Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • New York DFS Proposes Anti-Terrorism and Anti-Money Laundering Regulation

    State Issues

    On December 1, the New York DFS announced a proposed anti-terrorism and anti-money laundering regulation, Transaction Monitoring and Filtering Program Requirements and Certifications. Key requirements of the proposed regulation include maintaining programs (i) to monitor transactions after they’ve been executed for potential BSA/AML violations and Suspicious Activity Reporting; and (ii) to ban certain transactions that are prohibited by applicable sanctions, politically exposed persons lists, and internal watch lists. The proposed regulation outlines the programs’ respective minimum requirements, including ensuring that they are based on the Risk Assessment of the institution. Critically, the proposal also requires a Certifying Senior Officer of the regulated financial institutions to file with the Department executed certifications ensuring compliance with the requirements by April 15 of each year.

    Anti-Money Laundering Bank Secrecy Act NYDFS

  • U.S. Department of the Treasury Senior Staff Deliver Remarks Regarding Enforcement Efforts

    Consumer Finance

    On November 16, FinCEN Director Jennifer Calvery and Treasury’s Acting Under Secretary Adam Szubin delivered remarks at the American Bankers Association and American Bar Association Money Laundering Enforcement Conference on continued AML enforcement efforts. Szubin focused on the topic of “de-risking,” which he described as “instances in which a financial institution seeks to avoid perceived regulatory risk by indiscriminately terminating, restricting, or denying services to broad classes of clients, without case-by-case analysis or consideration of mitigating options,” and addressed Treasury’s efforts to curtail the negative effects attributed to de-risking, such as preventing access to the dollar and pushing people out of the regulated financial system. Szubin emphasized, however, that the Treasury would not “dilute or roll back [its] AML/CFT standards,” but expects financial institutions to be vigilant when identifying potential risks and to implement AML/CFT programs that effectively address risks associated with illicit financing on a client-by-client basis. In a separate speech, Director Calvery addressed FinCEN’s reliance on Bank Secrecy Act (BSA) data to “uncover risks, vulnerabilities, and gaps in each financial sector,” noting that BSA data supports FinCEN’s ongoing AML enforcement efforts.

    Anti-Money Laundering FinCEN Bank Secrecy Act Department of Treasury Combating the Financing of Terrorism

  • Federal Reserve and New York DFS Take Action Against Canadian Bank for Deficiencies Relating to AML Compliance

    Consumer Finance

    On November 10, the Federal Reserve and the New York DFS announced an enforcement action against a Canadian bank for alleged deficiencies relating to its BSA/AML compliance program. In order to resolve the allegations, the bank agreed to prepare various written policies and procedures, including (i) a written plan that provides for a sustainable governance framework, including improving the management information systems reporting of compliance with BSA/AML requirements, OFAC regulations, and State Regulations; (ii) a revised written BSA/AML compliance program; (iii) a revised written program for conducting customer due diligence; (iv) a written program that ensures that any suspicious activity is timely reported; and (v) a written plan to improve compliance with OFAC regulations. All policies must be submitted for approval within 60 days of the agreement’s issuance date.

    Federal Reserve Anti-Money Laundering Bank Secrecy Act OFAC NYDFS

  • FinCEN Issues Final Civil Money Penalty Against U.S.-based Casino Over BSA Violations

    Consumer Finance

    On November 6, FinCEN issued a final assessment of civil money penalty against a Las Vegas-based casino and its branch offices for violating the BSA by failing to develop and implement a sufficient AML program and report suspicious activity in connection with its private gaming areas. As FinCEN previously announced on September 8, the terms of the assessment require the casino to pay an $8 million civil monetary penalty, hire an independent auditor to test its BSA/AML compliance program, and conduct a look-back review of all transactions through branch offices in Asia and California for recordkeeping and reporting compliance. FinCEN’s final assessment follows approval on October 19 of the settlement from the Bankruptcy Court for the Northern District of Illinois, as the casino remains a debtor in its bankruptcy case.

    Anti-Money Laundering FinCEN Bank Secrecy Act Enforcement

  • Texas Department of Banking Issues Supervisory Memorandum to Money Services Business License Holders

    Fintech

    On October 29, the Texas Department of Banking (the Department) issued a supervisory memorandum to Money Services Business (MSB) license holders. The purpose of the memorandum “is to provide license holders with industry best practices regarding the documentation of [authorized delegate] and agent compliance monitoring efforts.” According to the Department, agents and Authorized Delegates (AD) pose substantial compliance risks to MSBs, with agent and AD file review comprising “a significant component of the examination process for assessing compliance with AML Program requirements and Texas law.” The memorandum provides MSBs with industry guidance on how to meet regulators’ expectations for maintaining documentation in compliance with agent and AD oversight. The Department identifies various documents that support effective agent and AD on-boarding due diligence, including: (i) agent and AD BSA policies and procedures; (ii) approval by foreign regulators to conduct money transmission; (iii) evidence of initial AML/BSA training; and (iv) credit review and approval documents, such as financials and credit reports. Moreover, the memorandum indicates that on-going due diligence requires MSBs to maintain, among other things, evidence to support (i) periodic BSA training; (ii) agent compliance with independent AML review requirements; and (iii) the license holder’s review of updated BSA/AML Program policies and procedures.

