Financial Crimes Enforcement Network (FinCEN)

We previously blogged on the lawsuit filed by the National Small Business Association (“NSBA”) and one of its individual members, which sought to challenge the constitutionality of the Corporate Transparency Act (“CTA”). Most recently, we analyzed the March 1 decision in that case by the Northern District of Alabama court, finding the CTA to be unconstitutional and enjoining the United States government from enforcing it against the plaintiffs.

The government sought an appeal before the Eleventh Circuit, and last Monday the Treasury Department filed its appellate brief. Before the District Court, the government argued that Congress had authority to enact the CTA under three distinct enumerated powers: (1) oversight of foreign affairs and national security; (2) its Commerce Clause-derived regulatory authority; and (3) its power to tax. The government’s brief on appeal focuses primarily on regulation of commercial activity, and its value as a component of the federal focus on combatting financial crime.

Continue Reading  Treasury Asks the Eleventh Circuit to Uphold the CTA and Congressional Authority

The Financial Crimes Enforcement Network (“FinCEN”) has issued a Notice on the Use of Counterfeit U.S. Passport Cards to Perpetrate Identity Theft and Fraud Schemes at Financial Institutions (“Notice”), asking financial institutions (“FIs”) to be vigilant in identifying suspicious activity relating to the use of counterfeit U.S. passport cards.  According to the Notice, the U.S. Department of State’s Diplomatic Security Service (“DSS”) has determined that there is a growing use of such counterfeit cards to gain access to victim accounts at FIs.  “This fraud occurs in person at [FIs] and involves an individual impersonating a victim by using a counterfeit U.S. passport card that contains the victim’s actual information.”

As its title plainly states, the Notice pertains to passport cards, rather than passport books.  Passport cards have more limited uses and can be used only for land, sea and domestic air travel into the U.S. from Canada, Mexico, the Caribbean and Bermuda.  The following graphic from the Department of State illustrates the difference. 

The Notice observes that FIs are less likely to detect fraud involving passport cards because they are a less familiar form of U.S. government-issued identification.  Victims’ personal identifiable information (“PII”) is typically acquired through the darknet or the U.S. mail (see our blog post on the surge in mail-theft check fraud here).  After a fake card is created, the illicit actor or complicit money mule will visit a branch of the victim’s FI – often by trying to avoid any branches that the victim actually may visit, so as to reduce the chances of detection.

Continue Reading  FinCEN Issues Notice on Counterfeit Passport Card Fraud

We are very pleased to be presenting on both Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance and the Corporate Transparency Act (CTA), in partnership with the Practicing Law Institute

First, on April 8 at 1 p.m., Siana Danch will discuss issues involving the CTA during a live one-hour briefing with Sara C. Lenet of Hogan

On March 28, 2024, the Financial Crimes Enforcement Network (FinCEN), in consultation with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Board of Governors of the Federal Reserve System, issued a request for information (RFI).

The RFI seeks information and comment regarding the

On March 1, Judge Liles C. Burke of the Northern District of Alabama issued a Memorandum Opinion (“Opinion”) and Final Judgment, finding that the Corporate Transparency Act (“CTA”) is unconstitutional.  We blogged on this lawsuit when it was filed in November 2022.

The opening paragraph of the Opinion is worthy of repetition:

The late Justice Antonin Scalia once remarked that federal judges should have a rubber stamp that says STUPID BUT CONSTITUTIONAL. See Jennifer Senior, In Conversation: Antonin Scalia, New York Magazine, Oct. 4, 2013. The Constitution, in other words, does not allow judges to strike down a law merely because it is foolish, burdensome or offensive. Yet the inverse is also true—the wisdom of a policy is no guarantee of its constitutionality. Indeed, even in the pursuit of sensible and praiseworthy ends, Congress sometimes enacts smart laws that violate the Constitution. This case, which concerns the constitutionality of the Corporate Transparency Act, illustrates that principle.

Having set the tone, the Opinion proceeds to reject the government’s three arguments that Congress had the authority to enact the CTA under the following enumerated and broad powers:

1.         Congress’ ability to oversee foreign affairs and national security;

2.         Congress’ ability to regulate under the Commerce Clause; and

3.         Congress’ taxing power.

As we will discuss, the Opinion reaches its conclusions by generally taking a broad view of States’ autonomy and a narrow view of the ability of Congress to regulate primarily “local” activity in the name of protecting national security.  It also finds that Congress cannot regulate the act of incorporation alone, and that the CTA presumably could pass constitutional muster if it applied only when a reporting entity actually begins to engage in commercial activity.  The immediate, nationwide effects of the Opinion are hard to predict at this time, other than to observe simply that the Opinion will have significant impact, and that confusion will ensue.

