FINCEN And Bank Secrecy Act Enforcement

by Michael Volkov

The Financial Crimes Enforcement Network (FinCEN) is a new, imposing figure in the world of financial regulatory enforcement. 

As originally created, FinCEN served as an information and intelligence support system for other regulatory agencies and federal prosecutors.  That all changed in 2004 when Congress mandated that FinCEN create an Office of Compliance.  Since then, FinCEN’s importance as a regulatory and enforcement agency has grown.

The regulation of traditional banks falls to federal banking agencies (e.g. Office of Comptroller of the Currency, Federal Deposit Insurance Corporation and the Federal Reserve).  FinCEN works closely with these agencies in Bank Secrecy Act (BSA) enforcement matters.  Working together, these agencies impose civil monetary penalties for significant and/or systemic violations of the BSA, not minor, isolated violations.

More importantly, FinCEN has exclusive civil enforcement authority over non-bank financial institutions.  FinCEN acts to ensure that financial institutions provide law enforcement and regulatory authorities with required reports and notifications involving current transactions, suspicious activity and other reports required by the BSA. 

FinCEN’s mission is to ensure BSA compliance and to prevent criminals from using our financial system to further money laundering, terrorist financing and other financial crimes. 

Like many enforcement program, FinCEN relies on data analysis, referrals and voluntary disclosures to fuel its enforcement program.  It has an established voluntary disclosure protocol and provides significant rewards to companies which disclose violations and quickly remediate any deficiencies in its BSA compliance program.  FinCen has announced its expectation that banks and non-banks will develop a risk-based approach to BSA compliance – FInCEN does not hold companies to a standard of perfect compliance. 

When it comes to banks, FinCEN and the federal banking agencies often work together to enforce BSA and anti-money laundering requirements.  Working together with the FDIIC, the Department of Justice and state regulators, on November 19, 2012, FinCEN imposed a concurrent $15 million civil monetary penalty against First Bank of Delaware, Wilmington, Delaware, for BSA and AML violations.   First Bank of Delaware also settled civil charges brought by the U.S. Department of Justice, U.S. Attorney’s Office for the Eastern District of Pennsylvania, for the bank’s involvement in related activities. 

FinCEN’s increasing enforcement presence has occurred in the non-bank financial area involving casinos and money services businesses.  Years ago, FinCEN imposed a separate $5 million civil money penalty against American Express Travel Related Services, Inc., a money services business located in Salt Lake City, Utah, for BSA violations. 

In a recent speech, Peter Alvarado, Deputy Director, FinCEN, stated that “as FinCEN expands its anti-money laundering/counter-terrorist financing regulations to new types of [non-bank] entities that are not historically as highly regulated as banks, I expect that enforcement actions will increasingly become a part of the regulatory framework.”

The financial industry should take note – as I always say, the government likes to tell people they are going to enforce the law before they start to do so, or to put it another way: “They say what they mean and the mean what they say.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

Written by:

Michael Volkov

The Volkov Law Group on:

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