Financial Crime Enforcement Archive

In a press release the Financial Crimes Enforcement Network (FinCEN) has announced its intention to retire the BSA Magnetic Media Filing Program. Current Magnetic Media filers must transition to BSA Electronic Filing (E-Filing) no later than December 31, 2008.

FinCEN has issued administrative ruling FIN-2008-R008 which clarifies:  (1) whether a fully disclosed clearing agreement between a U.S. clearing firm and a foreign introducing firm is a correspondent account for the purposes of regulations implementing section 312 of the USA PATRIOT Act (the "correspondent account rule"); (2) whether a clearing firm is obligated to regard the fully disclosed accounts of a foreign introducing firm as its own accounts for the purposes of complying with the customer identification program regulations (the "CIP rule"); and (3) whether a clearing firm is expected to obligate the foreign introducing firm to comply with the obligations of the CIP rule, the correspondent account rule, and other U.S. anti-money laundering regulations respecting any accounts it may introduce to the clearing firm on a fully disclosed basis.

FinCEN has issued the latest edition of The SAR Activity Review - By The Numbers. This report compiles the numerical data gathered from Suspicious Activity Reports (SARs) filed through the 2007 calendar year. While this report does not analyze specific trends, changes in the reporting of some suspicious activities are of note and should be of interest to all financial institutions.

FinCEN has released Issue 13 of its SAR Activity Review, Trends, Tips and Issues. This edition reflects several important topics relevant to SAR filers and SAR users. Among other things, it highlights three recent FinCEN SAR analytical reports: Insurance Industry Suspicious Activity Reporting: An Assessment of Suspicious Activity Report Filings; Mortgage Loan Fraud: An Update of Trends based Upon an Analysis of Suspicious Activity Reports, and;  Money Laundering in the Residential Real Estate Industry: An Assessment Based Upon Suspicious Activity Report Filing Analysis.

FinCEN and the OCC have announced the assessment of concurrent civil money penalties, each $15 million, against the New York Branch of United Bank for Africa, PLC (“the Branch”) for violations of the Bank Secrecy Act (BSA). This enforcement action stems from an earlier Cease and Desist Order issued in January 2007.  During a target examination conducted in November 2007, examiners determined that the Branch had failed to comply with the previous Order's terms and that significant BSA program deficiencies remained pervasive and systemic, including internal control and audit deficiencies, as well as the Branch's continued failure to identify and report suspicious activities.

The Financial Crimes Enforcement Network (FinCEN) is proposing to significantly simplify the current requirements for depository institutions to exempt their eligible customers from currency transaction reporting. FinCEN announced the proposal and request for comments in a Notice of Proposed Rulemaking submitted for publication in the Federal Register.

FinCEN has published guidance to help financial institutions to file more precise Suspicious Activity Reports in areas of foreign corruption.

In preparation for the retirement of the Magnetic Media Program, FinCEN has announced that it is no longer accepting new applications to batch file BSA forms using tapes and/or diskettes. New users who wish to batch file their BSA forms should submit these files using the BSA E-Filing system.

In a press release, FinCEN has announced the release of an update its November 2006 mortgage loan fraud assessment.  This assessment is based upon analysis of suspicious activity reports (SARs) provided by the financial industry. The previous study examined a statistical sample of SARs reporting mortgage fraud filed between April 1996 and March 2006. This updated study continues the analysis for reports filed through March 2007.

FinCEN has issued several advisories regarding money laundering threats in various countries. Financial institutions operating in the United States should take the risk arising from these threats into account and consider increased due diligence with respect to correspondent accounts maintained for foreign financial institutions. 

The Financial Crimes Enforcement Network has issued the latest edition of the SAR Activity Review - By The Numbers. This report presents a compilation of numerical data gathered from Suspicious Activity Reports (SARs) filed through the first six months of the year. The suspicious activity characterization Mortgage Loan Fraud increased 35% from the corresponding six-month period in 2006. FinCEN is preparing a more comprehensive analysis of mortgage fraud to be released in the near future. In addition, Structuring/Money Laundering continues to be the predominant characterization of SARs filed by depository institutions, at 48%. However, Check Fraud (10.5%), Counterfeit Check (8.9%), Credit Card Fraud (4.8%), Mortgage Loan Fraud (3.9%), Check Kiting (3.3%), Identity Theft (2.4%) and other types of fraud are consistently represented. By The Numbers further categorizes this data by state and by year so that users can compare numbers which are relevant to their areas of interest.

