Currency Transaction Report (CTR)

Director Blanco Stresses Importance of BSA Filings to Criminal Investigations and Prosecutions

As we have blogged, Kenneth Blanco, the Director of Financial Crimes Enforcement Network (“FinCEN”), has publically and repeatedly stressed the value of Suspicious Activity Reports (“SARs”) and other Bank Secrecy Act (“BSA”) filings in the context of discussing anti-money laundering (“AML”) enforcement — arguably, partly in order to provide a counter-narrative to a reform movement which questions the investigatory utility to governments and the mounting costs to the financial industry of the current BSA reporting regime.

Last week, and consistent with this approach and a general desire to “message” the importance of the BSA, Director Blanco hosted FinCEN’s fifth annual awards ceremony to recognize the efforts of Federal, state, local, and tribal law enforcement agencies in using the BSA to pursue and prosecute financial crimes.

In his remarks, Blanco credited the BSA for mandating or encouraging information-sharing and reporting, which “provides leads, helps expand cases, identifies networks of criminal and other bad actors, and often helps to alert the regulatory and law enforcement communities to trends in illicit activity, making our communities safer.” Under Secretary for Terrorism and Financial Intelligence Sigal P. Mandelker also made remarks, observing that the success stories underlying the awards “make clear that BSA data is critical in the fight against financial crime.”


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Regulators Spar Over BSA Reporting Thresholds and Regulatory Review for FinCEN

First Post in a Two-Part Series

Late last week, the U.S. Senate Committee on Banking, Housing, and Urban Affairs (the “Banking Committee”) met in open session to conduct a hearing on “Combating Money Laundering and Other Forms of Illicit Finance: Regulator and Law Enforcement Perspectives on Reform.” The Banking Committee heard the testimony of, and questioned, representatives from FinCEN, the OCC, and the FBI. This was the fourth hearing held in 2018 by the Banking Committee on the state of the Bank Secrecy Act (“BSA”) framework and its effective implementation by regulators and law enforcement. The partial backdrop for this hearing is that Congress is considering a draft bill, the Counter Terrorism and Illicit Finance Act (“CTIFA”), which proposes the most substantial overhaul to the BSA since the PATRIOT Act, and which contains provisions regarding many of the same issues discussed during the hearing.

In this hearing, we heard from three individuals:

  • Kenneth A. Blanco, Director of FinCEN (written remarks here);
  • Steven D’Antuono, Section Chief of the FBI’s Financial Crimes Section (written remarks here); and
  • Grovetta Gardineer, Senior Deputy Comptroller for Compliance and Community Affairs of the OCC (written remarks here).

In this post, we will discuss the issues which appeared to generate the most sparks between the OCC—which emphasized attempting to ease BSA regulatory burdens, particularly for small- to medium-sized community banks—and FinCEN and the FBI, which stressed the value of BSA filings to law enforcement. In our next post, we will discuss some of the less contentious (although still critical) issues addressed at the hearing, which broadly canvassed many of the most pressing BSA/AML issues currently facing financial institutions and the government.  These issues are: (i) the exploration by financial institutions of technological innovation, including artificial intelligence, in order to comply more efficiently with their BSA/AML obligations; (ii) the identification of the beneficial owners of legal entities; and (iii) the role of real estate in money laundering schemes.

The tension during the hearing between FinCEN and OCC at times was palpable, and the divides in partisan thinking on the direction of certain aspects of AML reform were apparent. Although there seemed to be consensus on the importance of the beneficial ownership rules and other issues, senators and regulators alike disagreed about increasing the $5,000 and $10,000 respective reporting threshold for the filing of Suspicious Activity Reports (“SARs”) and Currency Transaction Reports (“CTRs”).


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Ballard Spahr is very pleased to host on December 17, 2018 at noon in our Philadelphia office a CLE program for the gaming industry and associated counsel to participate in a panel discussion with speakers from the Internal Revenue Service (IRS) on the latest industry trends in BSA/AML compliance and examination.

Please join us in

Are Proposed AML Regulations for Real Estate Closings and Settlements Soon to Follow?

The Financial Crimes Enforcement Network (“FINCEN”) announced on November 15 that it has renewed and revised its Geographic Targeting Orders (“GTOs”) that require U.S. title insurance companies to identify the natural persons behind legal entities used in purchases of residential real estate

The Treasury Inspector General for Tax Administration, or TIGTA, issued last month a Report, entitled The Internal Revenue Service’s Bank Secrecy Act Program Has Minimal Impact on Compliance, which sets forth a decidedly dim view of the utility and effectiveness of the current Bank Secrecy Act (“BSA”) compliance efforts by the Internal Revenue Service (“IRS”).  The primary conclusions of the detailed Report are that (i) referrals by the IRS to the Financial Crimes Enforcement Network (“FinCEN”) for potential Title 31 penalty cases suffer lengthy delays and have little impact on BSA compliance; (ii) the IRS BSA Program spent approximately $97 million to assess approximately $39 million in penalties for Fiscal Years (FYs) 2014 to 2016; and (iii) although referrals regarding BSA violations were made to IRS Criminal Investigation (“IRS CI”), most investigations were declined and very few ultimately were accepted by the Department of Justice for prosecution.

Arguably, the most striking claim by the Report is that “Title 31 compliance reviews [by the IRS] have minimal impact on Bank Secrecy Act compliance because negligent violation penalties are not assessed.”

