FinCEN Updates FATF AML/CFT Deficient Jurisdictions List

On January 19, FinCEN issued an advisory, FIN-2016-A001, to provide financial institutions with guidance on reviewing their obligations and risk-based approaches with respect to certain jurisdictions. According to the advisory, on October 23, the Financial Action Task Force (FATF) updated two documents identifying the following: (i) jurisdictions that are either subject to the FATF’s call to apply countermeasures, or to Enhanced Due Diligence (EDD) due to their AML/CFT deficiencies; and (ii) jurisdictions with AML/CFT deficiencies. FinCEN’s recently issued advisory summarizes the changes made to the respective lists and reiterates that a financial institution must file a Suspicious Activity Report if it “knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity or that a customer has otherwise engaged in activities indicative of money laundering, terrorist financing, or other violation of federal law or regulation.”

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U.S. FinCEN Issues Geographical Targeting Orders Requiring Reporting of High-End Cash Purchases and Buyers of Residential Real Estate in Manhattan and Miami

On January 13, FinCEN issued two Geographical Targeting Orders (GTO) requiring certain U.S. title insurance companies to provide identification for certain “all-cash” buyers of high end real estate, and to report such transactions. One GTO focuses on the Borough of Manhattan in New York City, New York and the other focuses on Miami-Dade County, Florida.

According to FinCEN, natural persons may be purchasing real estate without bank financing and through LLCs or “other opaque structures” in an attempt to hide their assets and identity. FinCEN commented: “Having prioritized anti-money laundering protections on real estate transactions involving lending, FinCEN’s remaining concern is with money laundering vulnerabilities associated with all-cash real estate transactions.” The two GTOS will be effective from March 1, 2016 through August 27, 2016, and will require certain title insurance companies to “record and report to FinCEN the beneficial ownership information of legal entities purchasing certain high-value residential real estate without external financing.” Read more…

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FinCEN Assesses Civil Money Penalty Against LA-Based Precious Metals Business for AML Violations

On December 30, FinCEN announced a civil money penalty of $200,000 against a Los Angeles-based precious metals business – a financial institution as defined by the BSA – and its owner and compliance officer. The company and the two individuals admitted to willfully violating federal AML laws by (i) failing to adequately asses its own risk; and (ii) failing to conduct due diligence on its highest-risk customers. Specifically, the business did not have an AML program in place until 2011, five years after the IRS instructed it to establish one. In 2013, IRS examiners found that the company’s recently-established AML program did not ensure compliance with the BSA and, as a result, the company “failed to appropriately assess its money laundering to terrorist financing risks, conducted almost no due diligence on money laundering and terrorist financing, conducted almost no due diligence on many of its highest risk customers, and failed to implement effective procedures to identify red flags or to conduct inquiries when such red flags were present, among other things.” In addition to the civil money penalty, the company and the two individuals agreed that, until 2020, they would: (i) retain an auditor; (ii) provide a comprehensive annual report to FinCEN detailing the implementation of the company’s improved AML program; and (iii) annually provide FinCEN with a copy of the company’s AML training program, certifying attendance and testing results of the program.

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FinCEN Settles with Card Club Gaming Establishment for BSA Violations

On December 17, FinCEN announced a $650,000 settlement with a “card club” gaming establishment in California for willfully violating the program and reporting requirements of the Bank Secrecy Act (BSA). The gaming establishment allegedly trained its staff using misleading and inaccurate AML policy, which either failed to provide instructions at all, or provided incorrect instructions regarding the establishment’s obligations and reporting requirements under the BSA. As an example, the establishment “encouraged employees to provide notice to patrons if they were about to conduct a cash transaction that would put them over the $10,000 threshold for the filing of a Currency Transaction Report, thereby possibly encouraging structured transactions.” In addition, since the establishment’s policy did not contain instructions regarding when an employee should file a Suspicious Activity Report (“SAR”), it failed to file SARs in 2009 and 2010. Card clubs are gaming facilities that generally host only games involving cards; like casinos, card clubs are defined as financial institutions under the BSA, rendering them subject to FinCEN’s rules and regulatory authority.

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FinCEN Announces MOU with China Anti-Money Laundering Monitoring and Analysis Center

On December 11, FinCEN announced that Director Jennifer Shasky Calvery and the China Anti-Money Laundering Monitoring and Analysis Center (CAMLMAC) Director-General Luo Yang of the People’s Republic of China signed an MOU “to create a framework to facilitate expanded U.S.-China collaboration, communication, and cooperation between both nations’ financial intelligence units.” As the financial intelligence unit (FIU) for the United States, FinCEN is responsible for combating money laundering and the financing of terrorism by collecting, analyzing, and disseminating financial intelligence to law enforcement and other relevant authorities; as the Chinese counterpart to FinCEN, the CAMLMAC has comparable responsibilities to the Chinese government. The recently announced MOU is intended to provide a “mechanism for sharing information on money laundering and the financing of terrorism in order to prevent illicit actors from abusing either country’s financial systems.”