The Federal Reserve Board has entered into a Written Agreement with Salin Bank and Trust located in Indianapolis, IN for violations of the Bank Secrecy Act.  The FRB cited Salin Bank and Trust for deficiencies in their AML policies and procedures, customer due diligence practices, risk management processes, internal audit program and internal control environment.

FinCEN has issued interpretative guidance FIN-2008-G001 to clarify how rules implementing section 312 of the USA PATRIOT Act (the correspondent account rule) apply to a covered financial institution presenting a negotiable instrument for payment to another financial institution.

In a press release, the Financial Crimes Enforcement Network (FinCEN) has announced the assessment of a civil money penalty in the amount of $12 million against Sigue Corporation and Sigue, LLC, a money services business headquartered in San Fernando, California, for violations of the Bank Secrecy Act (BSA). Sigue, without admitting or denying the allegations, consented to the civil money penalty. Concurrently, the Department of Justice announced today that Sigue has also entered into a deferred prosecution agreement on charges of failing to maintain an effective anti-money laundering program and will forfeit $15 million to the U.S. government. FinCEN’s penalty will be deemed satisfied by a portion of the $15 million payment to the Department of Justice.

FinCEN determined that Sigue failed to establish and implement an anti-money laundering program reasonably designed to ensure compliance with the Bank Secrecy Act which led, in turn, to a failure by management at Sigue to implement measures to respond to continued patterns of suspicious activity, with repeated common characteristics, at certain agent locations. According to FinCEN, Sigue’s failure to implement effective internal controls, training or independent testing to manage the risk of money laundering was "serious, longstanding and systemic". 

While this enforcement action involves a MSB, there are significant BSA compliance lessons to be learned by all financial institutions.

FinCEN has issued administrative ruling FIN-2008-R001 to clarify the currency transaction report ("CTR") filing obligations when reporting transactions involving sole proprietorships.

FinCEN has released Issue 12 of its SAR Activity Review – Trends, Tips & Issues.  Issue 12 includes over 120 indexed law enforcement case examples.

FinCEN has issued a publication that explains the 10 most common errors in the filing of Suspicious Activity Reports (SARs) and ways to remedy the problems.

In a recent speech before the National Association of Federal Credit Unions, FinCEN Director James H. Freis, Jr. provides compliance information on the Bank Secrecy Act and an update on how the regulatory agencies use data from CTR and SAR filings.

The Federal Financial Institutions Examination Council (FFIEC) has released the revised Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual. According to the FFIEC's press release—link to Agencies Release Revised Bank Secrecy Act/Anti-Money Laundering Examination Manual (8/24/07), the revised manual reflects the ongoing commitment of the federal and state banking agencies and the Financial Crimes Enforcement Network (FinCEN) to provide current and consistent guidance on risk-based policies, procedures, and processes for banking organizations to comply with the BSA and safeguard operations from money laundering and terrorist financing. The 2007 version further clarifies supervisory expectations since the July 28, 2006, update.

The Financial Crimes Enforcement Network (FinCEN) has issued a final rule to implement the enhanced due diligence requirements for correspondent accounts for certain foreign banks set forth in section 312 of the PATRIOT Act. This final rule is effective September 10, 2007. On February 5, 2008, the enhanced due diligence provisions of this final rule will apply to correspondent accounts for certain foreign banks established on or after such date. On May 5, 2008, the enhanced due diligence provisions of this final rule will apply to correspondent accounts for certain foreign banks established before February 5, 2008.

According to a FinCEN press release the final rule clarifies the risk-based procedures that U.S. financial institutions should use in tailoring their enhanced due diligence to assess the risks of some foreign banking relationships.

American Express Bank International (AEBI), based in Miami, has been fined a total of $65 million for violating the Bank Secrecy Act (BSA) by failing to maintain an effective anti-money laundering program, the Department of Justice (DOJ) announced.

The government will recommend the dismissal of the charge in 12 months, provided the bank fully implements significant anti-money laundering measures required by the agreement.

