Peter D. Hardy

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hardyp@ballardspahr.com | 215.864.8838 | view full bio

Peter is a national thought leader on money laundering, tax fraud, and other financial crime. He is the author of Criminal Tax, Money Laundering, and Bank Secrecy Act Litigation, a comprehensive legal treatise published by Bloomberg BNA.  Peter co-chairs the Practising Law Institute's Anti-Money Laundering program, and serves on the Steering Committee for the Cambridge Forum on Sanctions & AML Compliance

He advises corporations and individuals from many industries against allegations of misconduct ranging from money laundering, tax fraud, mortgage fraud and lending law violations, securities fraud, and public corruption.  He also advises on compliance with the Bank Secrecy Act and Anti-Money Laundering requirements.  Peter handles complex litigation involving allegations of fraud or other misconduct.

Peter spent more than a decade as a federal prosecutor before entering private practice, serving as an Assistant U.S. Attorney in Philadelphia working on financial crime cases. He was a trial attorney for the Criminal Section of the Department of Justice’s Tax Division in Washington, D.C.

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On August 29, the Financial Crimes Enforcement Center (“FinCEN”) published Anti-Money Laundering Regulations for Residential Real Estate Transfers (“Final Rule”) regarding residential real estate.  The Federal Register publication is 37 pages long.  We have created a separate document which sets forth only the provisions of the Final Rule, at 31 C.F.R. § 1031.320, here.

The Final Rule institutes a new BSA reporting form – the “Real Estate Report” (“Report”) –which imposes a nation-wide reporting requirement for the details of residential real estate transactions, subject to some exceptions, in which the buyer is a covered entity or trust.  As expected, FinCEN has adopted a “cascade” approach to who is responsible for filing a Report, specifically implicating – among others – title agencies, escrow companies, settlement agents, and lawyers. 

Importantly, the person filing the Report may reasonably rely on information provided by others.  Parties involved in a covered transaction also may agree as to who must file the Report.  However, the Final Rule does not allow for incomplete reports, which likely will create practical problems.

The Final Rule does not require covered businesses to implement and maintain comprehensive anti-money laundering (“AML”) compliance programs or file Suspicious Activity Reports (“SARs”), like many other institutions covered by the Bank Secrecy Act (“BSA”).  FinCEN has indicated that separate proposed rulemaking on commercial real estate transactions is forthcoming.  However, the existence of a commercial element with a property does not automatically except a transfer from the Final Rule.  For example, the transfer of a property that consists of a single-family residence that is located above a commercial enterprise is covered if all of the other reporting criteria are met.

FinCEN has published a Fact Sheet which summarizes the basics of the Final Rule.  FinCEN also has published an eight-page set of FAQs on the Final Rule.  The Final Rule will be effective on December 1, 2025.  FinCEN has not yet issued a proposed form of the Report.

Continue Reading  FinCEN Issues Final BSA Reporting Requirements for Residential Real Estate Deals

With Guest Speaker Nick St. John

We are very fortunate to have Nick St. John, Director of Federal Compliance at America’s Credit Unions, as our guest speaker in this podcast on the Notice of Proposed Rulemaking issued by the Financial Crimes Enforcement Network and federal banking regulators regarding the enhancement and modernization of anti-money…

On August 1, 2024, the Department of Justice launched its Corporate Whistleblower Awards Pilot Program (the “Pilot Program”). Under this 3-year initiative managed by DOJ’s Criminal Division, a whistleblower may be eligible for an award of up to $50 million if she provides DOJ with information about corporate misconduct in certain industries.  As described in greater detail in the program guidance and below, the information must relate to at least one of four areas, including certain crimes relating to financial institutions, foreign corruption by companies, domestic corruption by companies and federal health care offenses involving private or other non-public health care benefit programs.

The Pilot Program has particular implications for financial institutions (“FIs”) and their anti-money laundering/countering the financing of terrorism (“AML/CFT”) compliance program personnel. Real-world application of the Pilot Program presumably will reveal the practical interplay (and possible tensions) between the Pilot Program and the relatively new whistleblower provisions under Bank Secrecy Act (“BSA”) created by the Anti-Money Laundering Act (“AML Act”), on which we have blogged frequently (see here, here, here, here, here and here).

