The Financial Crimes Enforcement Network (“FinCEN”) recently complied with two important deadlines under the Anti-Money Laundering Act (“AML Act”) — issuing national priorities for AML and countering the financing of terrorism (“CFT”), and issuing an assessment on potential “no-action” letters. Both of these publications were due on June 30, 2021. This development prompted us
Beth is the Managing Partner of the firm's Delaware office. She is a litigator focused on white collar crime, regulatory enforcement and compliance, and complex civil litigation, with an emphasis on banking and other financial services litigation. She represents major financial institutions, bringing actions against fraudulent debt relief companies, and defending against consumer financial services lawsuits.
Before joining Ballard Spahr, Beth was a federal prosecutor with the U.S. Attorney’s Office for the District of Delaware for more than a decade. She investigated and prosecuted financial fraud, including money laundering, bank and credit card fraud, asset forfeiture, and tax offenses.
As more states legalize cannabis to some degree, the resulting patchwork of laws becomes ever more difficult to navigate for financial institutions, regulators, entrepreneurs, legislators, journalists, and consumers. Some states continue to wrestle with legalization, while others have moved on to addressing labeling, marketing, and financial concerns.
Much has occurred in the last two months regarding the relationship between financial institutions and Marijuana-Related Businesses, or MRBs. In this post, we discuss three major developments, all of which share a complex connection. First, the National Credit Union Administration (“NCUA”) recently pursued its first enforcement action against a credit union for Anti-Money Laundering (“AML”) compliance failures when servicing MRBs. Second, two cannabis industry executives were convicted of bank fraud for allegedly tricking banks and other financial institutions into unwittingly extending financial services to their MRB. Third, and despite this enforcement drumbeat regarding MRBs, Congress has introduced again, with bi-partisan support, the SAFE Banking Act, which seeks to normalize the banking of cannabis by prohibiting federal bank regulators from taking certain actions against financial institutions servicing MRBs.…
Continue Reading Banking and Cannabis Enforcement Round Up: NCUA Imposes First Penalty Relating to Cannabis Banking Services; Cannabis Industry Execs Convicted of Defrauding Banks into Providing Financial Services; Congress Re-Introduces the SAFE Banking Act
In its most recent Marijuana Banking Update, the Financial Crimes Enforcement Network (FinCEN) stated that the decline in the number of banks and credit unions actively banking marijuana-related businesses (MRBs) in the United States “appears to have leveled off.” As of December 31, 2020, there were 684 banks and credit unions banking MRBs. That…
Covered Companies Must Report Beneficial Ownership to National Database Upon Incorporation
First Blog Post in an Extended Series on Legislative Changes to BSA/AML Regulatory Regime
Change is upon us. The U.S. House and Senate have passed – over a Presidential veto – the National Defense Authorization Act (“NDAA”), a massive annual defense spending bill. As we have blogged, this bill, now law, contains historic changes to the Bank Secrecy Act (“BSA”), coupled with other changes relating to money laundering, anti-money laundering (“AML”), counter-terrorism financing (“CTF”) and protecting the U.S. financial system against illicit foreign actors. This sweeping legislation will affect financial institutions, their clients, and law enforcement and regulators for many years. This will be the first post of many on these important legislative changes, which should produce related regulatory pronouncements throughout 2021.
Today, we will focus on the enactment that has received the most attention: the NDAA’s adoption of the Corporate Transparency Act (“CTA”) and its requirements for covered legal entities to report their beneficial owners at the time of their creation to a database accessible by U.S. and foreign law enforcement and regulators, and to U.S. financial institutions seeking to comply with their own AML compliance obligations. The issue of beneficial ownership and the misuse of shell corporations has been at the heart of global AML regulation and enforcement for many years. This legislation will be held out as a partial but important response to the continuing critiques by the international community of the United States as a haven for money laundering and tax evasion, often due to the perception that U.S. and state laws on beneficial ownership reporting are lax.
