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7. What is the difference between money laundering and terrorist financing?
ln contrast to money laundering, which involves the disguising of funds derived from illegal activity so they may be
used without detection of the illegal activity, terrorist financing can involve the use of legally derived money to carry
out illegal activities. The objective of money laundering is financial gain or the hiding or disguising of illicit proceeds,
whereas with terrorism, the objective is to promote the agenda or cause of the terrorist organization. For example, it
is widely believed that the terrorist activities of September 11,2001, were partially financed by legally obtained funds
that had been donated to charities. Both money launderers and terrorists, however, do need to disguise the
association between themselves and their funding sources.
8. ls the approach to combat money laundering and terrorist financing the same?
Although some of the risk factors and red flags that apply to other types of money laundering also may apply to
terrorisl fìnancing, the patterns of activity tend to be very different. Terrorist fìnancing often involves very small
amounts of fundð, which may be moved through charities or nontraditional banking systems, whereas other types of
money laundering may involve large volumes of funds. lt is important to understand the different patterns to protect
against the risks.
Overv¡ew of U.S. AML Laws and Regulations
9. What are the key U.S. AML laws and regulations?
The key U.S. AML laws and regulations are the Bank Secrecy Act of 1970 (BSA) and the Uniting and Strengthening
Americã by Providing Appropriate Tools Required to lntercept and Obstruct Terrorism Act of 2001 (commonly
referred to as the USA PATRIOT Act).
The BSA was the first major money laundering legislation in the United States. lt was designed to deter the use of
secret foreign bank accounts and provide an audit trail for law enforcement by establishing regulatory reporting and
recordkeeping requirements to help identify the source, volume and movement of currency and monetary instruments
into or out of ihe United States or deposited in financial institutions. For additional guidance on the Bank Secrecy Act,
please refer to the Bank Secrecv Act section.
The USA PATRIOT Act was signed into law by President George W. Bush on October 26,2001, following the
terrorist activity of September 11. Title lll, the lnternational Money Laundering Abatement and Anti-Terrorist Financing
Act of 2001 , deals with money laundering and terrorist financing. Title lll made significant changes to money
laundering regulations, imposed enhanced requirements for AML programs, and significantly expanded the scope of
coveragelo nonbank financial institutions. lt requires financial institutions to establish AML programs that include
policies, procedures and controls, designation of a compliance officer, training, and independent review. lt also
requires, among other things, that certain financial institutions establish customer identification procedures for new
accounts as well as enhanced due diligence (EDD) for correspondent and private banking accounts maintained by
non-U.S. persons. For additional guidance on the USA PATRIOT Act, please refer to the USA PATRIOT Act section'
10. What other AML laws have been enacted in the United States?
ln addition to the BSA and Title lll of the USA PATRIOT Act, other AML laws include the Money Laundering Control
Act of 1986 (MLCA), the Anti-Drug Abuse Act of 1988, the Annunzio-Wylie Anti-Money Laundering Act of 1992, the
Money Laundering Suppression Act of 1994 (MLSA), and the Money Laundering and Financial Crimes Strategy Act
of 1 998.
The MLCA established two AML criminal statutes that, for the first time, made money laundering a criminal offense,
with penalties of up to 20 years and fines of up to $500,000 for each count. Additionally, the MLCA prohibits the
structuring of currency transactions to avoid filing requirements and requires financial institutions to develop BSA
compliance programs.
The primary purpose of the Anti-Drug Abuse Act of 1988 was to provide funding and technical assistance to state and
local units óf government to combat crime and drug abuse. This Act increased the civil and criminal penalties for
money laundering and other BSA violations to include forfeiture of any property or asset involved in an illegal
transaction related to money laundering. lt introduced the'sting' provision, which enables law enforcement to
represent the source of funds involved in a transaction as the proceeds of unlawful activity. This Act also required the
identification and recording of purchases of monetary instruments, including bank checks or drafts, foreign drafts,
cashier's checks, money orders or travelels checks in amounts between $3,000 and $10,000 inclusive. This
legislation, in conjunction with the Office of National Drug Control Policy (ONDCP) Reauthorization Act of 1998,
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authorized the Director of the ONDCP to designate areas within the United States that exhibit serious drug traffìcking
problems and harmfully impact other areas of the country as High lntensity Drug Trafficking Areas (HlDTAs). The
HIDTA program aims to improve the effectiveness and efficiency of drug control efforts among local, state and federal
law enforcement agencies.
