In a significant move toward more transparency, the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) released new guidance (the “Guidance”) on August 18, 2020, setting forth its enforcement approach and detailing the factors that FinCEN will consider when evaluating matters involving potential violations of the Bank Secrecy Act (“BSA”).1 The move was announced by FinCEN Director Kenneth Blanco, who joined FinCEN in 2017 after spending nearly two decades as a federal prosecutor with the Department of Justice (“DOJ”), and interestingly, the Guidance closely resembles similar guidance that DOJ follows when evaluating whether to bring criminal charges against a business organization.2 Notably, FinCEN’s Guidance also commits to avoid “piling on” when other agencies have already taken enforcement action in connection with a matter, which follows similar anti-piling on policy guidance promulgated by DOJ and the Commodity Futures Trading Commission over the past few years.3 FinCEN also emphasized that it “will seek to establish a violation of law based on applicable statutes and regulations,” and “will not treat noncompliance with a standard of conduct announced solely in a guidance document as itself a violation of law.” This statement also echoes a change in DOJ policy in January 2018 with the Brand Memo, which stated that “[g]uidance documents cannot create binding requirements that do not already exist by statute of regulation.”4
FinCEN has broad authority to take enforcement actions against financial institutions, including taking no action and declining to bring a case; issuing a warning letter; seeking an injunction or equitable relief; enforcing a civil monetary penalty; requiring remedial action; and referring a matter to DOJ for criminal prosecution. Under the Guidance, FinCEN provided a non-exhaustive list of 10 factors that will be weighed when evaluating an appropriate disposition:
- The nature and seriousness of the violations, including the extent of possible harm to the public and the amounts involved;
- The impact or harm of the violations on FinCEN’s mission to safeguard the financial system from illicit use, combat money laundering, and promote national security;
- The pervasiveness of wrongdoing within an entity, including management’s complicity in, condoning or enabling of, or knowledge of the conduct underlying the violations;
- The financial institution’s history of similar violations, or misconduct in general, including prior criminal, civil, and regulatory enforcement actions;
- The financial gain or other benefit resulting from, or attributable to, the violations;
- The presence or absence of prompt, effective action to terminate the violations upon discovery, including self-initiated remedial measures;
- Whether and extent to which the matter involved a timely and voluntary disclosure of the violations to FinCEN;
- The quality and extent of cooperation with FinCEN and other relevant agencies, including as to potential wrongdoing by its directors, officers, employees, agents, and counterparties;
- The systemic nature of violations, including the number and extent of violations, failure rates (e.g., the number of violations out of total number of transactions), and duration of violations; and
- Whether another agency took enforcement action for related activity, with the understanding that FinCEN will consider the amount of any fine, penalty, forfeiture, and/or remedial action ordered.5
Mirroring DOJ’s approach to corporate cases, the Guidance makes clear that an institution will get credit for self-reporting, cooperation and remediation, but an organization’s history of bad acts, high-level and pervasive involvement and the gravity of an offense likely would adversely impact an enforcement decision.
Finally, FinCEN’s Guidance reinforces the importance of keeping anti-money laundering (“AML”) compliance programs up to date.6 The BSA specifically has requirements for AML compliance programs that include internal controls, training, independent testing, and specific individuals charged with day-to-day compliance with the BSA.7 Further, strong AML compliance programs can assist with swift detection and self-remediation of issues, and may prevent potential violations from becoming more pervasive, an aggravating factor under the Guidance. The Guidance therefore provides additional support to compliance officers and in-house counsel, empowering them with another tool to raise awareness within their organizations to invest in compliance and preventive measures, especially during this critical time.
1 U.S. Dep’t of Treasury, Financial Crimes Enforcement Network Statement on Enforcement of the Bank Secrecy Act (Aug. 20, 2020), available at https://www.fincen.gov/sites/default/files/shared/FinCEN%20Enforcement%20Statement_FINAL%20508.pdf (“FinCEN Enforcement Guidance”).
2 See U.S. Dep’t of Justice, Principles of Federal Prosecution of Business Organizations, Memorandum (Aug. 28, 2008), available at https://www.justice.gov/sites/default/files/dag/legacy/2008/11/03/dag-memo-08282008.pdf; United States Sentencing Guidelines, Chapter 8, Sentencing of Organizations (2018).
3 U.S. Dep’t of Justice, Policy on Coordination of Corporate Resolution Penalties (May 9, 2018), available at https://www.justice.gov/opa/speech/file/1061186/download; Commodity Futures Trading Comm’n, Remarks of CFTC Director of Enforcement James M. McDonald at the American Bar Association’s National Institute of White Collar Crime (March 6, 2019), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/opamcdonald2.
4 U.S. Dep’t of Justice, Limiting the Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases (Jan. 25, 2018), available at https://www.justice.gov/file/1028756/download.
5 FinCEN Enforcement Guidance, supra note 1.
7 31 C.F.R. § 1022.210 (AML program requirements for money service businesses).