Continue Reading  DOJ Unveils Corporate Whistleblower Awards Pilot Program – With Implications for Financial Institutions and AML/CFT Compliance Personnel

Thereby Highlighting Need for Future Changes to Banks’ CDD Rule Systems

The Financial Crimes Enforcement Network (“FinCEN”) has published a two-page reference guide (“Guide”) comparing the requirements for reporting beneficial ownership information (“BOI”) to FinCEN under the Corporate Transparency Act (“CTA”) with the current requirements for covered entity customers to report BOI to their financial institutions (“FIs”) under the Bank Secrecy Act’s Customer Due Diligence (“CDD”) Rule. 

Entitled “Notice to Customers: Beneficial Ownership Information Reference Guide,” the Guide is styled as a reference tool for business customers of banks who also are covered by the CTA.  It is predominated by a chart, which we set forth at the end of this blog post, setting forth the differences in what information needs to be reported under the different reporting regimes.  But, as we discuss, the Guide also serves as a reminder to FIs — intentionally or not — that they soon will be required to revamp their long-standing CDD Rule compliance systems.

Continue Reading  FinCEN Highlights Differences in CDD Rule and CTA Reporting of BOI

As we previously blogged, a Florida law (Fla. Stat. § 655.0323, entitled “Unsafe and unsound practices”) which became effective July 1, 2024 prohibits federal and state depository institutions conducting business in the state from denying services based on religion or political beliefs and activities. Every year, financial institutions must attest to their compliance with the Florida law. When he signed the bill into law, Governor Ron DeSantis said, “We are not going to allow big banks to discriminate based on someone’s political or religious beliefs, and we will continue to fight back against indoctrination in education and the workplace.”

As we will discuss, the Florida law also prohibits a financial institution acting on the basis of “any factor if it is not a quantitative, impartial, and risk-based standard, including any such factor related to the person’s business sector[.]” This prohibition in particular creates a clear challenge for implementing an anti-money laundering/countering the financing of terrorism (“AML/CFT”) compliance program, which inherently involves subjective judgments and an assessment of the risk presented by a customer based on its line of business. The problematic implications of the Florida law did not go unnoticed by the U.S. Congress or the U.S. Department of the Treasury (“Treasury”).

Continue Reading  Three Members of Congress and U.S. Treasury Express Concerns that Florida Law Prohibiting Banks from Considering Customers’ Business Sectors or Political or Religious Beliefs Conflicts with Federal AML/CFT Requirements

First in a Two-Part Series on the Utility of BSA Filings

Today we are very pleased to welcome guest blogger, Don Fort, who is the Director of Investigations at Kostelanetz LLP, and the past Chief of the Internal Revenue Service’s Criminal Investigation (CI) Division. 

As Chief of IRS-CI from 2017 to 2020, Don led the sixth largest U.S. law enforcement agency, managing a budget of over $625 million and a worldwide staff of approximately 3,000, including 2,100 special agents in 21 IRS field offices and 11 foreign countries. Don’s time in law enforcement included overseeing investigations of some of the most significant financial crimes involving tax evasion, sanctions evasion, money laundering, bribery, international corruption, bank malfeasance, cyber and cryptocurrency crimes, and terrorist financing.

We reached out to Don because we were interested in his perspective on the 2023 Year-in-Review (YIR) published by the Financial Crimes Enforcement Network (FinCEN), on which we previously blogged.  According to the YIR, there are about 294,000 financial institutions and other e-filers registered to file Bank Secrecy Act (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.  Although the YIR necessarily represents only a snapshot lacking full context, only a very small portion of those filings ever became relevant to actual federal criminal investigations.  But, the YIR makes clear that one of the most, or the most, important consumers of BSA filings is IRS-CI.

In our next related blog, we will discuss the utility of filings in the global anti-money laundering/countering the financing of terrorism compliance regime, from the perspective of industry – specifically, recent publications by the Wolfsberg Group, and the Bank Policy Institute, the Financial Technology Association, the Independent Community Bankers of America, the American Gaming Association, and the Securities Industry and Financial Markets Association.

