Financial Crimes Enforcement Network

1
Financial Crimes Enforcement Network April 2,
2009 Julie Hadley Jennifer White Regulatory
Policy and Programs Division
2
FinCEN Mission
To enhance U.S. national security, deter and
detect criminal activity, and safeguard financial
systems from abuse by promoting transparency in
the U.S. and international financial systems.
3
How we achieve our mission

• Administering the Bank Secrecy Act
• Supporting law enforcement, intelligence,
• and regulatory agencies through sharing
• and analysis of financial intelligence
• Building global cooperation with our
• counterpart financial intelligence units and
• Networking people, ideas, and information.

4
Financial Institutions Subject to the Bank
Secrecy Act
Depository Institutions
Non-Bank Financial Institutions

• Money Services Businesses
• Travel Check Businesses
• U.S. Postal Service
• Casinos/Card Clubs
• Tribal Casinos
• Broker Dealers
• Futures Commission
• Merchants/Introducing Brokers
• Dealers in Precious Metals and
• Jewels
• Insurance Companies

• Commercial Banks
• Credit Unions
• Savings and Thrift Institutions
• Trust Companies
• Branches of Foreign chartered
• banks doing business
• in the U.S.

5
FinCEN Administrator of the Bank Secrecy Act
6
Regulatory Partners

• Federal Deposit Insurance Corporation
• Federal Reserve Board
• Office of the Comptroller of the Currency
• Office of Thrift Supervision
• National Credit Union Administration
• Securities and Exchange Commission
• Commodity Futures Trading Commission
• Internal Revenue Service SB/SE
• State Regulatory Departments

7
Law Enforcement Partners

• Alcohol, Tobacco and Firearms (ATF)
• Federal Bureau of Investigation (FBI)
• Immigration and Customs Enforcement (ICE)
• U.S. Secret Service (USSS)
• Internal Revenue Service-Criminal Investigations
  Division (IRS-CID)
• U.S. Postal Inspection Service
• Drug Enforcement Agency (DEA)
• Naval Criminal Investigative Service
• Department of Homeland Security (DHS)
• Army Criminal Investigations Division
• Department of Justice (DOJ)

8
BSAAG Bank Secrecy Act Advisory Group
A Convergence of
FinCEN
Industry
Regulators
Law Enforcement
9
BSAAG
Created by the Secretary of the Treasury as
directed by Congress
Current Subcommittees Banking Insurance Law
Enforcement SAR SAR Activity Review Cross-border
Wire Transfer IT Non-Bank Financial
Institutions Privacy-Security Securities and
Futures
Active solicitation of advice on the
administration of the BSA
Forum to examine the benefits of the BSA,
enhancing utility, and strive for increased
efficiency and effectiveness
10
Current Priorities and Initiatives

• Increase Regulatory Efficiency
• Enhance the Risk-Based System
• Increase Feedback
• Review the Definition of MSBs
• Increase Communication on Enforcement Actions

11
CTR Exemptions

• Phase II Customers
• Companies not listed on a major stock exchange,
  including sole proprietorships
• Payroll customers

• Phase I Customers
• Other banks
• Governments
• Those acting with governmental authority
• Companies listed on a major stock exchange, and
  their subsidiaries

12
CTR Exemptions Ineligible Businesses

• Serving as a financial institution
• Purchase or sale of motor vehicles of any kind,
  vessels, aircraft, farm equipment or mobile homes
• Practice of law, accountancy or medicine
• Auctioning of goods
• Chartering or operation of ships, buses or
  aircraft
• Gaming of any kind
• Investment advisory or investment banking
  services
• Real estate brokerage
• Pawn brokerage
• Title insurance and real estate closings
• Trade union activities

13
CTR Exemptions Previous Phase I Requirements

• File a designation of exempt persons (DOEP)
  form, FinCEN form 110
• Annually review the customers status
• Document decision

14
CTR Exemptions Previous Phase II Requirements

• 12 months of account history
• Frequent/regular large cash transactions
• File a DOEP form
• Annually review the customers status
• Biennially file a DOEP renewal with any change of
  control information
• Document the decision

15
The GAO Report
Bank Secrecy Act Increased Use of Exemption
Provisions Could Reduce Currency Transaction
Reporting While Maintaining Usefulness to Law
Enforcement Efforts GAO-08-355, February 21,
2008
16
The GAOs Findings

• CTRs provide unique and reliable information
  essential to many efforts
• CTR data is often unavailable elsewhere or is
  more objective
• CTR data helps detect patterns or trends

17
The GAOs Findings

• CTRs make it more difficult for criminals to
  place cash
• CTR requirements often force structuring that
  results in SARs
• Linking LE use of CTR data directly to
  investigations is difficult