    Anti-Money Laundering Bank Secrecy Act Money Service / Money Transmitters

  • FinCEN to Withdraw 2011 Proposed Rule Against Lebanon-Based Bank

    Federal Issues

    On September 28, FinCEN announced its intention to withdraw its February 2011 Notice of Finding and Notice of Proposed Rulemaking identifying a Lebanon-based bank as a “financial institution of primary money laundering concern” under Section 311 of the USA PATRIOT Act. The bank had been linked with Hezbollah and found to be involved in international narcotics and money laundering networks. Accordingly, through the Notice of Finding, FinCEN sought to impose certain “special measures” on the bank which are designed to, among other things, weaken foreign banks suspected of money laundering and financing terrorism, as well as protect American financial institutions. However, given that the bank’s license was revoked in September 2011 by Lebanon’s central bank, the Banque du Liban, and all of its assets were subsequently liquidated, the bank no longer exists as a foreign financial institution and, as such, is no longer subject to the prohibitions set forth in the proposed rule. The withdrawal of FinCEN’s Notice of Finding does not require a comment period and will be effective upon publication in the Federal Register.

    FinCEN Bank Secrecy Act Patriot Act Agency Rule-Making & Guidance

  • Leading Casino Settles with FinCEN for $8 Million for BSA Violations

    Consumer Finance

    On September 8, FinCEN announced the assessment of an $8 million civil money penalty against a leading U.S.-based casino for its willful violations of the BSA’s requirements to develop and implement a reasonably designed AML program and to report suspicious activity. Among other things, FinCEN alleged that the casino failed to implement adequate internal controls, conduct adequate independent testing of AML compliance, provide adequate training, and file SARs. Of note were private gaming salons that cater to wealthy patrons and allowed such patrons to gamble anonymously. In addition to the $8 million penalty, which will be allowed as a general unsecured claim in the casino’s bankruptcy proceeding (pending approval of the consent by the bankruptcy court), the casino must also, among other things, hire an independent third party to test its BSA/AML compliance program, annually provide its implementation plan and training program to FinCEN for a period of three years, and conduct a look-back review of all transactions through branch offices in Asia and California for SAR compliance.

    Anti-Money Laundering FinCEN Bank Secrecy Act Enforcement

  • FinCEN Issues NPRM Establishing BSA/AML Requirements for Investment Advisers

    Securities

    On August 25, FinCEN issued a Notice of Proposed Rulemaking (NPRM) seeking to adopt minimum Bank Secrecy Act (BSA) and anti-money laundering (AML) standards that would be applicable to investment advisers. Under the proposal, investment advisers would be required to implement AML programs and report suspicious activity, among other safeguards. The NPRM states that the proposal would cover investment advisers registered or required to register with the SEC. The proposal would also add such investment advisers to the definition of “financial institution.” This would result in investment advisers being required to file currency transaction reports and to comply with recordkeeping and other requirements applicable to financial institutions. With respect to supervisory authority, FinCEN stated that it would delegate its authority to the SEC for purposes of examining investment advisers for compliance with the proposed requirements.

    Anti-Money Laundering FinCEN SEC Bank Secrecy Act Investment Adviser Agency Rule-Making & Guidance

  • FinCEN Determines That Issuing a Digital Certificate Evidencing Ownership in Precious Metals, and Buying and Selling Precious Metals, Are Subject to The BSA

    Fintech

    On August 14, FinCEN issued an Administrative Ruling, FIN-2015-R001, determining that a company who: i) provides Internet-based brokerage services between buyers and sellers of precious metals; ii) buys and sells precious metals on its own account; and iii) holds precious metals in custody, opens a digital wallet, and issues a digital proof of custody certificates evidencing ownership of such metals, is subject to the BSA.

    FinCEN determined that, as a broker or dealer in e-currencies and e-precious metals, the company did not fall under the e-currencies or e-precious metals trading exemption from money transmission:  “when the Company issues a freely transferable digital certificate of ownership to buyers, it is allowing the unrestricted transfer of value from a customer’s commodity position to the position of another customer of a third-party, and it is no longer limiting itself to the type of transmission of funds that is a fundamental element of the actual transaction necessary to execute the contract for the purchase of sale of the currency or the other commodity.” As such, it is acting as a convertible virtual currency administrator (the freely transferable digital certificates being the commodity-backed virtual currency). Further, the purchases and sales of precious metals made on its own account render the Company a dealer in precious metals (subject to certain monetary thresholds and other considerations), and thus a financial institution for purposes of the BSA.

    FinCEN Bank Secrecy Act Virtual Currency

  • Federal Reserve Orders Chinese Bank to Overhaul its BSA/AML Compliance Program

    State Issues

    On July 21, a leading China-based bank agreed to address deficiencies in connection with the BSA/AML risk management and compliance program of its New York branch office. The Agreement, entered into with the Federal Reserve Bank of New York and the New York State Department of Financial Services, requires the bank and its New York branch to (i) enhance the branch’s written BSA/AML compliance program and customer due diligence program; and (ii) develop a written program for the branch that is capable of identifying and reporting suspected violations of law and suspicious transactions to law enforcement and supervisory authorities. In addition, the bank must hire an independent third-party to review the Branch’s U.S. dollar clearing transaction activity “to determine whether suspicious activity involving high-risk customers or transactions at, by, or through the branch was properly identified and reported” to the appropriate federal banking authorities. No civil money penalty was imposed on the bank.

    Federal Reserve Anti-Money Laundering Bank Secrecy Act NYDFS China

Pages

Upcoming Events