The Treasury Department's Financial Crimes Enforcement Network (FinCEN), which acted in conjunction with the DOJ, determined that AEBI repeatedly failed, over the course of several years, to adequately respond to certain supervisory findings with respect to the effectiveness of account monitoring controls to ensure compliance with the BSA.

FinCEN also found that AEBI failed to implement adequate internal controls, failed to conduct adequate independent testing, and failed to designate compliance personnel to ensure compliance with the BSA. According to FinCEN, AEBI operated in certain high-risk jurisdictions and business lines without adequate systems and controls to detect and report money laundering and other suspicious activity in a timely manner, as well as manage the risks of money laundering, including the potential for illicit drug trafficking-based transactions.

"Banks and other financial institutions must uphold their responsibility to safeguard financial markets from the illegal activities of international drug cartels and professional money launderers," said Assistant Attorney General Alice S. Fisher of the DOJ's Criminal Division. "An effective anti-money laundering program is critical to law enforcement efforts to detect and cut off the flow of drug money."

Karen P. Tandy, head of the Drug Enforcement Administration, said "American Express and all legitimate banking organizations must take every step possible to avoid becoming entangled in the web of international drug money laundering. Today the message is loud and clear:  due diligence-don't take money without it."

For more information, click on the appropriate links:

• Federal Reserve Board
  Order of Assessment of a Civil Money Penalty
  
  
• Financial Crimes Enforcement Network
  Assessment of Civil Money Penalty
  
  
• U.S. Department of Justice deferred prosecution agreement (1.1 MB PDF)

Sarah Borchersen-Keto, ComplianceHeadquarters Washington Correspondent and Reporter for CCHGroup, Inc.

The federal financial regulatory agencies have issued a statement setting forth the agencies’ policy for enforcing specific anti-money laundering requirements of the Bank Secrecy Act (BSA). The purpose of the Interagency Statement on Enforcement of Bank Secrecy Act/Anti-Money Laundering Requirements is to provide greater consistency among the agencies in enforcement decisions in BSA matters and to offer insight into the considerations that form the basis of those decisions. Click on the appropriate regulator for a copy of the Statement:  FDIC | FRB | OCC | OTS | NCUA

House Financial Services Committee chairman Barney Frank, D-Mass., and other House lawmakers have asked the Government Accountability Office (GAO) for a report on the mission and operational capacity of the Treasury Department's Financial Crimes Enforcement Network (FinCEN), focusing on the increasing volume of Bank Secrecy Act (BSA) filings, including Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs).

GAO is already conducting a review of the filing and use of CTRs, but House members are now asking for a more comprehensive look at the current framework for achieving the goals of the BSA.

With regard to FinCEN, Frank and House Financial Services Committee ranking member Spencer Bachus, R-Ala., and Rep. Stephen Lynch, D-Mass., want to know how FinCEN's mission has evolved in response to statutory, technological, or other changes. Other areas of interest include whether there are any constraints on FinCEN's ability to achieve its mission arising from its cooperative arrangements with the Internal Revenue Service in maintaining BSA data.

Meanwhile, the House members are asking for more information on the factors that have contributed to the rise in the number of SARs filed in recent years, and to what extent current SAR forms are appropriate for law enforcement needs. Lawmakers also wish to know the impact of the BSA/AML Examination Manual on the examination process.

"Is there a more effective or efficient way to provide law enforcement with useful financial data and otherwise meet the goals of the Bank Secrecy Act, or if not, to significantly reduce the burden of providing the information," the lawmakers state in their letter to the GAO.

Sarah Borchersen-Keto, ComplianceHeadquarters Washington Correspondent and Reporter for CCHGroup, Inc. 

In a press release FinCEN announced it has issued the latest edition of the SAR Activity Review - By The Numbers. This issue introduces a number of visual enhancements aimed at providing financial institutions with more information on the geographical dispersion of the Suspicious Activity Report filings. The enhancements unveiled in Issue 8 include representations of the numerical depository institution SAR data for individual states; charts and graphs highlighting SAR filing trends and patterns between April 1, 1996 and December 31, 2006 for each state and territory; and maps for calendar year 2006.

