United States

FinCEN Statement provides transparency for violations and enforcement

AML AND COMPLIANCE NEWS  | 

This statement reveals the enforcement authorities, dispositions and factors evaluated in determining the appropriate response and enforcement actions of BSA violations. 

FinCEN has provided this guidance to underscore that when they take an enforcement action, it will address a violation of law and specific regulations. However, noncompliance with issued guidance alone will not be treated as a law violation. The information provided below is a refresher for those who have previous AML compliance experience; nevertheless, a reiteration of what and how FinCEN approaches each examination is worthwhile.

FinCEN further notes that this statement isn’t just for banks; it also applies to broker-dealers in securities, money services businesses (MSB) and casinos and card clubs. That said, despite previous efforts, FinCEN has been unable to incorporate registered investment advisors who manage hedge funds, venture capital funds and private equity funds, though a good number of investment advisors have implemented AML programs without coercion to deploy more effective due diligence in protecting their organization from fraud and money laundering.

Items to note from FinCEN’s statement:

  • It will not treat noncompliance with a standard of conduct announced solely in a guidance document as a violation of law
  • Provides an overview of information FinCEN analyzes in order to determine the appropriate outcome to violations of the BSA
  • Outlines the enforcement approach taken 
  • When an enforcement action is taken, it will seek to establish a violation of law based on applicable statutes and regulations
  • FinCEN maintains the authority to bring enforcement action against individuals

Potential enforcement actions by FinCEN:

  1. No Action: FinCEN may close a matter with no additional action. FinCEN may reopen the matter if FinCEN obtains new material information concerning the matter or becomes aware of additional or subsequent violations. 
  2. Warning Letter: FinCEN may issue a warning through a supervisory letter or similar communication. 
  3. Equitable Remedies: FinCEN may seek an injunction or equitable relief to enforce compliance when FinCEN believes an entity or individual has violated, is violating, or will violate the BSA or any BSA regulation or order. 
  4. Settlements: As part of a settlement, FinCEN may require both remedial undertakings and civil money penalties. 
  5. Civil Money Penalties: FinCEN may assess a civil money penalty. 
  6. Criminal Referral: If circumstances warrant, FinCEN may refer a matter to appropriate law enforcement agencies for criminal investigation and/or criminal prosecution.

FinCEN Director Kenneth A. Blanco stated, “FinCEN is committed to being transparent about its approach to BSA enforcement. It is not a ‘gotcha’ game. The information required by the BSA saves lives, and protects our communities and people from harm. It is a national security issue.”

Enforcement Action Process

FinCEN provides factors considered in their determination and the level of risk posed, which include (but are not limited to) the following:

  1. Nature and seriousness of the violations, including the extent of possible harm to the public and the amount involved. 
  2. Impact of or harm from the violation of FinCEN’s mission to safeguard the financial system from illicit use, combat money laundering and promote national security. 
  3. Pervasiveness of wrongdoing within an entity, including management’s complicity in, condoning or enabling of, or knowledge of the conduct underlying the violations. 
  4. History of similar violations, or misconduct in general, including prior criminal, civil and regulatory enforcement actions. 
  5. Financial gain or other benefit resulting from, or attributable to, the violations.
  6. Presence or absence of prompt, effective action to terminate the violations upon discovery, including self-initiated remedial measures. 
  7. Timely and voluntary disclosure of the violations to FinCEN. 
  8. Quality and extent of cooperation with FinCEN and other relevant agencies, including potential wrongdoing by an entity’s directors, officers, employees, agents and counterparties. 
  9. Systemic nature of violations. Considerations include (but are not limited to) the number and extent of violations, failure rates (e.g., the number of violations out of total number of transactions) and duration of violations. 
  10. Whether another agency took enforcement action for related activity. FinCEN will consider the amount of any fine, penalty, forfeiture and/or remedial action ordered.

According to FinCEN’s statement, “Regulated parties will be afforded an opportunity to respond to and contest factual findings or legal conclusions underlying any FinCEN enforcement action.” This has been true as a matter of practice and correlates with general principles of federal administrative procedure.

The statement reaffirms FinCEN’s position that it can bring enforcement cases against corporate officers and employees when a financial institution violates the BSA. The statement notes that in addition to “imposing civil money penalties on financial institutions, nonfinancial trades or businesses, and other persons that violate the BSA,” FinCEN “in a number of instances may take enforcement actions, to include imposing civil money penalties on partners, directors, officers or employees who participate in these violations.” In recent years, FinCEN has placed particular emphasis on its authority to bring enforcement actions against individuals at financial institutions.

For further details, read the FinCEN statement here.

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