The Annunzio-Wylie Anti-Money Laundering Act of 1992 gave protection from civil liability to any financial institution,
or director, officer or employee thereof, who/that makes a Suspicious Activity Report (SAR) under any local, state or
federal law. The Annunzio-Wylie Act made it illegal to disclose when a SAR is filed. lt also made it illegal to operate a
money transmitting business without a license where such a license is required under state law, and required all
financial institutioni to maintain records of domestic and international funds transfers. ln addition, this Act introduced
the'death penalty," mandating that bank regulators consider taking action to revoke the charter of any banking
organization that is found guilty or pleads guilty to a charge of money laundering.
The Money Laundering Suppression Act of 1994 (MLSA) specifically addressed money services businesses (MSBs),
requiring each MSB to register and maintain a list of its agents. ln addition to making it a federal crime to operate an
unregistered MSB, the MLSA encouraged states to adopt uniform laws applicable to MSBs. lt also established
procédures that allowed banks to exempt certain customers from Currency Transaction Report (CTR) filing.
Continuing with the trend of developing a national strategy to combat money laundering, the Money Laundering and
Financial Ôrimes Strategy Act of 1998 called for the designation of areas at high-risk for money laundering and
related financial crimes by geography, industry, sector or institution. Some of these areas were later designated as
High Risk Money Laundering and Related Financial Crimes Areas (HlFCAs). The HIFCA program was created to
coórdinate the efforts of local, state and federal law enforcement agencies in the fìght against money laundering.
The lntelligence Reform and Terrorism Prevention Act of 2004 amended the BSA to require the U.S. Treasury
Secretary to prescribe regulations requiring certain financial institutions to report cross-border electronic transmittals
of funds, if the Secretary determines such reporting is 'reasonably necessary' to aid in the fight against money
laundering and terrorist financing.
11. What is the role of the Office of Foreign Assets Control (OFAC) and how does it fit into
AML laws and regulations?
The purpose of OFAC is to promulgate, administer and enforce economic and trade sanctions against certain
individuals, entities and foreign government agencies and countries whose interests are considered to be at odds
with U.S. policy. Sanctions programs target, for example, terrorists and terrorist nations, drug traffìckers and those
engaged in the proliferation of weapons of mass destruction.
Overviews and details of the OFAC Sanctions programs can be found on OFAC's website at www.treas.oov/ofac
OFAC regulations are not part of AML compliance per se, but since the OFAC Sanctions lists include alleged money
launderers and terrorists and USA PATRIOT Act requirements mandate that certain financial institutions vet customer
names against the OFAC list, institutions often consider the OFAC program to be a subset of their overall AML
program. For additional guidance, please refer to the
Sanctions Proorams section.
12. How can one measure the effectiveness of an AML regime?
A number of factors can be considered when assessing the effectiveness of an AML regime, including the number of
money launderingiterrorist financing investigations, prosecutions and convictions, number and amount of
frozen/seized assets, identification of deficiencies in financial institutions in examinations by regulatory authorities,
and quality of coordination among financial institutions, regulatory and law enforcement authorities. For additional
guidance on tools and techniques used to assess the effectiveness of AML systems, please referto the Financial
Action Task Force section.
13. How do U.S. regulations compare to international AML regulations?
The United States' role as a leader in the fight against money laundering and terrorist financing dates back 40 years
to the passage of the Bank Secrecy Act in 1970. Through the ensuing decades and especially following the terrorist
activities of September 11,2001 , the United States has reinforced its commitment through the passage of a number
of additional money laundering-related laws, issuance of extensive regulatory guidance and aggressive enforcement.
