Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Top Takeaways from FinCEN’s AML Enforcement Guidance

Author: Scarinci Hollenbeck, LLC

Date: September 23, 2020

Key Contacts

Back

The Financial Crimes Enforcement Network (FinCEN) recently issued the first of its kind guidance describing its enforcement approach to enforcing the Bank Secrecy Act (BSA).

The Financial Crimes Enforcement Network (FinCEN) recently issued the first of its kind guidance describing its enforcement approach to enforcing the Bank Secrecy Act (BSA).

Key Takeaways from FinCEN’s AML Enforcement Guidance

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.”

Bank Secrecy Act – AML Program Required

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.”

Administrative Actions Available

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:

  • No Action: FinCEN may close a matter with no additional action. FinCEN may reopen the matter if FinCEN obtains new material information concerning the matter or becomes aware of additional or subsequent violations.
  • Warning Letter: FinCEN may issue a warning through a supervisory letter or similar communication.
  • Equitable Remedies: FinCEN may seek an injunction or equitable relief to enforce compliance when FinCEN believes an entity or individual has violated, is violating, or will violate the BSA or any BSA regulation or order.
  • Settlements: As part of a settlement, FinCEN may require both remedial undertakings and civil money penalties.
  • Civil Money Penalties: FinCEN may assess a civil money penalty.
  • Criminal Referral: If circumstances warrant, FinCEN may refer a matter to appropriate law enforcement agencies for criminal investigation and/or criminal prosecution.

FinCEN further notes that it will consider whether to impose “compliance commitments” to ensure financial institutions are in full compliance with the BSA.

Resolution of Enforcement Actions Through Evaluation of Factors

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:

  • Nature and seriousness of the violations, including the extent of possible harm to the public and the amounts involved.
  • 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.
  • Pervasiveness of wrongdoing within an entity, including management’s complicity in, condoning or enabling of, or knowledge of the conduct underlying the violations.
  • History of similar violations, or misconduct in general, including prior criminal, civil, and regulatory enforcement actions.
  • Financial gain or other benefit resulting from, or attributable to, the violations.
  • Presence or absence of prompt, effective action to terminate the violations upon discovery, including self-initiated remedial measures.
  • Timely and voluntary disclosure of the violations to FinCEN.
  • Quality and extent of cooperation with FinCEN and other relevant agencies, including as to potential wrongdoing by its directors, officers, employees, agents, and counterparties.
  • 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.
  • Whether another agency took enforcement action for related activity. FinCEN will consider the amount of any fine, penalty, forfeiture, and/or remedial action ordered.

Key Takeaways

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 questions, please contact us

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.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Dissolving Your Business: Essential Legal Steps to Protect Your Interests post image

Dissolving Your Business: Essential Legal Steps to Protect Your Interests

If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]

Author: Christopher D. Warren

Link to post with title - "Dissolving Your Business: Essential Legal Steps to Protect Your Interests"
The Role of Corporate Restructuring in Mergers & Acquisitions post image

The Role of Corporate Restructuring in Mergers & Acquisitions

Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]

Author: Dan Brecher

Link to post with title - "The Role of Corporate Restructuring in Mergers & Acquisitions"
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public post image

Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public

Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]

Author: Bryce S. Robins

Link to post with title - "Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public"
Understanding Chattel Paper: A Key Component in Secured Transactions post image

Understanding Chattel Paper: A Key Component in Secured Transactions

Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]

Author: Dan Brecher

Link to post with title - "Understanding Chattel Paper: A Key Component in Secured Transactions"
Crypto Compliance: A Comprehensive Guide post image

Crypto Compliance: A Comprehensive Guide

For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]

Author: Bryce S. Robins

Link to post with title - "Crypto Compliance: A Comprehensive Guide"
Supreme Court and Title VII: Implications for Reverse Discrimination post image

Supreme Court and Title VII: Implications for Reverse Discrimination

Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]

Author: Matthew F. Mimnaugh

Link to post with title - "Supreme Court and Title VII: Implications for Reverse Discrimination"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!