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FinCEN Director Highlights the Significance of SAR Filings

On December 9, FinCEN Director Calvery highlighted at a joint FBIIC-FSSCC meeting the role of FinCEN in gathering and analyzing financial intelligence and the value of Suspicious Activity Reports (SARs) in curtailing malicious cyber activity. Calvery noted the importance of attribution information, such as IP addresses, timestamps, e-mail addresses, and the nature of the suspicious activity, when included in SAR filings, in helping FinCEN and law enforcement agencies deflect cyber-attacks, detect the source of such attacks, and identify members of money laundering networks. “For example, SARs filed by several different financial institutions played a vital role in furthering an investigation where a regional Florida bank had nearly $7 million fraudulently wired out of one of its accounts,” Calvery explained. Calvery emphasized the importance of including cyber-derived information (such as IP addresses and bitcoin wallet addresses) in SAR filings, noting that while less than two percent of filed SARs contain IP addresses, the information is “incredibly important to FinCEN analysts and law enforcement investigators working to combat cyber-crimes.”

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FinCEN Extends Deadline for Report of Foreign Bank and Financial Accounts Filings

On December 8, FinCEN issued a notice extending the deadline for certain filers to submit the Report of Foreign Bank and Financial Accounts (FBAR) because filers continue to submit questions to FinCEN that require additional consideration and possible regulatory changes. The notice extends the filing deadline for FinCEN Form 114 – FBAR from June 30, 2016 to April 15, 2017 for “certain individuals with signature authority over but no financial interest in one or more foreign financial accounts.” FinCEN issued notices announcing identical extensions the past four years, and the extension applies to the reporting of signature authority held during the 2015 calendar year, as well as to the reporting deadlines extended by previous notices.

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FinCEN Appoints Andrea Sharrin as Policy Division Associate Director, Replaces Jamal El-Hindi

On December 7, FinCEN announced the selection of Andrea Sharrin as Associate Director for its Policy Division, the division responsible for drafting BSA rules as well as addressing strategic policy issues surrounding anti-money laundering and countering terrorist financing. Sharrin currently serves as the Director of the Office of Compliance and Enforcement in FinCEN’s Enforcement Division with responsibility for FinCEN’s BSA compliance and enforcement program. In her new role, Sharrin will lead the team that “defines the framework for protecting the U.S. financial system from money laundering, terrorist financing, and other illicit finance,” and will oversee FinCEN’s regulatory functions, which include drafting guidance and issuing regulatory rulings related to BSA. Sharrin replaces Jamal El-Hindi who was named FinCEN’s Deputy Director earlier this year.

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FinCEN Re-opens Comment Period for Final Rule Imposing Fifth Special Measure against FBME Bank Ltd.

On November 27, FinCEN published in the Federal Register a Notice to re-open the comment period for its previously issued Final Rule imposing the fifth special measure against FBME Bank Ltd. (FBME). On August 27, the day before the Rule was scheduled to take effect, the United States Court for the District of Columbia Court granted FBME’s motion for a preliminary injunction and enjoined the Final Rule from taking effect. On November 6, the Court granted the Government’s motion for voluntary remand to allow for further rulemaking proceedings. FinCEN’s most recent Federal Register Notice to re-open the comment period for the Final Rule solicits additional comments “particularly with respect to the unclassified, non-protected documents that support the rulemaking and whether any alternatives to the prohibition of the opening or maintaining of correspondent accounts with FBME would effectively mitigate the risk to domestic financial institutions.” Comments are due by January 26, 2016.

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U.S. Department of the Treasury Senior Staff Deliver Remarks Regarding Enforcement Efforts

On November 16, FinCEN Director Jennifer Calvery and Treasury’s Acting Under Secretary Adam Szubin delivered remarks at the American Bankers Association and American Bar Association Money Laundering Enforcement Conference on continued AML enforcement efforts. Szubin focused on the topic of “de-risking,” which he described as “instances in which a financial institution seeks to avoid perceived regulatory risk by indiscriminately terminating, restricting, or denying services to broad classes of clients, without case-by-case analysis or consideration of mitigating options,” and addressed Treasury’s efforts to curtail the negative effects attributed to de-risking, such as preventing access to the dollar and pushing people out of the regulated financial system. Szubin emphasized, however, that the Treasury would not “dilute or roll back [its] AML/CFT standards,” but expects financial institutions to be vigilant when identifying potential risks and to implement AML/CFT programs that effectively address risks associated with illicit financing on a client-by-client basis. In a separate speech, Director Calvery addressed FinCEN’s reliance on Bank Secrecy Act (BSA) data to “uncover risks, vulnerabilities, and gaps in each financial sector,” noting that BSA data supports FinCEN’s ongoing AML enforcement efforts.