A primary take-away from the Report is that an examination program lacking actual enforcement power is, unsurprisingly, not very effective.  The Report also highlights some potential problems which beset the IRS BSA Program, which include lack of staffing, lack of planning and coordination, and delay. Although the Report’s findings clearly suggest that what the IRS BSA Program really needs are resources and enhanced enforcement power, the repeated allusions in the Report to a certain purposelessness of the current BSA examination regime nonetheless might help fuel the current debate regarding possible AML/BSA reform, with an eye towards curbing regulatory burden.

The Report made five specific recommendations to the IRS for remedial steps. We will focus on four of those recommendations, and the findings upon which they rest:

  • Coordinate with FINCEN on the authority to assert Title 31 penalties, or reprioritize BSA Program resources to more productive work;
  • Leverage the BSA Program’s Title 31 authority and annual examination planning in the development of the IRS’s virtual currency strategy;
  • Evaluate the effectiveness of the newly implemented review procedures for FinCEN referrals; and
  • Improve the process for referrals to IRS CI.


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Director Blanco Emphasizes Investigatory Leads and Insights Into Illicit Activity Trends Culled from Nationwide BSA Data

As we just blogged, Financial Crimes Enforcement Network (“FinCEN”) Director Kenneth Blanco recently touted the value of Suspicious Activity Reports (“SARs”) in the context of discussing anti-money laundering (“AML”) enforcement and regulatory  activity involving digital currency.  Shortly thereafter, Director Blanco again stressed the value of SARs, this time during remarks before the 11th Annual Las Vegas Anti-Money Laundering Conference and Expo, which caters to the AML concerns of the gaming industry.

It is difficult to shake the impression that Director Blanco is repeatedly and publically emphasizing the value of SARs, at least in part, in order to provide a counter-narrative to a growing reform movement — both in the United States and abroad — which: (i) questions the investigatory utility to governments and the mounting costs to the financial industry of the current SAR reporting regime, and (ii) has resulted in proposed U.S. legislation which would raise the minimum monetary thresholds for filing SARs and Currency Transaction Reports (“CTRs”), and require a review of how those filing requirements could be streamlined.
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Second Part of a Two-Part Series

As we blogged yesterday, British Columbia’s (“B.C.”) Attorney General David Eby recently released an independent and very detailed report examining money laundering in B.C.’s gaming industry and providing 48 recommendations to combat the problem. See Peter M. German, QC, Dirty Money: An Independent Review of Money Laundering in Lower Mainland Casinos conducted for the Attorney General of British Columbia (Mar. 31, 2018) (“German Report”).  As we noted yesterday, when discussing the U.S. regulatory system, the German Report favorably cites the Nevada Gaming Commission and Nevada Gaming Control Board, whose Enforcement Division “acts as a first line of defence against organized crime and bulk cash buy-ins[,]” and further observes that the federal Financial Crimes Enforcement Network, “[i]n partnership with Internal Revenue Service, acts as the enforcement arm for most money laundering issues.”

The U.S.’s more robust, streamlined AML regulatory regime, although hardly perfect, stands in stark contrast to the dysfunction alleged in the German Report that plagues B.C.’s current framework. In this post, we describe the U.S. AML regulatory regime for the gaming industry, and the recent enforcement actions which it has produced.  Although the pace of AML enforcement has been somewhat sporadic, it appears to be increasing over time in regards to the gaming industry.  Certainly, attention by regulators — as well as by the industry itself — to AML/BSA compliance has increased over the last several years.


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May 11, 2018 Implementation Deadline Looms

Last year, we posted FinCEN’s Beneficial Ownership Rule: A Practical Guide to Being Prepared for Implementation regarding the Customer Due Diligence Requirements for Financial Institutions Rule (the “Beneficial Ownership Rule” or “Rule”) issued by the Financial Crime Enforcement Center (“FinCEN”). With the Rule’s May 11 implementation date only a few weeks away, and with FinCEN recently having published its new and long-awaited FAQs regarding the Rule (FAQs), we thought that the time was right for more practical tips and answers to questions surrounding the Rule.
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Second Post in a Two-Part Series

As we blogged earlier this week, Congress is considering a new draft bill, the Counter Terrorism and Illicit Finance Act (“CTIFA”), in committee in the Senate.  The CTIFA proposes the most substantial overhaul to the Bank Secrecy Act (“BSA”) since the PATRIOT Act.

We previously discussed CTIFA’s proposed requirement for legal entities to submit to FinCEN a list their beneficial owners (“BOs”) and the creation of a central directory of these BOs. Today, we discuss CTIFA’s many other major proposed revisions to the BSA. These include:

  • Raising the minimum monetary thresholds for filing Currency Transaction Reports (“CTRs”) and Suspicious Activity Reports (“SARs”), and requiring a review of how those filing requirements could be streamlined;
  • Expanding the prohibition against disclosing SAR-related information to third parties, including in private litigation;
  • Codifying absolute civil immunity for SAR filing;
  • Expanding the scope of voluntary information sharing among financial institutions;
  • Allowing FinCEN to issue no-action letters; and
  • A grab-bag of other proposals, including a safe harbor for AML-related technological innovation; requiring a review of whether FinCEN should assume a greater role in AML/BSA examinations of financial institutions; requiring a review of the costs to the private sector for AML/BSA compliance; and requiring an annual report to the Secretary of the Treasury (“the Secretary”) regarding the usefulness of BSA reporting to law enforcement.


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In its Summer 2017 issue of Supervisory Insights, published last week, the Federal Deposit Insurance Corporation (“FDIC”) provides some insight into its examination process and outcomes for Bank Secrecy Act (“BSA”)/Anti-Money Laundering (“AML”) compliance in an article entitled The Bank Secrecy Act: A Supervisory Update (“Supervisory Update”).  Although the Supervisory Update also summarizes the BSA and its history, we will focus here on the discussion of FDIC examinations.
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