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On June 15, FinCEN issued an advisory alerting financial institutions about the increase of elder financial exploitation (EFE). EFE involves the illegal or improper use of an older adult’s funds, among other things, and is often perpetrated either through theft or scams. According to the advisory, financial institutions filed 72,000 suspicious activity reports in 2021 related to EFE—an increase of 10,000 reports from 2020. The advisory provides updated typologies since FinCEN issued its first advisory on the issue in 2011, and highlights behavioral and financial red flags to aid financial institutions with identifying, preventing, and reporting suspected EFE. The announcement also refers to the risk-based approach to compliance under the Bank Secrecy Act, which provides that “[f]inancial institutions should perform additional due diligence where appropriate and remain alert to any suspicious activity that could indicate that their customers are perpetrators, facilitators, or victims of EFE.”
On May 20, the SEC announced charges against the broker-dealer affiliate of a national bank for allegedly failing to file Suspicious Activity Reports (SARs) in a timely manner in violation of the Securities Exchange Act and Rule 17a-8. According to the SEC’s order, the broker-dealer’s internal anti-money laundering (AML) transaction monitoring and alert system allegedly failed to reconcile the different country codes used to monitor foreign wire transfers due to an alleged failure to test a new version of the system. The broker-dealer also allegedly did not timely file SARs related to suspicious transactions in its customers’ brokerage accounts involving the wire transfers to or from foreign countries that it determined to be at a high or moderate risk for money laundering, terrorist financing, or other illegal money movements. Additionally, in April 2017, the broker-dealer allegedly failed to timely file additional SARs due to a failure to appropriately process wire transfer data into its AML transaction monitoring system in certain other situations. In addition to the $7 million penalty, the institution, without admitting or denying the SEC’s findings, agreed to a censure and a cease-and-desist order.
On May 19, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. Included is a cease and desist order against an Alaska-based bank for allegedly engaging in Bank Secrecy Act/anti-money laundering (BSA/AML) program violations. The bank allegedly “failed to adopt and implement a compliance program that adequately covers the required BSA/AML program elements, including, in particular, internal controls for customer due diligence and procedures for monitoring suspicious activity, BSA officer and staff, and training.” The order requires the bank to, among other things, establish a compliance committee, submit a BSA/AML action plan, and develop a written suspicious activity monitoring and reporting program.
On April 21, the OCC issued a consent order against the first federally-chartered bank focused on cryptocurrencies, just 15 months after granting the institution a national bank charter for purposes of taking custody of cryptocurrency. The consent order alleged failure to adopt and implement a compliance program that adequately covers required BSA/AML program elements. In January 2021, the OCC granted conditional approval to convert the bank’s charter to a national association with the “enforceable condition of approval” that the bank would, among other things, meet BSA/AML requirements.
On April 14, the OCC issued a bulletin reminding regulated banks of a final rule amending the agency’s suspicious activity report (SAR) regulations. The final rule takes effect May 1 (covered by InfoBytes here). Generally, the final rule clarifies the processes by which the OCC may issue exemptions from the requirements of the SAR regulations “based on a request … [for an exemption] that meets the criteria specified in the final rule.” The bulletin notes, however, that the final rule does not itself create any exemptions from the SAR regulations.
On April 14, FinCEN issued an advisory on kleptocracy and foreign public corruption, urging financial institutions to direct their efforts on detecting the proceeds of foreign public corruption. The advisory provides typologies and potential indicators of kleptocracy and other forms of foreign public corruption, including bribery, embezzlement, extortion, and the misappropriation of public assets, and highlights financial red-flag indications of kleptocracy and foreign public corruption to assist banks in preventing, detecting, and reporting suspicious transactions. The announcement also refers to the U.S. Treasury Department’s Kleptocracy Asset Recovery Rewards Program, which offers rewards for information leading to seizure, restraint, or forfeiture of assets linked to foreign government corruption, including the Government of the Russian Federation (covered by InfoBytes here).
On March 28, FinCEN announced that its Interactive SAR Stats webpage now includes Filing Trend Data by industry updated through December 31, 2021. As previously covered by InfoBytes, SAR Stats—formerly called By the Numbers—is an annual compilation of numerical data gathered from the Suspicious Activity Reports (SARs) filed by financial institutions using FinCEN’s new unified SAR form and e-filing process. Interactive SAR Stats provide users the opportunity to find FinCEN’s trend data for aggregated counts of defined suspicious activities that financial institutions file with FinCEN as required by the Bank Secrecy Act.
On March 17, FinCEN announced a $140 million civil money penalty against a federal savings bank for violating the Bank Secrecy Act (BSA) and its implementing regulations from at least January 2016 through April 2021 by allegedly failing to implement and maintain an effective, reasonably designed anti-money laundering (AML) program. According to FinCEN, the bank “also admitted that it willfully failed to accurately and timely report thousands of suspicious transactions to FinCEN involving suspicious financial activity by its customers, including customers using personal accounts for apparent criminal activity.” The consent order further noted that in 2017, the OCC informed the bank that its AML program failed to meet all the requirements of the agency’s regulations. The bank agreed to overhaul its AML program but, according to the order, the bank has not yet met all of the terms of its commitments to address the deficiencies. FinCEN emphasized that the bank’s violations resulted “in millions of dollars in suspicious transactions flowing through the U.S. financial system without appropriate reporting,” and stressed “that growth and compliance must be paired, and AML program deficiencies, especially deficiencies identified by federal regulators, must be promptly and effectively addressed.”
