The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has released a number of anti- money laundering measures in recent weeks. Of particular note is its publication of proposed amendment to its Bank Secrecy Act regulations. The amendments would clarify and strengthen customer due diligence obligations of banks and other financial institutions including broker-dealers, mutual funds, futures commission merchants, and introducing brokers in commodities.
As identified by FinCEN, the key elements of customer due diligence (CDD) include: (i) identifying and verifying the identity of customers; (ii) identifying and verifying the identity of beneficial owners of legal entity customers (i.e., the natural persons who own or control legal entities); (iii) understanding the nature and purpose of customer relationships; and (iv) conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions. The proposed amendments address the last three elements by proposing a new separate requirement to identify and verify the beneficial owners of legal entity customers, subject to certain exemptions, and by proposing to add explicit CDD requirements with respect to understanding the nature and purpose of customer relationships and conducting ongoing monitoring as components in each covered financial institution’s core AML program requirements.
The Wall Street Journal’s Risk & Compliance Journal noted that at least one group, Global Witness, believes that the proposal doesn’t go far enough. The group’s senior policy advisor commented that as proposed, the rules could be evaded by simply devising an ownership structure in which no one owns more than 25 percent.
Comments on the proposal should be submitted on or before October 3, 2014.
Last week, FinCEN advised that the Financial Action Task Force (“FATF”) updated its list of jurisdictions with strategic AML/CFT deficiencies. FATF called for the use of countermeasures with respect to Iran and North Korea and for enhanced due diligence with respect to Algeria, Ecuador, Indonesia, and Myanmar.
In close coordination with its Mexican counterpart, the Unidad de Inteligencia Financiera, FinCEN announced a series of reporting initiatives designed to greatly improve the transparency of cross-border cash movements. To address U.S. and Mexican law enforcement’s concerns about potential misuse of exemptions and incomplete or inaccurate reports filed by armored car services and other common carriers of currency, FinCEN has issued a Geographic Targeting Order that requires enhanced cash reporting by these businesses at the San Ysidro and Otay Mesa Ports of Entry in California. FinCEN also issued updated guidance concerning detailed and proper filing of Currency and Monetary Instruments Reports, which are filed when $10,000 or more in currency is moved across the U.S. border.
The American Banker discussed how FinCEN and other regulators can facilitate AML compliance. The way regulatory enforcement actions are drafted could help compliance officers guide their firms away from future violations or assist in the resolution of an existing violation.