reporting of signature authority held during the 2018 calendar year, as well as all reporting deadlines extended by previous Notices 2017-1, 2016-1, 2015-1, 2014-1, 2013-1, 2012-1 and 2012-2, along with Notices 2011-1 and 2011-2. For all other individuals with an FBAR filing obligation, the filing due date remains April 15, 2019.

Questions or comments regarding the contents of this notice should be addressed to the FinCEN Resource Center at 1-800-767-2825 or 1-703-905-3591 (not a toll free number) and select option 3 for regulatory questions. E-mail inquiries can be sent to FRC@fincen.gov.

Link:

FinCEN Notice