The Financial Crimes Enforcement Network (“FinCEN”) has issued its Year in Review for FY 2023 (“YIR”). It consists of five pages of infographics. According to FinCEN’s press release:
The Year in Review is intended to help stakeholders gain insight into the collection and use of Bank Secrecy Act [(“BSA”)] data, including FinCEN’s efforts to support law enforcement and national security agencies. The Year in Review includes statistics from fiscal year 2023 on BSA reporting and how it is queried and used by law enforcement agencies. The Year in Review also includes information on how FinCEN uses and analyzes BSA reporting to fulfill its mission, including to support alerts, trend analyses, and regulatory actions. The publication of the Year in Review is in furtherance of FinCEN’s commitment to provide information and statistics on the usefulness of BSA reporting, consistent with Section 6201 of the Anti-Money Laundering Act of 2020.
According to the YIR, there are approximately 294,000 financial institutions and other e-filers registered to file BSA reports with FinCEN. Collectively, they filed during FY 2023 a total of 4.6 million Suspicious Activity Reports (“SARs”) and 20.8 million Currency Transaction Reports (“CTRs”), as well as 1.6 million Reports of Foreign Bank and Financial Accounts (“FBARs”), 421,500 Forms 8300 regarding cash payments over $10,000 received in a trade or business, and 143,200 Reports of International Transportation of Currency or Monetary Instruments (“CMIRs”) for certain cross-border transactions exceeding $10,000.
As we will discuss, a massive amount of SARs and CTRs are filed every year. Apparently – and the YIR necessarily represents only a snapshot lacking full context, so extrapolation is dangerous – only a very small portion of those filings ever become relevant to actual federal criminal investigations. Further, the YIR suggests that information sharing under Section 314 of the Patriot Act between the government and financial institutions remains an under-utilized tool.
SARs and CTRs
The below infographic sets forth the sources of the SARs and CTRs, and the types of suspicious activities referenced in the SARs. Naturally, depository institutions file more reports than any other type of financial institutions, although money service businesses – which include cryptocurrency exchanges – are not far behind in regard to the number of their SAR filings.
The volume of SARs filed every year continues to climb, thereby keeping the spotlight on the question of the actual effectiveness and usefulness of SARs, particularly given their numbers and the phenomenon of “defensive filing” by financial institutions. The YIR confirms that the primary law enforcement “consumer” of SARs is the Internal Revenue Service – Criminal Investigation (“IRS – CI”), which has reported that 85.7% of investigations recommended for prosecution during FYs 2021 to 2023 “have a primary subject with a related BSA filing” (the IRS-CI Report for 2023 stated that IRS-CI recommended for prosecution 665 tax-crime matters and 1,179 non-tax crime matters, for a total of 1,838 matters referred in FY 2023, therefore suggesting that approximately 1,575 cases referred for prosecution involved BSA filings).
More importantly, IRS-CI reported that 13.9% of all investigations opened in FY 2023 originated from BSA data – as opposed to just involving the access of BSA data after opening (the IRS-CI Report for 2023 stated that IRS-CI opened 1,409 tax-crime related investigations and 1,267 non-tax crime related investigations, for a total of 2,676 investigations opened in FY 2023, therefore suggesting that IRS-CI opened about 372 investigations as a result of BSA filings). The following graphic sets forth use of BSA data by the FBI:
Thus, 11,367 FBI investigative subjects were also the subjects of SARs in FY 2023. Further, the YIR states that approximately 15.42% of active FBI investigations were “directly linked” to SARs and CTRs. However, and unlike with regard to IRS-CI, the YIR does not indicate how many FBI investigations were opened as a result of BSA data, and it is impossible to tell from the YIR what exact role, if any, BSA data played in FBI investigations, beyond the fact that certain investigatory subjects also were named in SARs and CTRs.
This data indicates that, compared to the approximately 4.6 million SARs filed in FY 2023, there were approximately 13,000 cases involving either IRS-CI or the FBI with some connection to SARs. Although this comparison is likely imperfect, and although there are other law enforcement agencies which also accessed SARs, the combined amount of IRS-CI and FBI cases involving SARs in some way appears to represent less than 0.3% of all FY 2023 SARs.
Section 314 Information Sharing: An Underused Tool?
Finally, the YIR sets forth some data points on Section 314 information sharing between the government and financial institutions (Section 314(a)), and amongst financial institutions (Section 314(b)). Both forms of information sharing are potentially powerful yet often under-utilized tools for combatting illicit finance and hampering criminal schemes in real time.
The YIR notes that approximately 14,000 financial institutions participate in Section 314(a) information sharing, which in FY 2023 involved 588 requests from 71 different law enforcement agencies regarding 4,606 subjects, which elicited 55,400 responses.
As for Section 314(b) sharing among financial institutions, the YIR indicates that 7,790 financial institutions have registered to participate. This number is just a small fraction of the 294,000 financial institutions and other e-filers registered to file BSA reports with FinCEN. Most of those registered are banks or credit unions (4,458), followed by investment advisers or other entities involved in the securities/futures industry (1,770). Over 26,400 SARs – filed by over 1,300 financial institutions – referenced Section 314(b), which potentially gives some insight into the use, or lack thereof, of Section 314(b) by financial institutions.
If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. Please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.