Beyond “just” the CTA, the breadth of the BSA/AML legislation is substantial. We have discussed BSA/AML reform for years, and many of the reforms (acknowledging that the word “reform” often involves a value judgment, and whether a particular change represents “reform” is typically in the eye of the beholder) that have been repeatedly bandied about by Congress, industry, think tanks and law enforcement are incorporated into this legislation, or at least referenced as topics for further study and follow-up. We therefore will be blogging repeatedly on the many and various components of this legislation, which implicates a broad array of key issues: BSA/AML examination priorities; attempting to modernize the BSA regulatory regime, including by improving feedback by the government on the usefulness of SAR reporting; potential “no action” letters by FinCEN; requiring process-related studies tied to the effectiveness and costs of certain BSA requirements, including current SAR and CTR reporting; increased penalties under the BSA for repeat offenders; greater information sharing among industry and the government; enhancing the ability of the government to investigate the use of correspondent bank accounts; cyber security issues; focusing on trade-based money laundering; adding a whistleblower provision to the BSA; and including dealers in antiquities to the definition of “financial institutions” covered by the BSA.…
Continue Reading U.S. Passes Historic BSA/AML Legislative Change
Farewell to 2020. Although it was an extremely difficult year, let’s still look back — because 2020 was yet another busy year in the world of money laundering and BSA/AML compliance.
We are highlighting 12 of our most-read blog posts from 2020, which address many of the key issues we’ve examined during the past year…
We are very pleased to announce that Ballard Spahr has unveiled its cannabis practice. Businesses in this fast-changing industry face unique issues and require smart, strategic advisers. Ballard Spahr has a national team of experienced attorneys who assist at each step along the way.
As more states legalize cannabis for both medical and recreational…
The Financial Crimes Enforcement Network has been busy lately, and has issued a flurry of proposed rulemakings and requests for comment. Although “reform” is often in the eye of the beholder, all of these proposals will have a practical impact.
As part of Ballard Spahr’s webcast series, Consumer Financial Services in Turbulent Times, we…
We are pleased to offer the latest episode in Ballard Spahr’s Consumer Financial Monitor Podcast series — a weekly podcast focusing on the consumer finance issues that matter most, from new product development and emerging technologies to regulatory compliance and enforcement and the ramifications of private litigation. Following up on a recent blog post,…
Regulators Provide Greater Transparency into BSA/AML Enforcement Process
On August 13, 2020 the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency (the “Agency” or collectively the “Agencies”) issued a joint statement updating and clarifying their 2007 guidance regarding how they evaluate enforcement actions when financial institutions violate or fail to meet BSA/AML requirements. The Financial Crimes Enforcement Network (“FinCEN”) followed with its own statement on August 18, 2020, setting forth its approach when considering enforcement actions against financial institutions that violate the BSA.
Below are a few highlights from the two sets of guidance:
- The joint statement repeatedly emphasizes that isolated or technical deficiencies in BSA/AML compliance programs will not generally result in cease and desist orders.
- The joint statement provides specific categories and examples of BSA/AML program failures that typically would (or would not) result in a cease and desist order. Certain of these examples are discussed below.
- Compared to the 2007 guidance, the joint statement provides more detailed descriptions and examples of the pillars of BSA/AML compliance programs, such as designated BSA/AML personnel, independent testing, internal controls, and training.
- FinCEN explains in its statement that it will base enforcement actions on violations of law, not standards of conduct contained solely in guidance documents.
- The FinCEN statement lays out the factors FinCEN considers when determining the disposition of a BSA violation. Unsurprisingly, these factors include the pervasiveness and seriousness of the conduct and the violator’s cooperation and history of wrongdoing.
All in all, the two statements, particularly the joint statement, succeed in providing greater transparency into the regulators’ decision-making processes with regards to pursuing enforcement actions for violations of the BSA and for AML program deficiencies.…
Continue Reading Federal Banking Agencies Issue Joint Statement On Enforcement of BSA/AML Requirements; FinCEN Follows With Its Own