That said, the United States, as with many other major jurisdictions, is not in full compliance with the FATF
Recommendations. ln fact, FATF in its most recent assessment of the United States' anti-money regime, identified
several areas in need of improvement, including: customer due diligence relating to beneficial owners, authorized
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signers, legal persons and trusts; ongoing due diligence; and general requirements for designated nonfinancial
bùsinesseõ and professions (DNFBP¡) (e.g., casinos, accountants, attorneys, dealers in precious metals and stones'
real estate agents).
For additional guidance, please refer to the Financial Action Task Force and Mutual Evaluations sections.
For additional guidance on international perspectives, please refer to the
section.
14. What are the consequences of not complying with AML laws and regulations?
The consequences of noncompliance with AML laws and regulations may include regulatory enforcement actions,
civil and criminal penalties, seizure and forfeiture of funds, and incarceration for the individuals involved. Depository
institutions also may be subject to restrictions on growth and expansion and, in the extreme, may have their
charters/licenses revoked, a consequence known as the'death penalty." For additional guidance, please refer to the
Enforcement Actions section.
15. What factors are considered by law enforcement when it assesses whether an institution
or its personnel are guilty of aiding and abetting money laundering or terrorist financing?
When assessing whether an institution or its personnel are guilty of aiding and abetting money_laundering or terrorist
financing, the author¡ties consider, among other factors, the following 'standards of knowledge':
. Reckless Disregard -
r Willful Blindness - Deliberate ignorance and failure to follow up in the face of information that suggests
probable money laundering or illicit activity
o Collective Knowledge - Aggregates/attributes the knowledge of employees to the employing company
Careless disregard for legal or regulatory requirements and sound business practice
It is important to remember that under U.S. law, a company may, in general, be held liable for the actions of its
employees, regardless of the number or level of employees involved in the wrongdoing.
Overview of the U.S. Regulatory Framework
Key U.S. Regulatory Authorities and Law Enforcement
Ag e n c¡es
16. Who has the authority to assess penalties for violations of AML laws and regulations?
Authority to assess civil penalties rests with the Secretary of the Treasury and is delegated to the Financial Crimes
Enforcement Network 1ÈinCeU¡ and the primary federal regulators or Self-Regulatory Organizations (SROs) (e.9.'
Financial lndustry Regulatory Authority tFlNRAl). Some state regulatory agencies have their own authority to assess
civil penalties, as weli Crimiñal penalties are determined through legal proceedings at state orfederal levels. The
Department of Justice (DOJ) can bring criminal and civil actions, as well as forfeiture actions.
17. Who are the primary federal banking regulators and what are their responsibilities?
The five federal banking regulators include:
o The Board of Governors of the Federal Reserve System (FRB) oversees state-chartered banks and trust
companies that belong to the Federal Reserve System, financial holding companies, bank holding companies
(BHC) and thrift holding companies.
r The Federal Deposit lnsurance Gorporation (FDIC) regulates federally charted banks (e.9., state-chartered
banks that do not belong to the Federal Reserve System) as well as state-chartered thrifts.
¡ The Office of the Comptroller of the Currency (OGC) regulates federally chartered banks (e.9., banks that
have the word 'National" in or the letters "N.A.' after their names as well as federal thrifts).
o The National Credit Union Administration (NCUA) regulates federally chartered credit unions.
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. Consumer Financ¡al Protection Bureau (CFPB): Established by the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (Dodd-Frank), the CFPB is a federal regulator charged with regulating
consumer protection for financial products and services.
Other regulatory bodies were authorized by the Dodd-Frank Act, but their mandates deal more specifically with broad
prudential considerations and consumer protection.
18. What is the Federal Financial lnstitutions Examination Council (FFIEC)?
The Federal Financial lnstitutions Examination Council (FFIEC) is a formal interagency body empowered to prescribe
uniform principles, standards and report forms, and to make recommendations to promote uniformity in the
supervision oi financial institutions. Òouncil members include the four federal regulators: FRB, FDl9r OCC' NCUA'
and the State Liaison Committee (SLC). The SLC includes representatives from the Conference of State Bank
Supervisors (CSBS), the American Council of State Savings Supervisors (ACSSS), and the National Association of
State Credit Union Supervisors (NASCUS).
