Suspicious Activity Report (SAR)

On October 1st, the Office of the Comptroller of the Currency (OCC) published the Fiscal Year 2020 Bank Supervision Operating Plan (“FY 2020 Plan”).

The FY 2020 Plan sets forth the OCC’s supervision priorities and objectives for the fiscal year beginning October 1, 2019 and ending September 30, 2020. The supervision priorities set forth align

Remarks Focus on Account Takeovers, BEC Schemes, Beneficial Ownership, Technological Innovation and SARs

FinCEN Director Kenneth A. Blanco delivered prepared remarks on September 24 at the 2019 Federal Identity (FedID) Forum and Exposition in Tampa, Florida.

Director Blanco summarized the topics of his remarks by stating the following:

  1. First, I would like to tell you

The United States continues to be plagued by mass shootings, which appear to be increasing in both frequency and lethality.  Certain businesses have reacted by adjusting their business models, such as the recent decision by mega-retailer WalMart to stop selling some — but not all — types of ammunition.  Likewise, some financial institutions

On August 21, 2019, FinCEN issued an advisory (the “Advisory”) alerting financial institutions to various financial schemes and mechanisms employed by fentanyl and synthetic opioid traffickers to facilitate the illegal fentanyl trade and launder its proceeds.

As defined by the Centers for Disease Control and Prevention (“CDC”), “fentanyl is a synthetic (man-made) opioid 50 times more potent than heroin and 100 times more potent that morphine.” In 2017, more than 28,000 deaths involving fentanyl and other synthetic opioid occurred in the United States. As noted in the Advisory, fentanyl traffics in the United States from two principal sources: from China by U.S. individuals for personal consumption or domestic distribution or from Mexico by transnational criminal organizations (“TCOs”) and other criminal networks. In turn, these trades are funded through a number of mechanisms, including: purchases from a foreign source made using money servICES businesses (“MSBs”), bank transfers or online payment processors; purchases from a foreign source made using convertible virtual currency (“CVC”); purchases from a domestic source made using MSBs, online payment processors, CVC or person-to-person cash sales.

Recognizing fentanyl traffickers’ modus operandi is critical to detecting and preventing these illicit transactions. Thus, the Advisory provides detailed illustrations of each of the above-identified forms of transaction in order to assist financial institutions to detect and prevent facilitating fentanyl trafficking.
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We regularly blog about the conflict between state and federal law related to cannabis and the uncertainty regarding how federal criminal and Bank Secrecy Act (“BSA”) law will, or will not, be enforced against financial institutions providing banking services to marijuana-related businesses (“MRBs”). Because of this continuing uncertainty, many MRBs must operate on a cash-only basis. This creates significant safety and security concerns for both the MRBs and the communities in which they operate, causes regulatory and tax compliance challenges, and handicaps business growth.

This post provides an update on very recent efforts to provide a level of federal protection to financial institutions which provide banking services to MRBs. First, the Senate Banking Committee held a hearing regarding challenges faced by financial institutions and businesses in the cannabis sector. Second, the National Credit Union Administration (“NCUA”) issued guidance regarding servicing hemp producers and the cannabis industry. This NCUA guidance came quickly on the heels of a statement by the chairman of the NCUA that his agency won’t sanction federally-chartered credit unions for working with state-legal MRBs.
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FinCEN Director Kenneth A. Blanco delivered prepared remarks on August 13 at the 12th Annual Las Vegas Anti-Money Laundering Conference.  We previously have blogged repeatedly on the anti-money laundering (“AML”) and Bank Secrecy Act (“BSA”) challenges facing the gaming industry.  This post will discuss Director Blanco’s comments at a high level only, consistent with the generality of his prepared speech.
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Second Post in a Two-Post Series on the ILLICIT CASH Act

A discussion draft of legislation recently introduced in the Senate, the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act (the “Act”), seeks to modernize federal anti-money laundering (AML) and combating the financing of terrorism (CFT) laws. The Act’s bipartisan drafters assert that the “US AML-CFT laws have not kept pace with the growing exploitation of the global financial system to facilitate criminal activities.” The proposed legislation – which is 102 pages long – would update and expand the tools available to regulators and law enforcement and overhaul domestic AML-CFT policies.

In part one of this series, we blogged about the Act’s proposed new reporting requirements for beneficial ownership information. This post focuses on the Act’s many other proposals for improving the resources available to the Financial Crimes Enforcement Network (FinCEN) and facilitating increased communication between law enforcement, regulators and financial institutions, including provisions regarding “no action” letters by FinCEN and “keep open” letters sent by law enforcement to financial institutions.
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On June 12, 2019, Kenneth A. Blanco, Director of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”), provided remarks at the NYU Law Program on Corporate Compliance and Enforcement that underscored the agency’s evolving approach to emerging threats in money laundering and terrorist financing.

His remarks specifically focused on:

  • FinCEN’s approach to addressing a number of emerging money-laundering threats, including the crisis in Venezuela and the rise in business email compromise (“BEC”) fraud schemes;
  • The agency’s collaboration with Congress to address the need to collect beneficial ownership information at a company’s formation; and
  • FinCEN’s ongoing efforts to strengthen and modernize the anti-money laundering (“AML”) and counter terrorism financing (“CFT”) system.


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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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As we previously blogged, the District of Massachusetts held in AER Advisors Inc. v. Fidelity Brokerage Services, LLC, that the safe harbor provision of the Bank Secrecy Act (BSA) provides unqualified protection to financial institutions and their employees from civil liability for filing a Suspicious Activity Report, or SAR. An update: the First Circuit recently upheld this ruling in an opinion which, consistent with the holdings of most other federal courts, clearly found that the safe harbor protections for SAR filings are absolute.
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