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FinCEN announces upcoming rulemaking on beneficial ownership reporting requirements
On March 22, FinCEN Director Kenneth A. Blanco spoke at the Florida International Bankers Association AML Compliance Conference, and discussed the upcoming advance notice of proposed rulemaking (ANPRM) concerning new beneficial ownership reporting requirements of the Anti-Money Laundering Act of 2021 (AML Act). As previously covered by InfoBytes, the AML Act was enacted in January as part of the National Defense Authorization Act for Fiscal Year 2021, and made significant changes to BSA and AML laws. Included within the AML Act is the Corporate Transparency Act (CTA), which defines a beneficial owner as an entity or individual “who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise. . .exercises substantial control over the entity” or “owns or controls not less than 25 percent of the ownership interests of the entity,” with limited exceptions. Blanco did not provide a timeline for when the ANPRM would be issued, but emphasized that implementing the AML Act is FinCEN’s “number one priority.” Blanco also noted, among other things, that FinCEN is taking steps to develop a secure database to house collected beneficial ownership information, and is currently in the process of developing the use and confidentiality protocols that will control access to the database.
FinCEN issues antiquities and art warning
On March 9, the Financial Crimes Enforcement Network (FinCEN) issued an advisory notice alerting financial institutions with existing Bank Secrecy Act (BSA) obligations about illicit activity associated with trade in antiquities and art. As previously covered by InfoBytes, the Anti-Money Laundering Act of 2020 (AML Act) was enacted in January as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021, and made significant changes to BSA and AML laws, including amending the definition of “financial institution” under the BSA to include persons “engaged in the trade of antiquities.” Among other things, FinCEN’s advisory notice updates financial institutions on AML Act measures related to the regulation of antiquities, noting in particular that the Department of Treasury, in coordination with the FBI, the U.S. Attorney General, and Homeland Security, “will perform a study of the facilitation of money laundering and the financing of terrorism through the trade in works of art.” The notice further warns financial institutions that crimes related to the trade of antiquities “may involve their institution” and could include the “sale of stolen or counterfeit objects,” as well as money laundering and sanctions violations. The advisory notice also provides suspicious activity report filing instructions related to trade in antiquities and art.
FinCEN updates AML/CFT deficiencies list
On March 11, the Financial Crimes Enforcement Network (FinCEN) issued an advisory identifying updates to the Financial Action Task Force’s (FATF) list of jurisdictions with strategic anti-money laundering and combating the financing of terrorism (AML/CFT) and counter-proliferation financing deficiencies. The advisory notes that in response to the Covid-19 pandemic, FATF “prioritized its review by focusing on jurisdictions with expired or expiring action plan deadlines,” and provided jurisdictions identified under “increased monitoring” the option to provide a status report. FinCEN’s advisory reminds members that its February 2020 statement High-Risk Jurisdictions Subject to a Call for Action remains in effect and urges “all jurisdictions to impose countermeasures on Iran and the Democratic People’s Republic of Korea (DPRK) to protect the international financial system from significant strategic deficiencies in their AML/CFT regimes.” The advisory also notes that last month FATF updated its Jurisdictions under Increased Monitoring document, adding Burkina Faso, Cayman Islands, Morocco, and Senegal. Further, the advisory provides AML program risk assessment considerations and suspicious activity report filing guidance.
FinCEN issues warning about fraud targeting Covid-19 economic impact payments
On February 24, the Financial Crimes Enforcement Network (FinCEN) issued an advisory alerting financial institutions to potential fraud and other financial crimes targeting Covid-19 economic impact payments (EIP). The advisory is based on FinCEN’s analysis of Covid-19 related information obtained from Bank Secrecy Act data, public reporting, and law enforcement partners, and outlines potential methods of EIP fraud, associated red flags, and information for reporting suspicious activity related to such fraud. According to FinCEN, U.S. authorities have detected a wide range of EIP-related fraud, including (i) fraudulent, altered, or counterfeit checks; (ii) theft of EIPs; (iii) phishing schemes using EIPs as a lure, in which emails, letters, phone calls, and text messages are used by fraudsters in order to obtain personal information such as account numbers and passwords; and (iv) private companies with control over a person’s finances that seize a person’s EIP for wage garnishment or debt collection and do not return the inappropriately-seized payment.
FinCEN also issued a notice for filing suspicious activity reports (SAR) related to Covid-19. The notice consolidates filing instructions and key terms for fraudulent activities, crimes, and cyber/ransomware attacks related to the pandemic. FinCEN reminded financial institutions to consult previously issued advisories and notices to access additional SAR filing instructions and other Covid-19-related advisories and alerts (available here).
SBA addresses BSA compliance obligations in updated PPP FAQs
On January 29, the Small Business Administration (SBA) updated its Paycheck Protection Program (PPP) frequently asked questions to further address borrower and lender questions. Among other things, the updated FAQs clarify that FinCEN’s April 2020 PPP FAQs are applicable to Second Draw PPP loans. In addition, for purposes of Bank Secrecy Act (BSA)/anti-money laundering compliance, SBA states that PPP lenders can rely on the same information received from a borrower during a First Draw loan application for a Second Draw PPP loan provided the borrower is an existing customer. Accordingly, FinCEN, as administrator of the BSA, published updates to its FAQs to include SBA’s newest clarifications. Additionally, SBA notes that FAQs 1-53 are currently being revised and do not reflect changes made by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act enacted on December 27, 2020 (covered by InfoBytes here).