Continue Reading  Federal District Court Ruling:  The CTA is Unconstitutional

The Financial Crimes Enforcement Network (“FinCEN”) recently released a Financial Trend Analysis (“FTA”) focusing on identity-related suspicious activity.  The FTA was issued pursuant to section 6206 of the Anti-Money Laundering Act of 2020, which requires FinCEN to periodically publish threat pattern and trend information derived from BSA filings.

FinCEN examined information from Bank Secrecy Act (“BSA”) filings submitted in the 2021 calendar year.  According to FinCEN’s analysis, 1.6 million “BSA filings” – presumably, the vast majority of which constituted Suspicious Activity Reports (“SARs”) – were identity-related, representing a total of $212 billion in suspicious activity.  These filings constituted 42% of filings for that year, thereby meaning that approximately 3.8 million SARs were filed in 2021.

The descriptions and the explanations in the FTA necessarily turn on how the SAR filings chose to describe the suspicious activity at issue.  This is presumably why most of the activity falls into the vague category of “general fraud” – because, apparently, this is the particular box on the SAR form which most of the SAR filers happened to choose.  However, and we will describe, the activity in fact animating the vast majority of these SARs is some form of identity theft.

Continue Reading  FinCEN Analysis Reveals $212 Billion in Identity-Related Suspicious Activity

Farewell to 2023, and welcome 2024.  As we do every year, let’s look back.

We highlight 10 of our most-read blog posts from 2023, which address many of the key issues we’ve examined during the past year: criminal money laundering enforcement; compliance risks with third-party fintech relationships; the scope of authority of bank regulators; sanctions

This morning, the Financial Crimes Enforcement Network (“FinCEN”) issued the much-anticipated final rule (“Final Rule”) under the Corporate Transparency Act (“CTA”) regarding access to beneficial ownership information (“BOI”) reported to FinCEN.  These regulations could hardly have arrived any later than they did – the CTA becomes effective on January 1, 2024, although FinCEN recently extended the reporting deadline for companies created in 2024 to a period of 90 days from the date of creation

The access regulations initially proposed in December 2022 (see our blog post here) were complex; the Final Rule is as well, or more so.  Indeed, it is over 247 pages long, prior to its final publication version in the Federal Register.  Given the Final Rule’s length, we will analyze it in more detail in a future blog post. 

Today, we will describe the YouTube video contemporaneously released by FinCEN, which describes the Final Rule at a high level, and notes certain differences between it and the initially proposed regulations.  The headline here is that FinCEN has attempted to address certain criticisms raised by financial institutions regarding the initially proposed regulations and their access to BOI.  In the video, FinCEN Director Andrea Gacki observed that FinCEN still needs to propose regulations aligning the CTA with the existing Customer Due Diligence (“CDD”) Rule for banks and other financial institutions (“FIs”), which requires covered FIs to obtain BOI from designated entity customers.

This blog post is high-level and focuses only on the statements made during the video.  The details of the Final Rule still need to be parsed.  Also, FinCEN continued the information onslaught today by issuing an accompanying news release, fact sheet, statement for banks, and statement for non-bank financial institutions.

Continue Reading  FinCEN Issues Final CTA BOI Access Rules, Heralded by YouTube Video

The October 7, 2023 attacks on Israel by Hamas have re-focused U.S. government efforts to identify and counter funding streams for Hamas and terrorist activity in general – including, in particular, through the use of cryptocurrency.  This heightened focus is exemplified by a recent report (“Report”) published by the Congressional Research Service (“CRS”), which examines the role of cryptocurrency donations in Hamas fundraising campaigns, which long predate the October 7 attacks.  The Report references recent, related efforts by the Financial Crimes Enforcement Network (“FinCEN”), which we also discuss.

Continue Reading  Hamas, Terrorist Financing, and Cryptocurrency

The Financial Crimes Enforcement Network (“FinCEN”) has extended the deadline for reporting beneficial ownership information (“BOI”) under the Corporate Transparency Act (“CTA”) for reporting companies formed in 2024.  Specifically, FinCEN has extended the filing deadline from 30 to 90 days from the date of formation for both domestic and foreign entities created or registered on or