FINCEN STATEMENT ON BSA ENFORCEMENT AND JOINT STATEMENT ON PEP DUE DILIGENCE

On August 18, the Financial Crimes Enforcement Network (FinCEN) issued Financial Crimes Enforcement Network (FinCEN) Statement on Enforcement of the Bank Secrecy Act, which “sets forth its approach to enforcing the rules and regulations within the BSA” and outlines factors FinCEN uses when determining enforcement response to actual or possible violations.

The Statement notes, when a violation, or potential violation of the BSA or implementing regulations occurs, FinCEN has authority to take various actions including no action, warning letters, remedies, settlements, civil money penalties, or criminal referrals. In evaluating violations, or possible violations, it considers both compliance with specific BSA requirements and the adequacy of an anti-money laundering (AML) program and also utilizes factors such as:

  1. Nature and seriousness of the violations, including the extent of possible harm to the public and the amounts involved.
  2. 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.
  3. Pervasiveness of wrongdoing within an entity, including management’s complicity in, condoning or enabling of, or knowledge of the conduct underlying the violations.
  4. History of similar violations, or misconduct in general, including prior criminal, civil, and regulatory enforcement actions.
  5. Financial gain or other benefit resulting from, or attributable to, the violations.
  6. Presence or absence of prompt, effective action to terminate the violations upon discovery, including self-initiated remedial measures.
  7. Timely and voluntary disclosure of the violations to FinCEN.
  8. Quality and extent of cooperation with FinCEN and other relevant agencies, including as to potential wrongdoing by its directors, officers, employees, agents, and counterparties.
  9. Systemic nature of violations. Considerations include, but are not limited to, the number and extent of violations, failure rates (e.g., the number of violations out of total number of transactions), and duration of violations.
  10. Whether another agency took enforcement action for related activity. FinCEN will consider the amount of any fine, penalty, forfeiture, and/or remedial action ordered.

FinCEN’s release follows the recent issuance of a similar statement, Joint Statement on Enforcement of BSA/AML Requirements, by the federal banking agencies (FRB, FDIC, OCC, and NCUA).

In addition to FinCEN’s Statement on enforcement discussed in this article and the previously issued Joint Statement on BSA/AML Enforcement referenced above, on August 21, FinCEN, along with the prudential financial institution regulators (FDIC, FRB, OCC, and NCUA) issued a “Joint Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May be Considered Politically Exposed Persons.” The Joint Statement notes, “banks must adopt appropriate risk-based procedures for conducting CDD; however, under the CDD rule, there is no regulatory requirement or supervisory expectation for banks to have unique, additional due diligence steps for customers whom the banks consider to be PEPs.” This Joint Statement discusses CDD requirements and specific considerations related to PEPs.

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