This blog post again takes the form of a Q&A session, in which Don responds to questions posed by Money Laundering Watch about the impact of BSA filings, from the perspective of IRS-CI.  We hope you enjoy this discussion on this important topic. – Peter Hardy and Siana Danch

Continue Reading  BSA Filings and Their Utility to Law Enforcement:  A Guest Blog

On July 3, the Financial Crimes Enforcement Network (FinCEN) published a notice of proposed rulemaking (NPRM) as part of a broader initiative to “strengthen, modernize, and improve” financial institutions’ anti-money laundering and countering the financing of terrorism (AML/CFT) programs. In addition, the NPRM seeks to promote effectiveness, efficiency, innovation, and flexibility with respect to AML/CFT programs; support the establishment, implementation, and maintenance of risk-based AML/CFT programs; and strengthen the cooperation between financial institutions (“FIs”) and the government.

This NPRM implements Section 6101 of the Anti-Money Laundering Act of 2020 (the “AML Act”).  It also follows up on FinCEN’s September 2020 advanced notice of proposed rulemaking soliciting public comment on what it described then as “a wide range of questions pertaining to potential regulatory amendments under the Bank Secrecy Act (‘BSA’) . . . . to re-examine the BSA regulatory framework and the broader AML regime[,]” to which FinCEN received 111 comments.

As we will discuss, the NPRM focuses on the need for all FIs to implement a risk assessment as part of an effective, risk-based, and reasonably designed AML/CFT program.  The NPRM also focuses on how consideration of FinCEN’s AML/CFT Priorities must be a part of any risk assessment.  However, in regards to addressing certain important issues, such providing comfort to FIs to pursue technological innovation, reducing the “de-risking” of certain FI customers and meaningful government feedback on BSA reporting, the NPRM provides nothing concrete.

FinCEN has published a five-page FAQ sheet which summarizes the NPRM.  We have created a 35-page PDF, here, which sets forth the proposed regulations themselves for all covered FIs.

The NPRM has a 60-day comment period, closing on September 3, 2024.  Particularly in light of the Supreme Court’s recent overruling of Chevron deference, giving the courts the power to interpret statutes without deferring to the agency’s interpretation, this rulemaking, once finalized, presumably will be the target of litigation challenging FinCEN’s interpretation of the AML Act. 

Continue Reading  FinCEN Issues Proposed Rulemaking Aimed at Strengthening and Modernizing AML Programs Across Multiple Industries

Opinion Can Invite New Challenges to Long-Standing BSA/AML Regulations

On July 1, 2024, the Supreme Court issued its opinion in Corner Post, Inc. v Board of Governors of the Federal Reserve System in which the Court determined when a Section 702 claim under the Administrative Procedure Act (APA) to challenge a final agency action first accrues. In a 6-3 Opinion, the Supreme Court sided with Corner Post in holding that a right of action first accrues when the plaintiff has the right to assert it in court—and in the case of the APA, that is when the plaintiff is injured by final agency action.

This ruling could open the litigation floodgates for industry newcomers to challenge longstanding agency rules. These APA challenges will be further aided by the Supreme Court’s recent overruling of Chevron deference, giving the courts the power to interpret statutes without deferring to the agency’s interpretation.

This development is relevant to potential challenges to anti-money laundering (“AML”) regulations promulgated under the Bank Secrecy Act (“BSA”) or other statutory schemes by the Financial Crimes Enforcement Network, the federal functional regulators, the Securities Exchange Commission, and FINRA. Many BSA/AML regulations were promulgated many years ago. Historically, litigation challenges to BSA/AML regulations have been rare. Given the combined effect of recent rulings by the Supreme Court, that could change.

Continue Reading  Supreme Court Opens Door to More APA Challenges by Ruling that Right of Action Accrues When Regulation First Causes Injury

The U.S. Department of the Treasury (“Treasury”) has released a Request for Information on the Uses, Opportunities, and Risks of Artificial Intelligence (“AI”) in the Financial Services Sector (“RFI”).  Written comments are due by August 12, 2024. 

AI is a broad topic and the term is sometimes used indiscriminately; as the RFI suggests, most AI systems being used or contemplated in the financial services sector involve machine learning, which is a subset of AI.  The RFI implicitly concedes that Treasury is playing “catch up” and quickly needs to learn more about AI and how industry is using it.  The RFI discusses a vast array of complex issues, including anti-money laundering (“AML”) and anti-fraud compliance, as well as fair lending and consumer protection concerns – particularly those pertaining to bias.

Continue Reading  Treasury Issues Request for Information on Use of AI in Financial Services

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.

Continue Reading  FinCEN Releases Year-in-Review for FY 2023: SARs, CTRs and Information Sharing