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FinCEN issues regulations requiring that financial institutions identify certain beneficial owners

FinCEN is issuing final rules under the Bank Secrecy Act to clarify and strengthen customer due diligence requirements for: Banks; brokers or dealers in securities; mutual funds; and futures commission merchants and introducing brokers in commodities. The rules contain explicit customer due diligence requirements and include a new requirement to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions. Please click on the link below to read the entire FinCen ruling:... read more

FinCEN Fines Kentucky Money Services Business and Its Owner/Compliance Officer for Anti-Money Laundering Failures

The Financial Crimes Enforcement Network (FinCEN) today imposed a civil money penalty against Thriftway Food Mart and its owner and compliance officer, Kustandy Rayyan, for willful and repeated violations of the Bank Secrecy Act (BSA). Mr. Rayyan has admitted to conduct that violated the BSA and has consented to a civil money penalty in the amount of $10,000.   News Release: https://www.fincen.gov/news_room/nr/pdf/20160324.pdf   Enforcement Action:... read more

FinCEN Issues a Geographic Targeting Order for Certain Real Estate Transactions

The Director of the Financial Crimes Enforcement Network (“FinCEN”), U.S. Department of the Treasury, hereby issues a Geographic Targeting Order (“Order”) requiring [title insurance company] to collect and report information about the persons involved in certain residential real estate transactions, as further described in this Order.  This Order supersedes the order applicable to [title insurance company] relating to certain transactions in the Borough of Manhattan in New York, New York that was executed by the Director of FinCEN on January 6, 2016. To read the entire article, please click here:... read more

FinCEN Proposes AML Regulations for Investment Advisers

On August 25, 2015 FinCEN proposed AML regulations for Investment Advisers that continue the path traced by FinCEN Director Jennifer Shasky Calvery to identify and correct AML deficiencies in areas previously ignored despite identified risks.   If adopted, the requirements proposed for Investment Advisers would mirror those imposed on other financial service providers.    We note that not all Investment Advisers have been lacking in the AML control area.  Some, including some Optima clients, have opted to proactively apply controls that they felt were required by the risks they identified in their individual operations.  As a whole, FinCEN’s proposed rule will level the playing field between Investment Advisors and other institutions and within the Investment Adviser sector itself.   If history can be relied upon to predict the future,  the rule will also create a more secure financial system, although some Investment Advisers experience growing pains in the process.     FinCEN’s Official Announcement   The Financial Crimes Enforcement Network (FinCEN) today proposed a rule requiring certain investment advisers to establish anti-money laundering (AML) programs and report suspicious activity to FinCEN pursuant to the Bank Secrecy Act (BSA). FinCEN also proposed to include investment advisers in the general definition of “financial institution,” which, among other things, would require them to file Currency Transaction Reports (CTRs) and keep records relating to the transmittal of funds.    News Release: http://www.fincen.gov/news_room/nr/pdf/20150825.pdf  Proposed Rule:... read more

FinCEN Targets Money Laundering Infrastructure with Geographic Targeting Order in Miami

On April 21, 2015 FinCEN issued another Geographic Targeted Order (“GTO”) in the Miami, Florida area to address Trade Based Money Laundering (“TBML”) activity involving drug cartels. This GTO follows a similar one issued against Los Angeles based businesses on October 2, 2014. In practical terms, the GTOs impose reporting requirements on businesses that mirror anti-money laundering (“AML”) and Bank Secrecy Act (“BSA”) requirements applicable to financial institutions. The specific requirement is a reduction of the threshold amount required for businesses to file Form 8300. Instead of filing Form 8300 upon the receipt of more than $10,000 in cash, the requirement applies to receipt of cash of $3,000 or more. Significantly, businesses are required to aggregate multiple transactions from the same source that accumulate said amount in one banking day. Most businesses that are not financial institutions lack a reliable, automated mechanism or tool to track and properly comply with the GTO. However, through Optima’s AML Compass businesses can comply with the monitoring, detection, reporting and record retention requirements that are embedded in the GTO. Judging by the basis for FinCEN’s actions in Miami and Los Angeles, it is likely that other GTOs will soon follow in additional jurisdictions.   FinCEN’s Official Announcement The Financial Crimes Enforcement Network (FinCEN) issued a Geographic Targeting Order (GTO) today to about 700 Miami businesses to shed light on cash transactions that may be tied to trade-based money laundering schemes. These complex schemes are a primary method used by drug cartels, including the Sinaloa and Los Zetas, to launder their illicit proceeds. FinCEN’s order is aimed at disrupting the illicit financial infrastructure upon... read more

FinCEN Assesses $1 Million Penalty and Seeks to Bar Former MoneyGram Executive from Financial Industry