Agencies release SARs/AML consideration FAQs
On January 19, the Financial Crimes Enforcement Network (FinCEN), Federal Reserve Board, FDIC, NCUA, and the OCC, in consultation with staff at certain other federal functional regulators, published answers to frequently asked questions concerning suspicious activity reporting (SAR) and other anti-money laundering (AML) considerations. The answers clarify financial institutions’ commonly asked questions about SARs/AML regulatory requirements and are provided to assist financial institutions with their Bank Secrecy Act (BSA)/AML compliance obligations in order to enable them “to focus resources on activities that produce the greatest value to law enforcement agencies and other government users of [BSA] reporting.” Topics discussed include (i) law enforcement requests for financial institutions to maintain accounts; (ii) receipt of grand jury subpoenas and law enforcement inquiries and SAR filings; (iii) maintaining customer relationships following the filing of SARs; (iv) filing SARs based on negative news identified in media searches; (v) information provided in SAR data and narrative fields; and (vi) SAR character limits. The agencies note that the FAQs do not alter existing BSA/AML requirements or establish new supervisory expectations, but have been developed in response to recent recommendations as described more thoroughly in FinCEN’s Advance Notice or Proposed Rulemaking issued last September on AML program effectiveness (covered by InfoBytes here).
FinCEN reaches $390 million settlement with bank for BSA violations
On January 15, the Financial Crimes Enforcement Network (FinCEN) announced a $390 million civil money penalty against a national bank for allegedly violating the Bank Secrecy Act and its implementing regulations. The settlement resolves an investigation into the bank’s alleged failure to maintain an effective anti-money laundering (AML) program. According to FinCEN, the bank’s check-cashing business unit failed to file thousands of suspicious activity reports (SARs) and currency transaction reports (CTR). As a result, suspicious transactions were not reported in a timely and accurate manner. FinCen noted that while the bank was allegedly aware of several compliance and money laundering risks associated with its check-cashing business unit, its process for investigating suspicious transactions was insufficient. The bank also allegedly failed to file SARs even though it had actual knowledge of criminal charges against specific customers and continued to process transactions for these customers’ businesses. In determining the penalty, FinCEN considered the bank’s significant remediation efforts—including taking remedial measures related to its SARs and CTR filing systems and enhancing its AML program over the past several years—as well as its cooperation with the agency’s investigation.
FinCEN warns financial institutions about Covid-19 vaccine-related scams and cyberattacks
On December 28, the Financial Crimes Enforcement Network (FinCEN) issued a notice to financial institutions concerning the potential for Covid-19 vaccine-related fraud, ransomware attacks, and other types of criminal activity. Specifically, FinCEN warns financial institutions to be aware of the potential sale of unapproved and illegally marketed vaccines, as well as fraudsters offering vaccines sooner than allowed for a fee. Financial institutions should also look out for ransomware targeting vaccine delivery operations and supply chains. The notice provides instructions for filing suspicious activity reports regarding the aforementioned activity.
FinCEN proposes new reporting requirements for certain CVC and digital asset transactions
On December 18, the Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking (NPRM) that would require financial institutions and money service businesses (MSBs) to maintain records and submit reports to verify customer identities for certain transactions involving convertible virtual currency (CVC) or digital assets with legal tender status (LTDA). Under the NPRM, the requirements would apply to transactions involving CVC and LTDA that are held in certain “hosted” wallets at financial institutions, as well as in “unhosted” wallets, which are not held in an exchange or bank. Banks and MSBs would be required to file transaction reports within 15 days with FinCEN verifying the identity of customers if a counterparty to the transaction is using an unhosted or otherwise covered wallet and the transaction is greater than $10,000. Banks and MSBs would also be required to maintain records of customers’ CVC or LTDA transactions and counterparties—“including verifying the identity of their customers, if a counterparty uses an unhosted or otherwise covered wallet and the transaction is greater than $3,000.” According to Treasury Secretary Steven T. Mnuchin, the proposed rule “is intended to protect national security, assist law enforcement, and increase transparency while minimizing impact on responsible innovation” by “closing loopholes that malign actors may exploit.” FinCEN notes that, while the NPRM “proposes to prescribe by regulation that CVC and LTDA are ‘monetary instruments’ for purposes of the” Bank Secrecy Act (BSA), it does not “modify the regulatory definition of ‘monetary instruments’ or otherwise alter existing BSA regulatory requirements applicable to ‘monetary instruments’ in FinCEN’s regulations.” Comments on the NPRM were due January 4.
Agencies proposes SAR filing exemptions
On December 15, the FDIC issued a proposed rule (with accompanying Financial Institution Letter FIL-114-2020), which would amend the agency’s Suspicious Activity Report (SAR) regulation to permit additional, case-by-case, exemptions from SAR filing requirements. The proposed rule would allow the FDIC, in conjunction with the Financial Crimes Enforcement Network (FinCEN), to grant supervised institutions exemptions to SAR filing requirements when developing “innovative solutions to meet Bank Secrecy Act (BSA) requirements more efficiently and effectively.” The FDIC would seek FinCEN’s concurrence with an exemption when the exemption request involves the filing of a SAR for potential money laundering, violations of the BSA, or other unusual activity covered by FinCEN’s SAR regulation. The proposal allows the FDIC to grant the exemption for a specified time period and allows the FDIC to extend or revoke the exemption if circumstances change. The proposal is intended to reduce the regulatory burden on supervised financial institutions that are likely to leverage existing or future technologies to report suspicious activity in a different and innovative manner. Comments on the proposed rule must be submitted within 30 days of publication in the Federal Register.
The OCC also issued a proposal that would similarly allow the OCC to issue exemptions from SAR filing requirements to support national banks or federal savings associations developing innovative solutions intended to meet BSA requirements more efficiently and effectively.