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  • Bank fined $140 million for BSA/AML compliance failures

    Federal Issues

    On March 17, FinCEN announced a $140 million civil money penalty against a federal savings bank for violating the Bank Secrecy Act (BSA) and its implementing regulations from at least January 2016 through April 2021 by allegedly failing to implement and maintain an effective, reasonably designed anti-money laundering (AML) program. According to FinCEN, the bank “also admitted that it willfully failed to accurately and timely report thousands of suspicious transactions to FinCEN involving suspicious financial activity by its customers, including customers using personal accounts for apparent criminal activity.” The consent order further noted that in 2017, the OCC informed the bank that its AML program failed to meet all the requirements of the agency’s regulations. The bank agreed to overhaul its AML program but, according to the order, the bank has not yet met all of the terms of its commitments to address the deficiencies. FinCEN emphasized that the bank’s violations resulted “in millions of dollars in suspicious transactions flowing through the U.S. financial system without appropriate reporting,” and stressed “that growth and compliance must be paired, and AML program deficiencies, especially deficiencies identified by federal regulators, must be promptly and effectively addressed.”

    The same day, the OCC announced a $60 million penalty against the bank for related violations resulting from the separate but coordinated investigation with FinCEN. Among other things, the consent order identified several deficiencies related to inadequate internal controls and risk management practices, suspicious activity identification, staffing, training, and third-party risk management. FinCEN’s announcement noted that “[a]s many of the facts and circumstances underlying the OCC’s civil penalty also form the basis of FinCEN’s Consent Order, FinCEN agreed to credit the $60 million civil penalty imposed by the OCC,” adding that, combined, the bank “will pay a total of $140 million to the U.S. Treasury for its violations, with $80 million representing FinCEN’s penalty and $60 million representing the OCC’s penalty.”

    Federal Issues Bank Regulatory Financial Crimes OCC FinCEN Enforcement Anti-Money Laundering Bank Secrecy Act Compliance SARs

  • Multinational efforts target Russian sanctions evasion, illicit assets of Russian oligarchs

    Federal Issues

    On March 16, the U.S. Treasury Department, along with representatives from Australia, Canada, Germany, France, Italy, Japan, the United Kingdom, and the European Commission, announced the first meeting of the Russian Elites, Proxies, and Oligarchs (REPO) multilateral task force, which was formed in February 2022. According to the announcement, the task force (consisting of the Finance Ministry and Justice or Home Ministry in each member jurisdiction) is “committed to using their respective authorities in concert with other appropriate ministries to collect and share information to take concrete actions, including sanctions, asset freezing, and civil and criminal asset seizure, and criminal prosecution.” Topics discussed among the REPO task force included, among other things: (i) ensuring coordination and effective implementation of the group’s collective financial sanctions relating to Russia and assisting other nations with locating and freezing assets found within their jurisdictions; (ii) preserving evidence and determining whether these frozen assets, or other assets linked to these sanctioned individuals or entities, are subject to forfeiture; and (iii) ensuring that enablers and gatekeepers “who have facilitated the movement of sanctioned assets or other illicit funds” are brought to justice. The announcement also noted that it launched the Kleptocracy Asset Recovery Rewards Program, offering monetary awards for information leading to seizure, restraint, or forfeiture of assets linked to foreign government corruption, including the Government of the Russian Federation. Member countries released a joint statement following the launch of the REPO task force encouraging other countries to take action to “hunt down the assets of key Russian elites and proxies and to act against their enablers and facilitators” in order “to isolate them from the international financial system and impose consequences for their actions.”

    In other international efforts, the DOJ launched Task Force KleptoCapture, “an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed, along with allies and partners,” in order to “isolate Russia from global markets.” (Covered previously by InfoBytes here.)

    Also on March 16, the Financial Crimes Enforcement Network (FinCEN) released a statement with counterparts in task force member countries and others stating their intent to increase information sharing.

    Federal Issues Financial Crimes Department of Treasury FinCEN DOJ Of Interest to Non-US Persons Russia Ukraine Ukraine Invasion OFAC Sanctions Bank Secrecy Act SARs

  • OCC issues final rule for granting exemptions to SAR requirements

    On March 16, the OCC issued a final rule amending its suspicious activity report (SAR) regulations. The rule sets out a process for national banks and federal savings associations to request exemptions from the OCC’s SAR requirements. To request exemption under the final rule, national banks or federal savings associations, including federal branches and agencies of foreign banks, must submit a request in writing to the OCC. The agency “will consider whether the exemption is consistent with the purposes of the [Bank Secrecy Act] and with safe and sound banking and may consider any other appropriate factors.” Where required, institutions must separately seek an exemption from FinCEN, and the OCC intends to coordinate with FinCEN on such requests. The final rule will also allow “the OCC to facilitate changes required by the Anti-Money Laundering Act of 2020" and “will make it possible for the OCC to grant relief to national banks or federal savings associations that develop innovative solutions intended to meet Bank Secrecy Act requirements more efficiently and effectively.”

