Suspicious Activity Report (SAR)

Advisory is Accompanied by Related OFAC and DOJ Actions

On June 20, 2024, the Financial Crimes Enforcement Network (“FinCEN”) issued a supplemental advisory to alert U.S. financial institutions about emerging trends in the illicit fentanyl supply chain. The supplemental advisory emphasized the increasing involvement of Mexico-based transnational criminal organizations (“TCOs”) in the procurement of fentanyl precursor chemicals and manufacturing equipment from suppliers in the People’s Republic of China (“PRC”).

The detailed supplemental advisory builds upon FinCEN’s 2019 advisory (see our blog post here) by introducing new typologies and red flags for financial institutions to try to identify and report suspicious transactions.  As we discuss, the supplemental advisory was accompanied by related actions by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and the U.S. Department of Justice (“DOJ”) as part of an apparently coordinated effort by the federal government to combat this pernicious illicit industry.

Continue Reading  FinCEN Issues Supplemental Advisory on Fentanyl Distribution and Growing Role of Transnational Criminal Organizations

On June 14, 2024, President Biden declared June 15th World Elder Abuse Awareness Day.  In honor of the day, the Financial Crimes Enforcement Network (FinCEN) reminded financial institutions (FIs) to remain vigilant in identifying and reporting elder financial exploitation (EFE).

In issuing the reminder, FinCEN cited the Financial Trend Analysis (2024 Analysis) it

The Financial Crimes Enforcement Network (“FinCEN”) has issued its Year in Review for FY 2023 (“YIR”).  It consists of five pages of infographics.  According to FinCEN’s press release:

The Year in Review is intended to help stakeholders gain insight into the collection and use of Bank Secrecy Act [(“BSA”)] data, including FinCEN’s efforts to support law enforcement and national security agencies. The Year in Review includes statistics from fiscal year 2023 on BSA reporting and how it is queried and used by law enforcement agencies. The Year in Review also includes information on how FinCEN uses and analyzes BSA reporting to fulfill its mission, including to support alerts, trend analyses, and regulatory actions. The publication of the Year in Review is in furtherance of FinCEN’s commitment to provide information and statistics on the usefulness of BSA reporting, consistent with Section 6201 of the Anti-Money Laundering Act of 2020.

According to the YIR, there are approximately 294,000 financial institutions and other e-filers registered to file BSA reports with FinCEN.  Collectively, they filed during FY 2023 a total of 4.6 million Suspicious Activity Reports (“SARs”) and 20.8 million Currency Transaction Reports (“CTRs”), as well as 1.6 million Reports of Foreign Bank and Financial Accounts (“FBARs”), 421,500 Forms 8300 regarding cash payments over $10,000 received in a trade or business, and 143,200 Reports of International Transportation of Currency or Monetary Instruments (“CMIRs”) for certain cross-border transactions exceeding $10,000.

As we will discuss, a massive amount of SARs and CTRs are filed every year.  Apparently – and the YIR necessarily represents only a snapshot lacking full context, so extrapolation is dangerous – only a very small portion of those filings ever become relevant to actual federal criminal investigations.  Further, the YIR suggests that information sharing under Section 314 of the Patriot Act between the government and financial institutions remains an under-utilized tool.

Continue Reading  FinCEN Releases Year-in-Review for FY 2023: SARs, CTRs and Information Sharing

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

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

Years in the making, on February 13, the Financial Crimes Enforcement Network (“FinCEN”) issued a notice of proposed rulemaking (“NPRM”) to include “investment adviser” (“IA”) within the definition of “financial institution” under the Bank Secrecy Act (“BSA”). FinCEN has posted a fact sheet on the NPRM here.

The NPRM subjects broad categories of IAs to statutory and regulatory anti-money laundering/countering terrorist financing (“AML/CTF”) compliance obligations. FinCEN is accepting comments on the NPRM until April 15, 2024.

Continue Reading  FinCEN Seeks to Make Investment Advisers Subject to Bank Secrecy Act

On February 16, the Financial Crimes Enforcement Center (“FinCEN”) published a Notice of Proposed Rulemaking (“NPRM”) regarding residential real estate.  The final version of the NPRM published in the Federal Register is 47 pages long.  We have created a separate document which more clearly sets forth the proposed regulations themselves, at 31 C.F.R. § 1031.320, here.

FinCEN also has published a Fact Sheet regarding the NPRM, here.  The Fact Sheet, slightly over four pages long, is helpful and walks through the basics of many of the proposed requirements.

The NPRM proposes to impose a nation-wide reporting requirement for the details of residential real estate transactions, subject to some exceptions, in which the buyer is a covered entity or trust.  Title agencies, escrow companies, settlement agents, and lawyers need to pay particular attention to the NPRM because, based on FinCEN’s “cascade” approach to who should be responsible for complying with the reporting requirements, these parties are the most likely to be responsible.

Although the NPRM pertains only to residential transactions, FinCEN has indicated that it intends to publish a separate proposed rulemaking in 2024 regarding commercial real estate transactions.

Continue Reading  FinCEN Proposes BSA Reporting Requirements for Residential Real Estate

Second of Three Posts in a Related Series on Recent AML and Money Laundering Prosecutions

The Department of Justice (“DOJ”) has been very active in the Bank Secrecy Act (“BSA”) / Anti-Money Laundering (“AML”) space, as reflected by a recent series of individual prosecutions and corporate non-prosecution agreements (“NPAs”).  

In the first blog post in this series, we discussed a significant prosecution of an individual, and two related corporate NPAs, involving the gaming industry.  In our final post, we will discuss the prosecution and sentencing of a lawyer who allegedly became part of the fraud and money laundering scheme perpetrated by his crypto client.

In this second post, we will discuss two unusual prosecutions involving, respectively, an individual executive of a bank and an alleged AML specialist working with small financial institutions.  

As we previously noted, all of these cases, although all unique, are also united in certain ways – particularly in regards to the need for institutions and professionals to perform sufficient due diligence regarding the conduct and source of funds of high-risk clients and customers.

Continue Reading  Criminal Case Round-Up: Recent Prosecutions Involving Financial Institution Officers

First of Three Posts in a Related Series on Recent AML and Money Laundering Prosecutions

The Department of Justice (“DOJ”) has been very active in the Bank Secrecy Act (“BSA”) / Anti-Money Laundering (“AML”) space, as reflected by a recent series of individual prosecutions and corporate non-prosecution agreements (“NPAs”). 

In this first blog post, we will discuss a significant prosecution of an individual, and two related corporate NPAs, involving the gaming industry

In the next related post, we will discuss two unusual prosecutions involving, respectively, an individual executive of a bank and an alleged AML specialist working with small financial institutions.  

In our final post, we will discuss the prosecution and sentencing of a lawyer who allegedly became part of the fraud and money laundering scheme perpetrated by his crypto client.

Although these cases are all unique and interesting in their own way, they are also all united in certain ways – particularly in regards to the need for institutions to perform sufficient due diligence regarding the conduct and source of funds of high- or higher-risk customers, and the related need for institutions to ensure that their own employees are not undermining the institutions’ AML compliance programs.

Continue Reading  Criminal Case Round-Up: Recent Prosecutions Involving Casinos

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