FinCEN has issued a Fact Sheet that outlines steps it plans to take to increase the effectiveness and efficiency of the Bank Secrecy Act. Included in the fact statement is a discussion of risk based exams for smaller institutions, money service business exam materials and FinCEN efforts to provide feedback to the industry.

OFAC has issued guidance on entities owned by persons whose property and interests in property are blocked.

In a press release, the Federal Trade Commission staff states that it is seeking comments on the impact and effectiveness of credit freezes as part of a multi-pronged approach to combat identity theft. Comments must be received on or before February 25, 2008.

The federal banking regulators have jointly issued a notice of proposed rulemaking pursuant to section 312 of the FACT regarding the accuracy and integrity of information about consumers for use by entities that furnish such information to a consumer reporting agency. The agencies also are proposing regulations that would require each such entity to establish reasonable policies and procedures for implementing the guidelines.

The regulatory agencies have issued final rules on affiliate marketing under section 214 of the FACT Act.  The final rules generally prohibit a financial institution from using certain information received from an affiliate to make a solicitation to a consumer unless the consumer is given notice and a reasonable opportunity to opt out of such solicitations, and the consumer does not opt out. The rules are effective January 1, 2008, with compliance mandatory by October 1, 2008.

Identity thieves may still be able to reconstruct full social security numbers (SSNs) by combining different truncated versions of the SSN available from public and private sources, a new report from the Government Accountability Office (GAO) warns.

"Truncation does not provide complete protection against identity theft," the report concludes, adding that Congress may wish to further improve SSN protection by enacting truncation standards or assigning an agency to do so.

The report also noted that the Internal Revenue Service and Department of Justice are the only federal agencies that commonly provide records containing SSNs to state and local public record keepers, and in recent years both have taken steps to truncate or remove SSNs in those records. But despite these steps, "full SSNs remain in the millions of lien records provided to public record keepers before the agencies implemented these changes," the GAO said. Increased access to these records through bulk sales to private companies and Internet access also creates the potential for identity theft, the report adds.

At a House Ways and Means subcommittee hearing June 21, Sen. Charles Schumer, D-N.Y., who had requested the GAO report, testified that SSNs provide "the golden key that opens all doors," adding that "we need public access that doesn't expose people to identity theft." Schumer said he is proposing legislation that would require the Social Security Administration (SSA) to determine which method of SSN truncation to use – either hiding the first five digits or the last four. Schumer said his bill would also require that state and local record-keepers do not post complete SSNs on the Internet.

SSA Inspector General Patrick O'Carroll told the hearing that the agency has very few mechanisms to curb the improper, or unnecessary, use of a SSN. "We read about these occurrences in the newspaper every day, but we’ve yet to develop meaningful ways to stem the tide," he said.

O’Carroll told members that the SSA needs more help. "We believe the time has come to consider legislation limiting the collection and use of SSNs to those purposes mandated by federal law, or otherwise reducing the use of SSNs as convenient identifiers."

Sarah Borchersen-Keto, ComplianceHeadquarters Washington Correspondent and Reporter for CCHGroup, Inc.

FinCEN has issued the latest edition of The SAR Activity Review - By The Numbers. This report compiles the numerical data gathered from Suspicious Activity Reports (SARs) filed through the 2007 calendar year. While this report does not analyze specific trends, changes in the reporting of some suspicious activities are of note and should be of interest to all financial institutions.

FinCEN has released Issue 13 of its SAR Activity Review, Trends, Tips and Issues. This edition reflects several important topics relevant to SAR filers and SAR users. Among other things, it highlights three recent FinCEN SAR analytical reports: Insurance Industry Suspicious Activity Reporting: An Assessment of Suspicious Activity Report Filings; Mortgage Loan Fraud: An Update of Trends based Upon an Analysis of Suspicious Activity Reports, and;  Money Laundering in the Residential Real Estate Industry: An Assessment Based Upon Suspicious Activity Report Filing Analysis.

FinCEN and the OCC have announced the assessment of concurrent civil money penalties, each $15 million, against the New York Branch of United Bank for Africa, PLC (“the Branch”) for violations of the Bank Secrecy Act (BSA). This enforcement action stems from an earlier Cease and Desist Order issued in January 2007.  During a target examination conducted in November 2007, examiners determined that the Branch had failed to comply with the previous Order's terms and that significant BSA program deficiencies remained pervasive and systemic, including internal control and audit deficiencies, as well as the Branch's continued failure to identify and report suspicious activities.