19. Who are the key nonbanking regulatory agencies?
Nonbanking regulatory agencies include but are not limited to:
. Securities and Exchange Commission (SEC): The SEC is the federal regulator of the securities markets and
administers the federal sãcurities laws (including the Securities Act of 1933, the Securities Exchange Act of
1934, the lnvestment Company Act of ì940, the lnvestment Advisers Act of 1940 and the Trust lndenture Act of
193g), with direct regulatory and oversight responsibilities of securities exchanges, securities brokers and
dealers, investmentãdviseis and investment companies, and self-regulatory organizations (SROs).
. Commodity Futures Trading Gommission (CFTG): The CFTC is thefederal regulator of U.S. commodity
futures and options markets iñ tne United States. lt administers and enforces the federal futures and options laws
as set forth in the Commodity Exchange Act (CEA) and the accompanying regulations'
¡ Financial lndustry Regulatory Authority (FINRA): Formerly known as the National Association of Securities
Dealers (NASD), FINRA is an SRO for broker-dealers
. Consumer Financial Protection Bureau (GFPB): Established by the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 20't0 (Dodd-Frank), the CFPB is a federal regulator charged with regulating
consumer protection for fìnancial products and services.
o National Futures Association (NFA): The NFA is the SRO for the futures market.
, New york Stock Exchange (NYSE): The NYSE is the SRO for exchange member organ¡zations (i.e., registered
broker-dealer organized aõ a corporation, a partnership or an LLC that holds an NYSE trading license or opts for
NYSE regulation).
¡ National lndian Gaming Commission (NIGC): The NIGC is an independent federal regulatory agency whose
primary mission is to regulate gaming activities on lndian lands.
. IRS Tax Exempt and Government Entities Division (lRS-TEGE): The IRS-TEGE provides federal oversight to
all nonprofit organizations in the United States, including reviews to determine if nonprofìt organizations are
facilitating terrorist financing.
. IRS Small Business and Self-Employment Division (IRS-SBSE): The IRS-SBSE has been delegated
examination authority over all financial institutions that do not have a federal functional regulator as defined in the
BSA, including MSBé, insurance companies, credit card companies, nonfederally insured credit unions, casinos
(tribal and noñtriOat¡, and dealers in precious metals, stones and jewels. The IRS-SBSE also has responsibility
ìor auditing compliance with currency transaction reporting requirements that apply to any trade or business
(Form 8300).
For further guidance on the AML responsibilities of broker-dealers, money services businesses and other nonbank
entities, pleáse refer to the
section'
20. What are the key law enforcement agencies responsible for combating money
laundering and terrorist financing?
Key law enforcement agencies responsible for combating money laundering and terrorist financing include:
r Drug Enforcement Administration (DEA)
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. Federal Bureau of lnvestigation (FBl)
o Department of Homeland Security, lmmigration and Customs Enforcement (lCE)
. Department of Homeland Security, Customs and Border Protection (CBP)
r lnternal Revenue Service Criminal lnvestigation (lRS-CI)
21. What are examples of other key agencies with responsibilities to combat money
laundering and terrorist financing?
Key agencies with responsibilities to establish policies and strategies to combat money laundering and terrorist
financing include, but are not limited to, the following:
U.S. Department of the Treasury
¡ Office of Terrorism and Financial lntelligence (TFl)
¡ Office of Terrorist Financing and Financial Crime (TFFC)
. Office of lntelligence and Analysis (O|A-T)
¡ Financial Crimes Enforcement Network (FinCEN)
¡ Office of Foreign Assets Control (OFAC)
. Treasury Executive Office for Asset Forfeiture (TEOAF)
U.S. Department of Justice (DOJ)
o Asset Forfeiture and Money Laundering Section, Criminal Division (AFMLS)
. Counterterrorism Section, Criminal Division (CTS)
r National Drug lntelligence Center (NDIC)
¡ Office of lnternational Affairs, Criminal Division (OlA)
U.S. State Department
. Bureau of Economic and Business Affairs (EB)
. Bureau of lnternational Narcotics and Law Enforcement Affairs (lNL)
r State's Office of the Coordinator for Counterterrorism (S/CT)
22. What publications and resources have been provided to the public by U.S. regulatory
and/or law enforcement authorities?
