Advisories

Fincen’s Latest Order Requires A Serious Second Look

December 2003

Many banking organizations probably took little, if any, note of a recent enforcement order issued by United States Department of the Treasury’s Financial Crimes Enforcement Network ("FinCEN"). And those that did probably dismissed the order quickly. The facts were not compelling — a small, no-name securities brokerdealer was fined $10,000 for violating certain of the federal Bank Secrecy Act’s ("BSA") provisions, including, not surprisingly, the failure to implement an effective anti-money laundering ("AML") compliance program.

This case, however, merits the close attention of every entity currently or soon to be subject to the various requirements of the USA Patriot Act and the BSA for the following reasons:

• The order provides important new clues to FinCEN’s evolving enforcement policies and posture.
• It is FinCEN’s first action to enforce the foreign bank correspondent account provisions added to the BSA by the USA Patriot Act.
• It provides further insight into FinCEN’s expectations with respect to adequate and effective AML programs.
• It is FinCEN’s first action involving a referral by the Securities and Exchange Commission ("SEC"), one to which FinCEN reacted quickly.
• FinCEN showed no tolerance for untimely compliance with BSA requirements, including the deadline for implementing an AML compliance program.
• FinCEN imposed fines that were substantial for the particular entity, whether measured as a percentage of assets, net worth or revenue.
• The order illustrates that qualifying for the regulatory safe harbor with respect to foreign bank correspondent accounts does not eliminate the need to satisfy the statutory requirements for enhanced due diligence on such accounts, given their inherently higher risk profiles.