18
The GAOs Findings

• The large majority of CTRs are filed by a handful
  of large banks
• Banks couldnt easily separately quantify the
  costs of filing CTRs from other BSA requirements
• Many banks arent using exemptions

19
GAOs Recommendations

• General regulatory recommendations
• Designed to help improve the CTR exemption
  system, while recognizing the value of CTR
  filings

20
The GAOs Recommendations

• Provide guidance on documentation needed to
  demonstrate the portion of a business revenue
  that is from ineligible activities
• Provide web-based material to help train and
  guide depository institution staff in determining
  eligibility status
• Amend regulatory provisions to simplify the
  exemption process

21
The Final Rule

• Published December 2008
• Effective January 2009
• Amends existing exemption provisions

22
Removal of MOST Phase I Filing Review
Requirements

• Banks will no longer be required to file a DOEP
  or annually review customers who are banks,
  governments, or those acting with governmental
  authority

23
Shortening Phase II Waiting Period

• Banks will be able to exempt phase II customers
  after two months (or less after a risk analysis)

24
Removal of Phase II Biennial Renewal Requirement

• Banks will no longer be required to biennially
  renew DOEP filings for Phase II customers.

25
Other Notables

• Not required to file a revocation
• Not required to report change of control
• Technical edits, like NASDAQ and the transitional
  rule

26
(No Transcript)
27
SAR Confidentiality/Sharing

• Confidentiality is essential to the reporting
• system
• Confidentiality is essential to your safety
• Confidentiality is essential to LE efforts
• Sharing enhances compliance efforts
• Sharing enhances quality of report info
• Sharing reduces burden

28
SAR Confidentiality Concerns

• Inconsistency between Title 12/31 rules
• No regulatory prohibition on government
  disclosure
• Limited scope of existing non-disclosure
  provision
• Ambiguity regarding scope of the confidentiality
• Enterprise-wide compliance issues (sharing)

29
SAR ConfidentialityProposed Rule

• Published March 3, 2009
• Comment period through June 8, 2009
• Comment sought on regulation and guidance
• Not yet implemented

30
SAR ConfidentialityProposed Rule

• Incorporates government prohibition
• A federal, state, local, territorial, or tribal
  government authority, or any director, officer,
  employee, or agent of any of the foregoing, shall
  not disclose a SAR, or information that would
  reveal the existence of a SAR, except as
  necessary to fulfill official duties consistent
  with Title II of the Bank Secrecy Act

31
SAR ConfidentialityProposed Rule

• Expands confidentiality
• A SAR, and any information that would reveal the
  existence of a SAR, are confidential and shall
  not be disclosed except as authorized in this
  paragraph

32
SAR ConfidentialityProposed Rule

• A SAR to FinCEN, LE, Supervisor, or SRO
• Underlying Information (including joint filing
  and employment references / termination notices)
• Sharing within corporate organizational structure
• The sharing by a bank of a SAR, or any
  information that would reveal the existence of a
  SAR, within the banks corporate organizational
  structure for purposes consistent with Title II
  of the BSA, as determined by regulation or
  guidance

33
SAR SharingProposed Guidance

• Permits sharing with affiliates/subsidiaries
• Complement to 2006 sharing up guidance
• Contains certain restrictions on sharing

34
SAR SharingProposed Guidance Restrictions

• Affiliates/subsidiaries
• Must be subject to SAR requirement
• Domestic affiliates only
• Should have written confidentiality agreement

35
BSA Value
36

37
E-Filing
BSA Reporting
Paper
Reporting Obligations
Guidance
BSA data
MOUs
MOUs/Bulk Data
Secure Outreach
Secure Outreach
Proactive and reactive case support/ analytic
products
Case support/ analytic products
FINANCIAL INTELLIGENCE UNIT
Financial Intelligence Unit
38
E-Filing
BSA Reporting
Paper
Reporting Obligations
Guidance
BSA data
FINANCIAL INTELLIGENCE UNIT
Financial Intelligence Unit
39
Industry Partners

• BSA reports are the cornerstone of the U.S.
  governments efforts to disrupt illicit financial
  activity
• These reports do help put criminals in jail
• FinCEN does recognize the significant costs and
  resources the industry invests in complying with
  these responsibilities

40
Industry Partners

• FinCEN analysts use BSA data to
• support investigative efforts
• conduct geographical threat assessments
• study currency flows
• develop information on emerging trends and issue
  comprehensive analytical reports

41
MOUs
Secure Outreach
FINANCIAL INTELLIGENCE UNIT
Financial Intelligence Unit
42
Regulatory Partners

• Federal Banking Agencies
• FDIC, FRB, NCUA, OCC, OTS
• Internal Revenue Service
• Securities and Exchange Commission
• Commodity Futures Trading Commission
• 46 State Regulatory Agencies