Examples of publications and resources include, but are not limited to, the following:
. FFIEC Bank Secrecy AcUAnti.Money Laundering Examination Handbook - Provides guidance to examiners
for carrying out BSA/AML and OFAC examinations for depository institutions. The manual contains an overview
of AML Compliance Program requirements, AML risks (e.9., products, services, transactions and customertypes
of heightened risk), risk management expectations, industry sound practices and examination procedures. The
development of this manual was a collaborative effort of the Federal Reserve, the OCC, the NCUA, the OTS
(which has since been dissolved and replaced on the FFIEC by the Consumer Financial Protection Bureau
(CFPB), the FDIC and FinCEN to ensure consistency in the application of AML requirements.
. Bank Secrecy AcUAnti-Money Laundering Examination Manual for Money Services Businesses -
Provides guidance to examiners for carrying out BSA/AML and OFAC examinations for MSBs. The manual
contains an overview of AML Compliance Program requirements, risk management expectations, industry sound
practices, examination procedures, overviews of the different types of MSBs (i.e., check cashers, currency
dealers or exchangers, issuers of traveleis checks and money orders, money transmitters), overview of the
relat¡onship between principals and agents, and additional guidance on MSB registration requirements, foreign
agent or foreign counterparty due diligence, and recordkeeping and retention requirements for all types of MSBs.
Tñe development of this manual was a collaborative effort by the lRS, state agencies responsible for MSB
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regulations, the Money Transmitter Regulators Association (MTRA), the Conference of State Bank Supervisors
(CSBS), and FinCEN.
r Bank Secrecy Act Exam Resources - Developed by the NCUA, this publication provides guidance to
examiners for carrying out AML and OFAC examinations for credit unions.
r FFIEC lnformation Technology Examination Handbook - Developed through a collaborative effort of the
Federal Reserve, the OCC, the NCUA, the CFPB and the FDIC, the lT Examination Handbook covers key
technology topics as they relate to financial services in separate booklets, including:
o Audit
o Operations
o Management
o Business continuity planning
o Outsourcing technology services
o Development and acquisition
o Retail payment systems
o Wholesale payment systems
o E-banking supervision of technology service providers
o lnformation security
The lT Examination Handbook provides guidance on topics such as risks and suggested controls on third-party
payment processors (e.g., Automated Clearing House [ACH] providers, remote deposit capture [RDC] providers)
and electronic payments (e.9., electronic banking, automated teller machine IATMI).
. Anti-Money Laundering (AML) Source Tool for Broker-Dealers - Developed by the SEC to assist brokerdealers
with fulfilling their responsibilities to establish an AML Compliance Program, as required by AML laws
and regulations.
o Template for Small Firms - This template, available on FINRA's website, is designed to assist small firms in
fulfilling their responsibilities to establish an AML Compliance Program, as required by the BSA and its
implementing regulations and FINRA Rule 3310, by providing text examples, instructions, relevant rules,
websites and other resources.
. Compliance Self-Assessment Guide - Developed by the NCUA, this guide is intended for use by a credit
union's board of directors and management, compliance officers, and others having responsibility for compliance
as part of their duties. While the guide covers most federal consumer protection laws and regulations that affect
credit unions, it does not address all federal laws or any state laws.
. AML e-learning courses - FINRA offers several e-learning courses and interactive scenarios on AMl-related
'
topics, ranging from customer identification procedures to recognizing red flags.