The same day, the OCC announced a $60 million penalty against the bank for related violations resulting from the separate but coordinated investigation with FinCEN. Among other things, the consent order identified several deficiencies related to inadequate internal controls and risk management practices, suspicious activity identification, staffing, training, and third-party risk management. FinCEN’s announcement noted that “[a]s many of the facts and circumstances underlying the OCC’s civil penalty also form the basis of FinCEN’s Consent Order, FinCEN agreed to credit the $60 million civil penalty imposed by the OCC,” adding that, combined, the bank “will pay a total of $140 million to the U.S. Treasury for its violations, with $80 million representing FinCEN’s penalty and $60 million representing the OCC’s penalty.”
On March 16, the U.S. Treasury Department, along with representatives from Australia, Canada, Germany, France, Italy, Japan, the United Kingdom, and the European Commission, announced the first meeting of the Russian Elites, Proxies, and Oligarchs (REPO) multilateral task force, which was formed in February 2022. According to the announcement, the task force (consisting of the Finance Ministry and Justice or Home Ministry in each member jurisdiction) is “committed to using their respective authorities in concert with other appropriate ministries to collect and share information to take concrete actions, including sanctions, asset freezing, and civil and criminal asset seizure, and criminal prosecution.” Topics discussed among the REPO task force included, among other things: (i) ensuring coordination and effective implementation of the group’s collective financial sanctions relating to Russia and assisting other nations with locating and freezing assets found within their jurisdictions; (ii) preserving evidence and determining whether these frozen assets, or other assets linked to these sanctioned individuals or entities, are subject to forfeiture; and (iii) ensuring that enablers and gatekeepers “who have facilitated the movement of sanctioned assets or other illicit funds” are brought to justice. The announcement also noted that it launched the Kleptocracy Asset Recovery Rewards Program, offering monetary awards for information leading to seizure, restraint, or forfeiture of assets linked to foreign government corruption, including the Government of the Russian Federation. Member countries released a joint statement following the launch of the REPO task force encouraging other countries to take action to “hunt down the assets of key Russian elites and proxies and to act against their enablers and facilitators” in order “to isolate them from the international financial system and impose consequences for their actions.”
In other international efforts, the DOJ launched Task Force KleptoCapture, “an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed, along with allies and partners,” in order to “isolate Russia from global markets.” (Covered previously by InfoBytes here.)
Also on March 16, the Financial Crimes Enforcement Network (FinCEN) released a statement with counterparts in task force member countries and others stating their intent to increase information sharing.
On March 16, the OCC issued a final rule amending its suspicious activity report (SAR) regulations. The rule sets out a process for national banks and federal savings associations to request exemptions from the OCC’s SAR requirements. To request exemption under the final rule, national banks or federal savings associations, including federal branches and agencies of foreign banks, must submit a request in writing to the OCC. The agency “will consider whether the exemption is consistent with the purposes of the [Bank Secrecy Act] and with safe and sound banking and may consider any other appropriate factors.” Where required, institutions must separately seek an exemption from FinCEN, and the OCC intends to coordinate with FinCEN on such requests. The final rule will also allow “the OCC to facilitate changes required by the Anti-Money Laundering Act of 2020" and “will make it possible for the OCC to grant relief to national banks or federal savings associations that develop innovative solutions intended to meet Bank Secrecy Act requirements more efficiently and effectively.”
- Kathryn L. Ryan to host the affiliate members meeting at AARMR’s 2022 Annual Regulatory Conference & Training
- Kathryn L. Ryan and Jedd R. Bellman to discuss “Risk and compliance management: Are you covered?” at a Mortgage Bankers Association webinar
- Melissa Klimkiewicz and Daniel A. Bellovin to discuss “Things to know about flood insurance” at a NAFCU webinar
- Hank Asbill to discuss “Ethical issues at sentencing” at the 31st Annual National Seminar on Federal Sentencing
- Max Bonici will moderate a panel on “Enforcement risk and other regulatory and compliance issues related to crypto and digital assets” at the American Bar Association’s 2022 Annual Meeting
- John R. Coleman to provide a “CFPB Update” at MBA’s 2022 Regulatory Compliance Conference
- Amanda R. Lawrence to discuss “The shifting data privacy and data protection landscape” at MBA’s 2022 Regulatory Compliance Conference
- Benjamin W. Hutten to discuss “Fundamentals of financial crime compliance” at the Practicing Law Institute
- Benjamin W. Hutten to discuss “Ongoing CDD: Operational considerations” at NAFCU’s Regulatory Compliance & BSA Seminar