    Bank Regulatory Federal Issues Financial Crimes Agency Rule-Making & Guidance OCC SARs Federal Register Of Interest to Non-US Persons Bank Secrecy Act Anti-Money Laundering Anti-Money Laundering Act of 2020 FinCEN Bank Compliance

  • NYDFS fines money transmitter $8.25 million for AML compliance failures

    State Issues

    On March 16, NYDFS announced the imposition of an $8.25 million fine on a money transmitter alleged to have violated anti-money laundering (“AML”) requirements and New York law by failing to adequately supervise local agents in New York City that processed an unusual volume of suspicious transactions to China. NYDFS conducted an examination and enforcement investigation, which found that the company “did not adequately oversee the activity of six agents that saw a large spike in transaction volume of business with China.” According to the investigation, there were roughly 7,500 transactions aggregating approximately $30 million in 2014. These figures rose to more than 25,000 transactions aggregating more than $100 million during the period between January 2016 and May 2017. Most of these transactions were processed by small, store-front independent agents—“a clear indicator of increased money laundering risk, particularly given that the destination was known to carry a high AML risk,” NYDFS stated, adding that the company should have also addressed risks resulting from a suspicious pattern of different senders transmitting money to the same recipient. NYDFS acknowledged that the company, when alerted to the increased transaction activity, severed its relationship with the problematic agents and implemented remedial measures to improve supervision of its agents. Under the terms of the consent order, the company will pay an $8.25 civil money penalty and is required to submit a report to NYDFS outlining enhancements made with respect to new and existing agents, suspicious activity reporting program, and special transaction limitations. Additionally, NYDFS announced that the company will also update the Department on improvements to the policies and procedures of its Bank Secrecy Act/AML compliance program and will provide data to NYDFS for ongoing monitoring purposes.

    State Issues State Regulators NYDFS Enforcement Compliance Money Service / Money Transmitters Payments Anti-Money Laundering Bank Secrecy Act SARs Of Interest to Non-US Persons China

  • FinCEN releases fact sheet on RRP

    Federal Issues

    On February 14, FinCEN issued a fact sheet regarding its Rapid Response Program (RRP), which is “a collaborative partnership that leverages FinCEN’s relationships with law enforcement, U.S. financial institutions, and foreign financial intelligence units to help victims and their financial institutions recover funds stolen as the result of certain cyber-enabled financial crimes schemes, including business e-mail compromise.” According to FinCEN, in addition to providing information about the program, the fact sheet emphasizes that victims of cyber-enabled crimes, or victims’ financial institutions, need to file a complaint with law enforcement to start the RRP process. The fact sheet also provides guidance on, among things: (i) activating the RRP; (ii) suspicious activity reporting; and (iii) information for financial institutions sharing information. FinCEN noted that it assisted in the recovery of over $1.1 billion since the program started in 2015.

    Federal Issues FinCEN Of Interest to Non-US Persons SARs Financial Crimes

  • FinCEN proposes SAR pilot program

    Agency Rule-Making & Guidance

    On January 24, FinCEN issued a Notice of Proposed Rulemaking (NPRM) to establish a limited-duration pilot program for financial institutions to share suspicious activity reports (SARs), pursuant to Section 6212 of the Anti-Money Laundering Act of 2020. The pilot program would allow financial institutions with SAR reporting obligations to share SARs and related information (subject to certain restrictions) with their foreign branches, subsidiaries, and affiliates for the purpose of combating illicit finance risks. The NPRM would expand guidance that previously only permitted SARs to be shared internally with foreign head offices, controlling companies (domestic or foreign), and domestic affiliates, and seeks input on the expected costs and benefits, technical challenges, merits of quarterly reporting, and SAR confidentiality protections. According to FinCEN, the pilot program is intended to provide feedback as the agency considers longer-term approaches towards SAR sharing with foreign affiliates. Comments are due March 28.

    Agency Rule-Making & Guidance FinCEN Financial Crimes SARs Anti-Money Laundering Act of 2020 Of Interest to Non-US Persons

  • FinCEN says wildlife trafficking threatens financial system integrity

    Financial Crimes

    On December 20, the Financial Crimes Enforcement Network (FinCEN) issued a Financial Threat Analysis concerning suspicious activity reports (SARs) related to wildlife trafficking trend information identified in Bank Secrecy Act (BSA) data. FinCEN identified wildlife trafficking as a major transnational organized crime involving “the illicit trade of protected animals, animal parts, and derivatives thereof, including procurement, transport, and distribution, in violation of international or domestic law, and money laundering related to this activity.” The proceeds related to wildlife trafficking is estimated to be between $7 and $23 billion annually. According to FinCEN, traffickers damage the integrity of the financial system. FinCEN also stated that financial institutions play a critical role in “identifying wildlife trafficking and protecting the U.S. financial system from associated illicit finance through compliance with their BSA obligations.”