U.S. Money Laundering Threat Assessment (MLTA) - Published in 2005, the MLTA was written by the
following agencies, bureaus and offices:
o Office of Terrorist Financing and Financial Crime (TFFC)
o Financial Crimes Enforcement Network (FinCEN)
o Office of lntelligence and Analysis (OlA)
o Office of Foreign Assets Control (OFAC)
o Executive Office for Asset Forfeiture (TEOAF)
o lnternal Revenue Service (lRS) - Criminal lnvestigation (Cl)
o IRS - Small Business/Self-Employed Division (SB/SE)
o Federal Bureau of lnvestigation (FBl)
o Drug Enforcement Administration (DEA)
o Asset Forfeiture Money Laundering Section (AFMLS)
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o National Drug lntelligence Center (NDIC)
o Organized Crime Drug Enforcement Task Force (OCDETF)
o lmmigration and Customs Enforcement (lCE)
o Customs and Border Protection (CBP)
o Federal Reserve
o United States Postal lnspection Service (USPIS)
The MLTA contains detailed analyses of money laundering vulnerabilities across banking, insurance, casinos
and MSBs including, but not limited to, the following:
o Banking (e.g., correspondent banking, cash lettersipouch activities, private banking, online banking,
remote deposit capture [RDC])
o MSBs (e.g., provision of check cashing, money transmission, prepaid access, monetary instrument,
currency exchange services to'noncustomers") and informal value transfer systems (IVTS)
o Emerging electronic and remote payment systems
o Bulk cash smuggling
o Trade-based money laundering (e.9., Black Market Peso Exchange [BMPE], foreign trade zones
IFTZs])
o Legal entities (e.9., trusts, shell companies, corporations, limited liability companies)
¡ National Money Laundering Strategy (NMLS) - Written by the U.S. Departments of Homeland Security,
Justice, Treasury, and State, as well as by the Federal Reserve, the OCC, and the FDIC, the NMLS was
published in2QO7 in direct response to the MLTA. Nine key goals were outlined:
o Continuing to safeguard the banking system
o Enhancing financial transparency in money services businesses (MSBs)
o Stemming the flow of illicit bulk cash out of the United States
o Attacking trade-based money laundering at home and abroad
o Promoting transparency in the ownership of legal entities
o Examining anti-money laundering regulatory oversight and enforcement at casinos
o lmplementing and enforcing anti-money laundering regulations for the insurance industry
o Supporting global anti-money laundering capacity building and enforcement efforts
o lmproving how to measure progress
o lnternational Narcotics Gontrol Strategy Report (INCSR) -
An annual report issued by the U.S. Department
of State that describes the efforts to attack, country by country, all aspects of the international drug trade, as well
as chemical control, money laundering and fìnancial crtmes.
o Country Reports on Terrorism -
An annual report, previously known as Patterns of Global Terrorism, issued
by the Department of State that provides overyiews of terrorist activity in countries in which acts of terrorism
occurred, countries that are state sponsors of terrorism, and countries determined by the U S. Secretary of State
to be of particular interest in the global war on terror. The Country Reports on Terrorism also cover major
terrorism-related events involving Americans, information on terrorist groups, terrorist sanctuaries, terrorist
attempts to acquire weapons of mass destruction, statistical information provided by the National
Counterterrorism Center (NCTC) on individuals killed, injured or kidnapped by terrorist groups, and bilateral and
multilateral counterterrorism cooperation.
For additional guidance issued by key international groups, please refer to the Kev lntemational Grouos and
lnitiatives section. For details on guidance specifìc to a particular topic (e.9., Suspicious Activity Reports [SARs],
correspondent banking, politically exposed persons [PEPs], trade finance), please refer to the respective sections
throughout this publication.
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Financial Crimes Enforcement Network
23. What is the Financial Crimes Enforcement Network, and what is its role in AML
regulation?
The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury Department, was established in
1990 by Treasury Ordel|05-08. lts mission is to safeguard the financial system from abuses of financial crime. lt is
the Finâncial lntelligence Unit (FlU) of the United States, formed to support law enforcement and the fìnancial
community in the fight against money laundering, terrorist financing and other financial crimes through the collection,
analysis and sharing of gSR information. FinCEN seeks to provide adequate financial intelligence to law enforcement
without overburdening the financial community or compromising the privacy of individuals.
The many partnerships of FinCEN are not limited to the United States, but expand internationally to law enforcement,
financial institutions and regulatory authorities in foreign countries' as well.
