The U.S. financial intelligence unit’s policy for “suppressing” highly sensitive Bank Secrecy Act reports of suspected criminal activity is necessary in certain instances, but should be rarely used, say sources.
The Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, came under fire in May after the New Yorker cited claims by an unnamed law enforcement official that two suspicious activity reports filed on Michael Cohen, President Donald Trump’s then personal attorney, had disappeared from a bureau-administered database.
First Republic Bank filed the SARs on Cohen, who is now under federal investigation in New York on suspicion of bank fraud, wire fraud and campaign finance violations, the Washington Post reported in April.
Prompted by senior Democratic lawmakers, the department’s Office of the Inspector General investigated whether FinCEN had indeed removed the SARs or followed already-established procedures for limiting access to them on the basis that the information they contained may imperil national security or law enforcement operations.
The inspector general concluded in a quietly released memorandum late last month that the SARs “were not destroyed” and that FinCEN had followed procedure when the bureau restricted access to them last year.
The SAR suppression policy mostly exists for the benefit of law enforcement, though not all investigators with access to the database may understand how it works, a former FinCEN official told ACAMS moneylaundering.com.
“But if you [FinCEN] are going to mask one SAR, you’d have to anticipate how to mask subsequent activity too, in case someone notices,” the former regulator said on condition of anonymity.
Previous leaks have drawn attention to FinCEN’s operations and administration of Bank Secrecy Act data.
In 2004, then Republican Sen. Bob Dole complained that the disclosure that Riggs Bank had filed BSA reports on what turned out to be his legitimate habit of regularly withdrawing thousands of dollars made him appear to the public eye to be involved in the lender’s money laundering operations and ties to corrupt foreign officials.
PNC Bank acquired Washington, D.C.-based Riggs Bank in 2005 and permanently retired the brand following the scandal.
SARs also led federal investigators to payments former New York Gov. Eliot Spitzer made to an escort in Washington, D.C., as well as to attempts by former House Speaker Dennis Hastert to structure withdrawals of cash to pay hush money to a sexual abuse victim.
“I am personally familiar with situations where FinCEN has used this process where high-profile individuals were involved,” Daniel Stipano, a former senior regulator with the Office of the Comptroller of the Currency, told moneylaundering.com. “They do it to ensure there isn’t a leak that could compromise a criminal investigation.”
The unauthorized disclosure of a SAR can trigger fines as high as $250,000 and a maximum prison sentence of five years.
The inspector general concluded in its report that the SAR suppression policy, which FinCEN updated in August of last year, enables the bureau to remove filings that contain classified or possibly inaccurate data and withhold them from “statistical analysis or activity reporting.”
FinCEN can also use the policy to restrict access to sensitive SARs while keeping them available for tallying.
The latter approach typically applies to reports that reveal the existence of a grand jury subpoena, contain national security-related information or threaten to undermine an undercover investigation, or otherwise involve “highly unusual circumstances”—the category under which FinCEN restricted access to the SARs filed on Cohen.
In these cases, a notice posted in lieu of the masked filing informs users that the report is “not available to be viewed at this time.”
Regulators and investigators authorized to view BSA data can request that FinCEN suppress certain records.
A group within FinCEN determines whether a suppression request meets standards, and may either escalate the review to senior officials or involve representatives of regulatory or law enforcement agencies as warranted, the inspector general noted in the report.
The bureau can also restrict access independently.
“This SAR pertains to a highly sensitive ongoing law enforcement investigation that could be jeopardized by the availability of the SAR to users of the BSA Portal or other SAR requesters,” FinCEN officials wrote to the inspector general in support of their decision to suppress the filings on Cohen.
The federal investigation of Cohen underway in New York has run parallel to Special Counsel Robert Mueller’s inquiry into possible collusion between the Trump campaign and Russian government to steer the 2016 election in favor of the Republican candidate.
The unnamed law enforcement official interviewed by the New Yorker said he decided to disclose the third SAR that First Republic Bank filed on Cohen’s Delaware-incorporated shell company, Essential Consultants LLC, after failing to locate two previous SARs the lender referenced in that filing.
The three SARs reportedly describe a combined $4 million in payments to Essential Consultants by several domestic and foreign companies, including an investment firm controlled by U.S.-blacklisted Russian oligarch Viktor Vekselberg. The payments allegedly do not match explanations Cohen gave to First Republic Bank.
The inspector general’s report appears to suggest that FinCEN has since restricted access to the third SAR as well.
|Topics :||Anti-money laundering , Counterterrorist Financing|
|Document Date:||July 26, 2018|