FinCEN, Federal Regulators Outline AML Enforcement Standards

By Valentina Pasquali

The Financial Crimes Enforcement Network may choose from a menu of a half-dozen enforcement measures in response to violations of the Bank Secrecy Act, the 1970 law that buttresses the U.S. anti-money laundering framework, the bureau noted in a statement Tuesday.

According to the statement, which comes on the heels of a related missive from the Office of the Comptroller of the Currency, Federal Reserve and other federal regulators, FinCEN can issue supervisory letters or other warnings to the entity or individual found in breach of BSA and AML rules, or seek injunctions to force them into compliance.

FinCEN can assess monetary penalties against entities and individuals who egregiously violated the BSA, according to the 3-page statement, or even refer them to the Justice Department for criminal investigation and potential prosecution.

The bureau uses 10 factors to assess the severity of a violation, it said. Those include the threat that the breach posed to the U.S. financial system, its level of pervasiveness across an institution, whether management knew of it or was otherwise involved, and the firm’s willingness to remediate it promptly.

“FinCEN will not treat noncompliance with a standard of conduct announced solely in a guidance document as itself a violation of law,” the bureau said Tuesday, adding that parties targeted with enforcement of any type retain the right to contest the “factual findings or legal conclusions” behind the action.

According to the statement, FinCEN has authority to penalize banks, brokerages, money services businesses and casinos for compliance breaches, but can also target a coterie of nonfinancial businesses, such as certain retailers and other firms that must file currency transaction reports, as well as any of the firms’ partners, directors, officers and employees involved in a violation.

Tuesday’s missive constitutes FinCEN’s first attempt at publicly outlining its enforcement posture but its brevity and scarcity of details limit its significance, said Dan Stipano, former deputy chief counsel for the Office of the Comptroller of the Currency, or OCC.

“Given the more extensive statement issued by the banking agencies, it appears that the FinCEN statement may be aimed more at non-banking institutions,” Stipano, now with the Buckley law firm in Washington, D.C., told ACAMS in an email.

In their 17-page joint statement last week, the OCC and other federal regulators similarly outlined the range of their possible responses to AML lapses, from informal discussions with an offending firm’s management, to formal, written warnings to the firm’s directors.

Regulators shall issue a cease-and-desist order against firms whose failure to adopt adequate AML controls such as written policies and procedures, customer due-diligence checks, transaction-screening systems, independent testing and specialized training exposes them to significant financial-crime risks, according to the Aug. 13 statement.

“An institution that has deficiencies only in its procedures for providing BSA/AML training … may be subject to examiner criticism and/or supervisory action … unless the … deficiencies … are so severe … as to result in a finding that the organization’s BSA/AML compliance program, taken as a whole, is not effective,” regulators said last week.

The statement does not appear to break new ground, Stipano said, but does confirm that regulators view BSA reporting and recordkeeping rules, including customer due-diligence requirements, as elements of the “internal controls” pillar of an institution’s AML program.

It also clarifies that regulators can respond to a single-pillar violation with a cease-and-desist order if the breach was egregious enough to have impacted the offending institution’s entire compliance program, but would not pursue formal enforcement in response to “isolated or technical” violations of the BSA, he said.

Contact Valentina Pasquali at

Topics : Anti-money laundering , Counterterrorist Financing
Source: U.S.: FinCEN
Document Date: August 18, 2020