The OCC has entered into a settlement agreement with Wachovia Bank, National Association that directs the bank to make restitution to consumers harmed by its relationships with several telemarketers and third party payment processors.

According to the OCC’s press release, the bank has agreed to make restitution to all consumers harmed who have not been previously reimbursed and who file claims under the processes set out in the settlement. The estimated maximum amount of potential claims is $125 million; actual claims may result in restitution in a lesser amount. In addition to the restitution payments, the bank will also be required to contribute approximately $8.9 million to consumer education programs directed at the elderly, and to pay a $10 million civil money penalty to the U.S. Treasury. In reaching the settlement,  the OCC concluded that the bank engaged in unsafe or unsound practices during the course of its relationships with the payment processors and telemarketers, and unfair practices within the meaning of the Federal Trade Commission Act.

FinCEN has published guidance to help financial institutions to file more precise Suspicious Activity Reports in areas of foreign corruption.

In preparation for the retirement of the Magnetic Media Program, FinCEN has announced that it is no longer accepting new applications to batch file BSA forms using tapes and/or diskettes. New users who wish to batch file their BSA forms should submit these files using the BSA E-Filing system.

In a press release, FinCEN has announced the release of an update its November 2006 mortgage loan fraud assessment.  This assessment is based upon analysis of suspicious activity reports (SARs) provided by the financial industry. The previous study examined a statistical sample of SARs reporting mortgage fraud filed between April 1996 and March 2006. This updated study continues the analysis for reports filed through March 2007.

The U.S. Treasury Department has  released its Blueprint for an improved financial regulatory structure.  This structure is designed to  strengthen consumer protections, improve tools for market stability and enhance financial innovation. Treasury's Blueprint for a Modernized Financial Regulatory Structure also presents a series of short-, intermediate- and long-term recommendations for reform of the U.S. regulatory structure.

FinCEN has issued several advisories regarding money laundering threats in various countries. Financial institutions operating in the United States should take the risk arising from these threats into account and consider increased due diligence with respect to correspondent accounts maintained for foreign financial institutions. 

The Financial Crimes Enforcement Network has issued the latest edition of the SAR Activity Review - By The Numbers. This report presents a compilation of numerical data gathered from Suspicious Activity Reports (SARs) filed through the first six months of the year. The suspicious activity characterization Mortgage Loan Fraud increased 35% from the corresponding six-month period in 2006. FinCEN is preparing a more comprehensive analysis of mortgage fraud to be released in the near future. In addition, Structuring/Money Laundering continues to be the predominant characterization of SARs filed by depository institutions, at 48%. However, Check Fraud (10.5%), Counterfeit Check (8.9%), Credit Card Fraud (4.8%), Mortgage Loan Fraud (3.9%), Check Kiting (3.3%), Identity Theft (2.4%) and other types of fraud are consistently represented. By The Numbers further categorizes this data by state and by year so that users can compare numbers which are relevant to their areas of interest.

The Federal Reserve Board has entered into a Written Agreement with Salin Bank and Trust located in Indianapolis, IN for violations of the Bank Secrecy Act.  The FRB cited Salin Bank and Trust for deficiencies in their AML policies and procedures, customer due diligence practices, risk management processes, internal audit program and internal control environment.

FinCEN has issued interpretative guidance FIN-2008-G001 to clarify how rules implementing section 312 of the USA PATRIOT Act (the correspondent account rule) apply to a covered financial institution presenting a negotiable instrument for payment to another financial institution.

In a press release, the Financial Crimes Enforcement Network (FinCEN) has announced the assessment of a civil money penalty in the amount of $12 million against Sigue Corporation and Sigue, LLC, a money services business headquartered in San Fernando, California, for violations of the Bank Secrecy Act (BSA). Sigue, without admitting or denying the allegations, consented to the civil money penalty. Concurrently, the Department of Justice announced today that Sigue has also entered into a deferred prosecution agreement on charges of failing to maintain an effective anti-money laundering program and will forfeit $15 million to the U.S. government. FinCEN’s penalty will be deemed satisfied by a portion of the $15 million payment to the Department of Justice.