While FinCEN relies primarily on federal functional regulators to examine financial institutions and enforce AML
compliance, the reguiators look to FinCEN for guidance in the implementation of the BSA and USA PATRIOT Act'
f¡nigru has issued regulations, in concert with federal functional regulators and the lnternal Revenue Service (lRS),
related to BSA and AML compliance. FinCEN may issue enforcement actions for violations of the BSA and USA
PATRIOT Act through ¡ts Office of Enforcement jointly or unilaterally. The Office of Enforcement evaluates
enforcement matters, including the assessment of civil money penalties.
24. ln what types of initiatives does FinCEN engage?
ln 1992, as part of the Annunzio-Wylie Anti-Money Laundering Act, FinCEN formed the Bank Secrecy Act Advisory
Group (BSAAG), a task force established to coordinate and inform the fìnancial community about BSA-related
matters. The BSAAG includes senior representatives from financial institutions, federal law enforcement agencies,
regulatory agencies, and others from the public and private sectors. ln 2009, the Financial Fraud Enforcement Task
foice 1fÉeff) was established as a multi-agency task force with federal, state and local partners to improve efforts
to investigate and prosecute significant financial crimes, recover proceeds for victims, and address financial
discrimination in the lending and financial markets.
FinCEN also has created several communication systems to facilitate the sharing of information among both
domestic and international entities. The BSA E-Filing System allows fìnancial institutions to file electronic BSA forms,
such as CTRs and SARs, quickly and securely. The Gateway program enables law enforcement agencies and
financial industry regulators to have expedited access to BSA records fìled with FinCEN. The Law Enforcement and
Financial lnstituiionlnformation Sharing (LEFllS) system allows law enforcement to receive feedback from financial
institutions on subjects of money laundering and terrorism investigations, and is used to facilitate information sharing
among financial institutions. FinCEN also developed the Egmont Secure Web (ESW), which is a private network that
allowJconnected FlUs to interface with FinCEN and each other to access information related to money laundering
trends, analytical tools and technological developments via e-mail.
Additional tools include the Geographic Threat Assessments and Nontraditional Methodologies Sections, a resource
center for emerging methods of money laundering and terrorist financing.
FinCEN also collaborates with other FlUs globally to exchange information supporting AML and counterterrorism
initiatives worldwide, and assists other countries with developing their FlUs. For additional guidance on FlUs, please
refer to the
section
25. What resources has FinCEN provided to the public?
Among the issuances and resources provided by FinCEN are the following:
r Statutes and Regulations - Resource that contains links to BSA and USA PATRIOT Act statutes and codified
regulations.
. Federal Register Notices - Links to final regulations issued after the date of codification as well as Notices of
Proposed Rulemaking (NPRs) in the Federal Registe
o Guidance - Clarification of issues or responses to questions related to FinCEN regulations (e.9., completion and
filing of Suspicious Activity Reports [SARs]; applicability of the defìnition of a money services business [MSB] to
a pãrticular business activity; applicability of the Safe Harbor provision when sharing SARs under certain
circumstances).
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o Administrative Rulings - Rulings that provide a new interpretation of the BSA or any other statute granting
FinCEN authority, express an opinion about a new regulatory issue, and/or outline the effect of the various
releases on covered financial institutions.
o Advisories/Bulletins/Rulings/Fact Sheets - An archive of advisories, advisory withdrawals, bulletins, rulings
and fact sheets dating back to 1 996.
. Answers to Frequently Asked Bank Secrecy Act (BSA) Questions - A list of basic questions and answers
about BSA and USA PATRIOT Act laws and regulations.
. Reports and Publications - Reports published periodically on key regulatory issues and strategies to address
these issues including, but not limited to, the following:
o The SAR Activity Review: "Trends, Tips & lssues" - A publication produced approximately once or
twice each year by FinCEN in cooperation with many regulatory, law enforcement and industry partners.