    FinCEN stated that the issues with wildlife trafficking are: “(1) its strong association with corruption and transnational criminal organizations, two of FinCEN’s national anti-money laundering and countering the financing of terrorism priorities published in June 2021; (2) a need to enhance reporting and analysis of related illicit financial flows; and, (3) wildlife trafficking’s contribution to biodiversity loss, damage to fragile ecosystems, and the increased likelihood of spreading of zoonotic diseases.” 

    Financial Crimes FinCEN Of Interest to Non-US Persons Bank Secrecy Act SARs Anti-Money Laundering

  • SEC settles with company distributing unregistered shares

    Securities

    On December 15, the SEC announced a settlement with a California-based broker-dealer for allegedly unlawfully distributing nearly 100 million unregistered shares of over 50 different low-priced microcap companies, and for the company’s failure to file suspicious activity reports (SARs) regarding those transactions. According to the SEC’s order, the company violated Sections 5(a) and 5(c) of the Securities Act, which “make it unlawful for any person, directly or indirectly, to offer or sell securities by any means or instruments of transportation or communication in interstate commerce unless a registration statement has been filed with the Commission with respect to Section 5(c) and is in effect with respect to Section 5(a),” by engaging in unregistered offers and sales of large blocks of low-priced securities by an offshore customer from January 2017 through September 2018. The order also noted that the company could not rely on an exemption under Section 4(a)(4) of the Securities Act, which would apply to the company “only if, after conducting a reasonable inquiry into the facts surrounding the sales at issue, [the company] was not aware of facts indicating that its offshore customer was engaging in an unlawful distribution of securities,” since the company allegedly failed to conduct a reasonable inquiry. Additionally, the company violated Section 17(a) of the Exchange Act and Rule 17a-8 thereunder by failing to file SARs for certain suspicious transactions that it executed on behalf of its offshore customer. The order, which the company consented to without admitting or denying the findings, imposes a civil money penalty of $1,000,000, a total of $173,508.40 in disgorgement, and $34,332.16 in prejudgment interest. The order also directs the company to engage an independent compliance consultant “to conduct a comprehensive review of, and to report and make recommendations as to, the effectiveness, construction and implementation of [the company’s] supervisory, compliance, and other policies and procedures reasonably designed to prevent violations of the federal securities laws by [the company] and its employees.” The order provides that the company will “cease and desist from committing or causing any violations and any future violations of Sections 5(a) and 5(c) of the Securities Act and Section 17(a) of the Exchange Act and Rule 17a-8 promulgated thereunder.”

    Securities Enforcement SARs SEC

  • FinCEN issues environmental crimes notice

    Federal Issues

    On November 18, the Financial Crimes Enforcement Network (FinCEN) issued a notice calling attention to the increase of environmental crimes and associated illicit financial activity. FinCEN emphasized that this trend is due to: (i) its strong association with corruption and transnational criminal organizations, two of FinCEN’s national anti-money laundering and countering the financing of terrorism priorities; (ii) a need to enhance reporting and analysis of related illicit financial flows; and (iii) environmental crimes’ contribution to the climate crisis, including threatening ecosystems, decreasing biodiversity, and increasing carbon dioxide in the atmosphere. The notice also provided financial institutions with specific suspicious activity report filing instructions and outlined the likelihood of illicit financial activity associated with several types of environmental crimes.

    Federal Issues FinCEN Financial Crimes Anti-Money Laundering Combating the Financing of Terrorism SARs Climate-Related Financial Risks

  • FinCEN hosts exchange on SAR reporting

    Financial Crimes

    On November 9, the Financial Crimes Enforcement Network (FinCEN) held a virtual “FinCEN Exchange” with members of the financial industry and law enforcement “to discuss FinCEN’s analysis of suspicious activity reporting (SAR) with a transactional nexus to Alabama, Florida, Georgia, Mississippi, and South Carolina.” As previously covered by InfoBytes, SAR Stats—formerly called By the Numbers—is an annual compilation of numerical data gathered from SARs filed by financial institutions using FinCEN’s new unified SAR form and e-filing process. According to FinCEN, analysis of certain Bank Secrecy Act filing statistics for SARs and an analysis of SAR filings related to recent FinCEN advisories were among the topics discussed. FinCEN also noted that this FinCEN Exchange “supports one of FinCEN’s highest priorities—to strengthen public-private partnerships to identify and mitigate threats in order to safeguard our national security and protect communities and citizens from harm.”

    Financial Crimes FinCEN SARs Bank Secrecy Act

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