Financial Crimes Enforcement Network (FinCEN)

Enforcement Trends, Gaming, Crypto — and More

I am very pleased to co-chair again the Practicing Law Institute’s 2024 Anti-Money Laundering Conference on May 23, 2024, starting at 9 a.m. in New York City (the event also will be virtual). 

I am also really fortunate to be working with my fabulous co-chair Elizabeth (Liz) Boison

The Financial Crimes Enforcement Network (“FinCEN”) recently issued a Financial Trend Analysis (“Analysis”) focusing on patterns and trends identified in Bank Secrecy Act (“BSA”) data linked to Elder Financial Exploitation (“EFE”) involving scams or theft perpetrated against older adults.

The Analysis is a follow up to FinCEN’s June 2022 EFE Advisory (“2022 Advisory”). The Analysis reviews BSA reports filed between June 15, 2022 and June 15, 2023 that either used the key term referenced in the 2022 Advisory (“EFE FIN-2022-A002”) or checked “Elder Financial Exploitation” as a suspicious activity type.  In its 2022 Advisory, FinCEN warned financial institutions (“FIs”) about the rising trend of EFE, which FinCEN defines as “the illegal or improper use of an older adult’s funds, property, or assets, and is often perpetrated either through theft or scams.” The 2022 Advisory identified 12 “behavioral” and 12 “financial” red flags to help FIs detect, prevent, and report suspicious activity connected to EFE. Additionally, FinCEN recommended EFE victims file incident reports to the FBI’s Internet Crime Complaint Center (IC3) and the Federal Trade Commission. Consistent with a risk-based approach to BSA compliance, FinCEN encouraged FIs to perform additional due diligence where appropriate.

Continue Reading  FinCEN Issues Analysis of Increasing Elder Financial Exploitation

On April 18, the Financial Crimes Enforcement Network (“FinCEN”) released updated FAQs related to the Corporate Transparency Act (“CTA”) and Beneficial Ownership Information (“BOI”) Rule. The last round of updates occurred in January 2024. As we previously have reported, the FAQs do not create any new requirements and are intended to clarify the regulation. In total, there are 16 new FAQs and 2 updated FAQs. We have included brief summaries below.

One of the main take-aways is that FinCEN does not expect to provide access to CTA BOI to financial institutions (“FIs”) until 2025.  In the interim, FinCEN will issue the long-awaited proposed regulations seeking to align the CTA with the Customer Due Diligence (“CDD”) Rule already applicable to certain FIs, including banks, which requires FIs to obtain BOI from covered entity customers opening accounts.  This delay is likely very frustrating for FIs seeking to comply with the CTA and adjust their existing systems for complying with the CDD Rule.

Continue Reading  FinCEN Releases Updated BOI FAQs

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