Individual Accountability Emphasized in Civil Actions Click here to see Press Release Actual Court Documents can be seen at: http://www.fincen.gov/news_room/ea/files/Haider_Assessment.pdf http://www.fincen.gov/news_room/ea/files/USAO_SDNY_Complaint.pdf   WASHINGTON, DC – The Financial Crimes Enforcement Network (FinCEN) today issued a $1 million civil money penalty(CMP) against Mr. Thomas E. Haider for failing to ensure that hiscompany abided by the anti-money laundering (AML) provisions of the Bank Secrecy Act(BSA). Concurrently, FinCEN’s representative, the U.S. Attorney’s Office for the Southern District of New York (SDNY), today filed a complaint in U.S. District Court that seeks to enforce the penalty and to enjoin Mr. Haider from employment in the financial industry. This CMP is the product of a joint investigation by FinCEN and the SDNY. From 2003 to 2008, Mr. Haider was the Chief Compliance Officer for MoneyGram International Inc. Mr. Haider oversaw MoneyGram’s Fraud Department, which collected thousands of complaints from consumers who were victims of fraudulent schemes. Mr. Haider also headed MoneyGram’s AML Compliance Department, which was charged with ensuring compliance with requirements under the BSA designed to protect the financial system against money laundering and terrorist finance. “In my job, I’ve met hundreds of compliance officers and I know them to be some of the most dedicated and trustworthy professionals in the financial industry,” said FinCEN Director Jennifer Shasky Calvery. “FinCEN and our law enforcement partners greatly depend on their judgment and their diligence in our common fight against money laundering, fraud, and terrorist finance. Mr. Haider’s failures are an affront to his peers and to his profession. With his willful violations, he created an environment where fraud and money laundering thrived and dirty money rampaged... read more

US State Bank Supervisors Issue Model Regulation for Digital Currencies

The Conference of State Bank Supervisors (CSBS) has released a draft proposal for regulating digital currency businesses. The membership group, which represents bank regulators from US state agencies but does not play a direct role in how states craft new financial rules, outlined a number of areas in which it believes companies that work with digital currencies should be supervised, including approaches to consumer protection, licensing and security. Overall, the framework echoes elements of the New York State Department of Financial Services’ (NYDFS) BitLicenseproposal. The draft framework targets those who exchange digital currencies or facilitate such activities, and explicitly identifies itself as “technology neutral”. The CSBS suggests licensing and supervision requirements should apply to businesses that exchange virtual currency for fiat currency and virtual currency for other types of virtual currency; transmit virtual currencies; and facilitate the third-party exchange, storage or transmission of virtual currencies. The latter category is defined to include wallets, vaults, kiosks, merchant-acquirers and payment processors. The draft continues: “For financial services, these activities-based regulations already exist in most state laws, generally covering the transmitting, exchanging, and/or holding of value on behalf of another. Such financial transactions or services place the activity provider in a position of trust. This position of trust is the basis for most financial services laws and regulations, and should be applied regardless of the medium of value.” The CSBS has held several meetings in the past year, which garnered participation from both regulators and members of the cryptocurrency industry. During those hearings, both the promise and challenges of the technology underlying bitcoin were explored, eliciting both positive and negative reactions from the CSBS representatives leading the talks.... read more

CFPB Proposes Strong Federal Protections for Prepaid Products

With its proposed rule to create better protections for users of prepaid access, the CFPB is not only flexing its regulatory muscle. It is expanding its reach to create federal uniformity in an area sporadically and unevenly controlled by state regulations. This is likely a prelude to expansion into other areas of non-bank services that equally lack uniformity from state to state. Entities that provide these services would be wise to pay close attention to the CFPB and apply effective controls. They should also anticipate greater CFPB participation in their daily activities. ————————————————————————————————————————- FOR IMMEDIATE RELEASE: November 13, 2014 CONTACT: Office of Communications Tel: (202) 435-7170 CONSUMER FINANCIAL PROTECTION BUREAU PROPOSES STRONG FEDERAL PROTECTIONS FOR PREPAID PRODUCTS  Bureau’s Proposal Includes New ‘Know Before You Owe’ Prepaid Disclosures   WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) is proposing strong, new federal consumer protections for the prepaid market. The proposal would require prepaid companies to limit consumers’ losses when funds are stolen or cards are lost, investigate and resolve errors, provide easy and free access to account information, and adhere to credit card protections if a credit product is offered in connection with a prepaid account. The Bureau is also proposing new “Know Before You Owe” prepaid disclosures that would provide consumers with clear information about the costs and risks of prepaid products upfront. “Consumers are increasingly relying on prepaid products to make purchases and access funds, but they are not guaranteed the same protections or disclosures as traditional bank accounts,” said CFPB Director Richard Cordray. “Our proposal would close the loopholes in this market and ensure prepaid consumers are... read more

FinCEN Statement on Providing Banking Services to Money Services Businesses

FinCEN believes it is important to reiterate the fact that banking organizations can serve the MSB industry while meeting their Bank Secrecy Act obligations.  Currently, there is concern that banks are indiscriminately terminating the accounts of all MSBs, or refusing to open accounts for any MSBs, thereby eliminating them as a category of customers. Please click on the link below to read the entire FinCen Statement: FInCEN Statement on MSB Bank Account Closing NOV 10... read more

FinCen Reaffirms its Intent to Apply Strict Controls to the Virtual Currencies

In two of its most recent guidance response letters, FinCen reaffirms its intent to apply strict controls to the virtual currency world.  In these latest examples you can plainly see how they are interpreting applicability of guidance to open market startups providing significant detail to support their assertion of applicability for BSA rules.  Startups in the space will do well to assume these obligations and factor these issues into their deployment models and regulatory obligations if they are to mitigate market, regulatory, and investor risks. You can find this information in two FinCen PDFs below: FIN-2014-R011: http://www.fincen.gov/news_room/rp/rulings/pdf/FIN-2014-R011.pdf   FIN-2014-R012: http://www.fincen.gov/news_room/rp/rulings/pdf/FIN-2014-R012.pdf... read more

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