FinCEN determined that Sigue failed to establish and implement an anti-money laundering program reasonably designed to ensure compliance with the Bank Secrecy Act which led, in turn, to a failure by management at Sigue to implement measures to respond to continued patterns of suspicious activity, with repeated common characteristics, at certain agent locations. According to FinCEN, Sigue’s failure to implement effective internal controls, training or independent testing to manage the risk of money laundering was "serious, longstanding and systemic". 

While this enforcement action involves a MSB, there are significant BSA compliance lessons to be learned by all financial institutions.

In a speech before the ABA/ABA Money Laundering Enforcement Conference, FinCEN Director James H. Freis Jr. made several comments regarding compliance with the Bank Secrecy Act.  Among other things, Freis noted that the regulatory agencies are taking a risk based approach to examinations and are outreaching to money services businesses.  In addition, Fries commented on the use of BSA data and new FinCEN developments.

FinCEN has issued advisory FIN-2007-A001 which offers guidance to U.S. financial institutions so that they may guard against threats of illicit Iranian activity related to money laundering, terrorist financing and weapons of mass destruction proliferation financing.

FinCEN and the OCC have announced the assessment of concurrent civil money penalties, each $10 million, against Union Bank of California, N.A. of San Francisco, California, for violations of the Bank Secrecy Act. Union Bank also consented to issuance of a Cease and Desist Order by the OCC.

In a recent speech before the National Association of Federal Credit Unions, FinCEN Director James H. Freis, Jr. provides compliance information on the Bank Secrecy Act and an update on how the regulatory agencies use data from CTR and SAR filings.

The FTC has updated its website with a reminder that all financial institutions are covered by the Red Flags Rules.  According to Lydia Parnes, Director of the Bureau of Consumer Protection at the Federal Trade Commission, "We encourage all organizations that have ongoing accounts or relationships with consumers to keep an eye out for red flags that signal identity theft.”

Check out the Red Flag Resource Center for information and solutions on implementing an ID theft prevention program.

The federal financial institution regulatory agencies have sent to the Federal Register for publication final rules on identity theft “red flags” and address discrepancies. The final rules implement sections 114 and 315 of the Fair and Accurate Credit Transactions Act of 2003.

In a press release, the FTC announced it will host a public workshop, “Security in Numbers: SSNs and ID Theft,” to explore the uses of Social Security numbers in the private sector and the role of SSNs in identity theft. The workshop will be held on December 10 and 11, 2007 and will provide a forum for public-sector, private-sector, and consumer representatives to discuss the various uses of SSNs by the private sector, the necessity of those uses, alternatives available, the challenges faced by the private sector in moving away from using SSNs, and how SSNs are obtained and used by identity thieves.

In a press release addressing a speech made before the Maryland Task Force on Identity Theft, the FTC discusses identity theft issues and ways to combat the problem. 

The OCC has released Bulletin 2008-16 which reminds banks and their technology service providers that application security is an important component of their information security program.

The OCC has entered into a settlement agreement with Wachovia Bank, National Association that directs the bank to make restitution to consumers harmed by its relationships with several telemarketers and third party payment processors.

According to the OCC’s press release, the bank has agreed to make restitution to all consumers harmed who have not been previously reimbursed and who file claims under the processes set out in the settlement. The estimated maximum amount of potential claims is $125 million; actual claims may result in restitution in a lesser amount. In addition to the restitution payments, the bank will also be required to contribute approximately $8.9 million to consumer education programs directed at the elderly, and to pay a $10 million civil money penalty to the U.S. Treasury. In reaching the settlement,  the OCC concluded that the bank engaged in unsafe or unsound practices during the course of its relationships with the payment processors and telemarketers, and unfair practices within the meaning of the Federal Trade Commission Act.

The Federal Financial Institutions Examination Council (FFIEC) has issued updated guidance for examiners, financial institutions, and technology service providers to identify business continuity risks and evaluate controls and risk management practices for effective business continuity planning. The guidance is an update to the “Business Continuity Planning Booklet,” which was issued in March 2003.