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FinCEN Issues Final Civil Money Penalty Against U.S.-based Casino Over BSA Violations

On November 6, FinCEN issued a final assessment of civil money penalty against a Las Vegas-based casino and its branch offices for violating the BSA by failing to develop and implement a sufficient AML program and report suspicious activity in connection with its private gaming areas. As FinCEN previously announced on September 8, the terms of the assessment require the casino to pay an $8 million civil monetary penalty, hire an independent auditor to test its BSA/AML compliance program, and conduct a look-back review of all transactions through branch offices in Asia and California for recordkeeping and reporting compliance. FinCEN’s final assessment follows approval on October 19 of the settlement from the Bankruptcy Court for the Northern District of Illinois, as the casino remains a debtor in its bankruptcy case.

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Georgia Resident Pleads Guilty to Charges of Operating Unlicensed Money Transmitting Business

On October 13, the DOJ announced that a Columbus, Georgia resident pleaded guilty to one count of operating an unlicensed money transmitting business. According to the DOJ, between February 2013 and March 2014, the individual unlawfully owned, operated, and managed multiple money transmitting companies throughout the Columbus area, offering check-cashing services. The individual allegedly knew that he was required to register his company with FinCEN and with the state of Georgia, but failed to do so. Scheduled to face sentencing in January 2016, the individual faces a statutory maximum sentencing of five years and has agreed to a forfeiture order of more than $1,300,000.

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FinCEN to Withdraw 2011 Proposed Rule Against Lebanon-Based Bank

On September 28, FinCEN announced its intention to withdraw its February 2011 Notice of Finding and Notice of Proposed Rulemaking identifying a Lebanon-based bank as a “financial institution of primary money laundering concern” under Section 311 of the USA PATRIOT Act. The bank had been linked with Hezbollah and found to be involved in international narcotics and money laundering networks. Accordingly, through the Notice of Finding, FinCEN sought to impose certain “special measures” on the bank which are designed to, among other things, weaken foreign banks suspected of money laundering and financing terrorism, as well as protect American financial institutions. However, given that the bank’s license was revoked in September 2011 by Lebanon’s central bank, the Banque du Liban, and all of its assets were subsequently liquidated, the bank no longer exists as a foreign financial institution and, as such, is no longer subject to the prohibitions set forth in the proposed rule. The withdrawal of FinCEN’s Notice of Finding does not require a comment period and will be effective upon publication in the Federal Register.

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Leading Casino Settles with FinCEN for $8 Million for BSA Violations

On September 8, FinCEN announced the assessment of an $8 million civil money penalty against a leading U.S.-based casino for its willful violations of the BSA’s requirements to develop and implement a reasonably designed AML program and to report suspicious activity. Among other things, FinCEN alleged that the casino failed to implement adequate internal controls, conduct adequate independent testing of AML compliance, provide adequate training, and file SARs. Of note were private gaming salons that cater to wealthy patrons and allowed such patrons to gamble anonymously. In addition to the $8 million penalty, which will be allowed as a general unsecured claim in the casino’s bankruptcy proceeding (pending approval of the consent by the bankruptcy court), the casino must also, among other things, hire an independent third party to test its BSA/AML compliance program, annually provide its implementation plan and training program to FinCEN for a period of three years, and conduct a look-back review of all transactions through branch offices in Asia and California for SAR compliance.

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U.S. District Court Grants FBME Preliminary Injunction; Effective Date of FinCEN’s “Special Measure Five” Final Rule Delayed

On August 28, FinCEN issued a notice regarding the agency’s July 29 final rule imposing “special measure five” against FBME Bank Ltd. (“FBME”), which would prohibit financial institutions from opening or maintaining correspondent accounts or payable through accounts for or on behalf of FBME. Per FinCEN’s most recent notice, the originally scheduled effective date of August 28, 2015 has been postponed. On August 7, FBME filed suit in the United States Court for the District of Columbia and moved for a preliminary injunction, which the Court granted on August 27. The Court “ordered the parties to meet and confer as to an expedited briefing schedule on the merits of FBME’s Complaint and to file a joint proposed schedule, or separate schedules if mutual agreement cannot be reached.” The rule will not take effect until a final judgment is entered.

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