FinCEN clarifies BSA enforcement, stresses importance to national security - 21 August 2020

As the primary regulator and administrator of the Bank Secrecy Act, FinCEN issued a statement setting forth its approach to enforcing rules and regulations implemented under the BSA.

The Financial Crimes Enforcement Network has released a statement setting forth its approach to enforcing the rules and regulations within the Bank Secrecy Act (BSA). The statement follows an earlier joint statement by the federal banking regulators—Office of the Comptroller of the Currency, Federal Reserve Board, and Federal Deposit Insurance Corporation—to clarify how the agencies apply the BSA enforcement provisions and related anti-money laundering (AML) laws and regulations.

Clarity and transparency. The aim of the FinCEN statement is to provide clarity and transparency to the agency’s approach when contemplating compliance or enforcement actions against covered financial institutions that violate the BSA. For purposes of the BSA, the term "financial institution" encompasses a wide variety of institutions, including banks, broker-dealers in securities, money services businesses, and casinos and card clubs, among others. FinCEN is also responsible for prescribing rules of conduct for nonfinancial trades and businesses and individuals, such as dealers in precious metals, precious stones, or jewels.

Commenting on the agency’s statement, FinCEN Director Kenneth A. Blanco said, "FinCEN is committed to being transparent about its approach to BSA enforcement. It is not a ‘gotcha’ game."

Possible actions and factors considered. The statement outlines the range of administrative actions available to FinCEN, such as warning letters, settlements, civil money penalties, and criminal referrals. The statement also provides an illustrative list of factors that FinCEN analyzes in order to determine the appropriate outcome to BSA violations. These factors include, among other things, the nature and seriousness of the violations; impact or harm of the violations on FinCEN’s mission to safeguard the financial system; history of similar violations; and whether another agency took enforcement action for related activity.

National security. Blanco highlighted the significance of BSA compliance for fraud detection and national security, saying, "The information required by the BSA saves lives, and protects our communities and people from harm. It is a national security issue."

Blanco has previously stressed the importance to national security for covered entities to comply with BSA requirements, including filing Suspicious Activity Reports (SARs) and maintaining customer due diligence programs.

Enforcement. BSA violations can result in substantial penalties. Recently, parallel actions by the SEC, CFTC, and FINRA imposed more than $38 million in penalties against Interactive Brokers, LLC for multiple anti-money-laundering violations, including failure to file SARs. The CFTC stated it was the first time the agency has charged a violation of CFTC Regulation §42.2 for failure to comply with the BSA.

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