43
Regulatory Partners

• Exchange of information assists FinCEN in our
  role as administrator
• Improved and enhanced the level of cooperation in
  the area of BSA examination and compliance

44
Regulatory Partners

• Information Provided To FinCEN
• Annual summary report
• Program documents
• Quarterly aggregate reports
• Special BSA examination projects
• Notice of institutions with significant
• BSA violations or deficiencies

45
Regulatory Partners

• Information Provided by FinCEN
• Quarterly aggregate reports
• Notice and status of possible
• enforcement actions
• Assistance in identifying BSA
• compliance deficiencies
• Analytical products referrals and
• advisories
• Example SAR data quality research

46
Case support/ analytic products
FINANCIAL INTELLIGENCE UNIT
Financial Intelligence Unit
47
Global Partners
FinCEN is one of 107 recognized national
Financial Intelligence Units (FIU) across the
globe
FIUs play a lead role in international efforts to
combat money laundering and terrorist financing
48
Global Partners

• Egmont Group
• Formed in 1995 to establish an informal group for
  the stimulation of international co-operation
• Meet regularly to find ways to cooperate,
  especially in the areas of information exchange,
  training sharing of expertise

49
(No Transcript)
50
Croatia Cyprus Czech Republic Denmark Dominica Egy
pt El Salvador Estonia Finland France Georgia Germ
any Gibraltar Greece Grenada Guatemala Guernsey Ho
nduras Hong Kong Hungary Iceland India Indonesia I
reland Isle of Man Israel
Italy Japan Jersey Korea Latvia Lebanon Liechtenst
ein Lithuania Luxembourg Macedonia Malaysia Malta
Marshall Isl. Mauritius Mexico Moldova Monaco Mont
enegro Netherlands Netherlands Antilles New
Zealand Nigeria Niue Norway Panama Paraguay
Peru Philippines Poland Portugal Qatar Romania Rus
sia San Marino Serbia Singapore Slovakia Slovenia
S. Africa Spain St. Kitts Nevis St. Vincent
the Grenadines Sweden Switzerland Syria Taiwan Tha
iland Turkey Turks Caicos Ukraine UAE United
Kingdom
Albania Andorra Antigua Barbuda Argentina Armeni
a Aruba Australia Austria Bahamas Bahrain Barbados
Belarus Belgium Belize Bermuda Bosnia
Herzegovina Brazil British Virgin
Isl. Bulgaria Canada Cayman Isl. Chile Colombia Co
ok Isl. Costa Rica
United States Vanuatu Venezuela
51
Global Partners

• Membership in the Egmont Grouppermits FinCEN to

• Support U.S. anti-money laundering policy
  initiatives on a global basis
• Provide technical assistance training
• Exchange information

52
MOUs/Bulk Data
Secure Outreach
Proactive and reactive case support/ analytic
products
FINANCIAL INTELLIGENCE UNIT
Financial Intelligence Unit
53
Law Enforcement Partners

• Over 300 agencies access records with over 4,000
  users.
• 385 MOUs
• Non-proactive Cases Assessed 26,328
• Proactive Cases Assessed 4,439
• Total Cases 30,767
• As of 12/31/2008

54
Law Enforcement Partners

• Total CBRS Reports Viewed 375,792
• CTR 180,165
• CTRC 16,718
• FBAR 6,647
• CMIR 10,791
• SAR 103,671
• SARC 965
• 8300 13,184
• SARM 36,385
• RMSB 1,776
• Exemptions 826 As of 12/31/2008

55
(No Transcript)
56
Law Enforcement Partners
57
(No Transcript)
58
(No Transcript)
59
(No Transcript)
60
(No Transcript)
61
(No Transcript)
62
(No Transcript)
63
(No Transcript)
64
(No Transcript)
65
(No Transcript)
66
(No Transcript)
67
BSA Value - Sources of Feedback

• The SAR Activity Review, Trends, Tips, and
  Issues
• SAR Activity Review By the Numbers
• Analytic Assessments
• NEW FinCEN web site Law Enforcement Cases and
  Success Stories

68
Resources

• FFIEC BSA/AML Examination Manual
• Guidance/Rulings/Advisories
• 314(a) Secure Information Sharing System
• Guidance on Preparing SAR Narratives
• Electronic filing Enrollment Information
• New FinCEN website - www.fincen.gov

69
The SAR Activity Review
70
Contact Information

• FinCEN Regulatory Helpline
• 1-800-949-2732
• Financial Institutions Hotline
• 1-866-556-3974
• www.fincen.gov

71
(No Transcript)