Scarinci Hollenbeck, LLC
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201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: September 23, 2020
The Firm
201-896-4100 info@sh-law.comThe Financial Crimes Enforcement Network (FinCEN) recently issued the first of its kind guidance describing its enforcement approach to enforcing the Bank Secrecy Act (BSA).
According to FinCEN, the objective of its “Statement on Enforcement of the Bank Secrecy Act” is to provide clarity and transparency to its outcome approach when contemplating compliance or enforcement actions against covered financial institutions that violate the BSA. The statement outlines the administrative actions available to FinCEN, and provides an overview of the information FinCEN analyzes when determining the appropriate outcome to violations of the BSA.
“FinCEN is committed to being transparent about its approach to BSA enforcement. It is not a ‘gotcha’ game,” FinCEN Director Kenneth A. Blanco said in a press statement. “The information required by the BSA saves lives, and protects our communities and people from harm. It is a national security issue.”
In an effort to deter money laundering and related financial crimes, the BSA and its implementing regulations require financial institutions to develop anti-money laundering (AML) programs, among other requirements. The BSA governs a wide variety of institutions, including banks, broker-dealers in securities, money services businesses, and casinos and card clubs. The BSA, in more limited circumstances, also prescribes rules of conduct for nonfinancial trades and businesses and individuals.
FinCEN is tasked with administering the BSA. As highlighted in its guidance, FinCEN is authorized to institute enforcement actions, such as imposing civil money penalties, against financial institutions, nonfinancial trades or businesses, and other persons that violate the BSA. In some cases, enforcement actions may also seek to impose civil money penalties on partners, directors, officers, or employees who participate in these violations.
FinCEN’s enforcement guidance also emphasizes that its enforcement actions seek to establish a violation of law based on applicable statutes and regulations. “FinCEN will not treat noncompliance with a standard of conduct announced solely in a guidance document as itself a violation of law,” the guidance emphasizes. “Regulated parties will be afforded an opportunity to respond to and contest factual findings or legal conclusions underlying any FinCEN enforcement action.”
As set forth in its guidance, FinCEN has a broad range of authority to take the following actions when it identifies an actual or possible violation of the BSA or any BSA regulation or order:
FinCEN further notes that it will consider whether to impose “compliance commitments” to ensure financial institutions are in full compliance with the BSA.
According to FinCEN, it considers a range of factors when evaluating an appropriate disposition upon identifying actual or possible violations of the BSA. “FinCEN strives for proportionality, consistency, and effectiveness,” the guidance further states. “The weight given to any factor in contemplation of the potential dispositions identified above may change based on the relevant facts and circumstances of a case.” Factors include both compliance with specific BSA requirements—such as registration, recordkeeping, and reporting requirements—as well as the adequacy of an AML program, including the extent of the AML program’s compliance with “pillar requirements,” such as implementing a set of internal controls, conducting training and independent testing, and designating one or more individuals to assure day-to-day compliance with the BSA.
The factors FinCEN considers include, but are not limited to, the following:
Given that BSA compliance violations can lead to costly financial penalties, it is imperative that regulated financial institutions have robust ALM programs in place, meeting BSA ‘pillar requirements’, a designated AML Compliance Officer, and independent testing of the institutions program. However, should compliance oversights occur, FinCEN’s latest guidance provides a helpful roadmap of what type of enforcement action businesses might face and how institutions can effectively respond to proposed enforcement action.
If you have any questions or if you would like to discuss these issues further,
please contact Paul Lieberman or the Scarinci Hollenbeck attorney with whom you work, at (201) 896-4100.
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