The publicáion gives the public information and insight concerning the preparation, use and value of
SARs filed by institutions.
o The SAR Activity Review: "By the Numbers" - A publication that is generally produced tvvice each
year as a companion to The SAR Activity Review: "Trends, Tips & lssues' and provides numerical data
on SAR filings.
o Financial lnstitutions Outreach lnitiative - Reports sharing information gathered through various
outreach initiatives with representatives in the financial industry (e.9., large depository institutions,
MSBs).
o Strategic Analytical Reports and Other Publications - Publications addressing other trends and
issues, such aJMortgage Loan Fraud: An Update of Trends Based upon an Analysis of Suspicious
Activity RePorts (APril 2008).
o Annual Report - Provides an overview of FinCEN's current state and details the strategies and
outcomes of the Yea/s oPerations.
o Report to Congress -
An archive of reports made to Congress by the U.S. Secretary of the Treasury
dating back lo2002, including the required annual 361(b) report.
o The Strategic Plan - Published periodically, the Strategic Plan details how FinCEN intends to achieve
its current goals in the near future.
o Bank Secrecy AcUAnti-Money Laundering Examination Manual for Money Services Businesses -
Guidance on the examination process of MSBs, in English and Spanish.
. Enforcement Actions - Links to enforcement actions dating back to '1999.
. Law Enforcement - A summary of support services for law enforcement and links to law enforcement case
examples that have been assisted by information reported under BSA regulations.
. News Releases -
An archive of important FinCEN news releases dating back to 1994.
o Speeches - An archive of speeches given by the director of FinCEN dating back to 2004'
¡ Testimony - An archive of testimony given by the director of FinCEN dating back to 2004.
26. How does FincEN interact with banking and securities regulators?
ln2OO4, FinCEN entered into a Memorandum of Understanding (MOU) with federal banking regulators. The MOU
sets forih procedures for the administration of the BSA, Titles I and ll of Pub. L. 91-508, as amended' codified at 12
u.s.c. s 1829b,12 U.S.C. SS 1951-1959, and 31 U.S.C. SS 5311-5332; information relating to the primary federal
regulato-rs' policies and proðõdures for examination of BSA compliance; significant BSA compliance issues at banking
orlanizations supervised by the regulators; and analytical data based_on or derived from information provided by the
relulators. The MOU also gives F|ñCEN authority to issue its own enforcement actions, even when regulators may
noi think it is necessary. Oñ April 26,2005, FinCEN and the New York State Banking Department entered into a
similar MOU; shortly thereafter, a number of other states followed suit'
ln late 2006, the SEC and FinCEN entered into an MOU under which the SEC provides FinCEN with detailed
information on a quarterly basis regarding the AML examination and enforcement activities of the SEC and the Self-
Regulatory Organizationé (SROs). ln return, FinCEN provides assistance and analytical reports to the SEC.
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ln June 2011, FinCEN entered into an MOU with the Consumer Financial Protection Bureau (CFPB), which provides
the CFPB direct electronic access to BSA information and analytical materials (e.9., analytical tools, BSA information
reviews, etc.) as required and appropriate forthe exercise of the CFPB's regulatory authority. ln return, the CFPB,
upon request, will provide reports on the results of its investigations or examinations and statistical information related
to any inquiries to assist FinCEN in understanding and analyzing the value of BSA information.
Enforcement Actions
27. What types of enforcement actions are available to regulators for addressing AML
Compliance Program deficiencies and violations?
Regulators have a range of enforcement tools available to address AML Compliance Program defìciencies and
violations of AML laws and regulations.
While enforcement actions against nonbanks have increased in recent years, the number of enforcement actions
issued by bank regulators coñtinues to outnumber those of other agencies, at least in the United States. Examples of
enforcement actions available to U.S, bank regulators in order of severity are:
. Commitment Letter: A Commitment Letter is an agreement between a bank's board of directors and a bank
regulator in which the board, on behalf of a bank, agrees to take certain actions to address issues or concerns
surfaced by the regulator. A Commitment Letter is not legally binding, but the failure of a bank to live up to the
terms of the Commitment Letter may subject the bank to more formal regulatory action.
. Memorandum of Understanding: A Memorandum of Understanding (MOU) is an agreement between a bank's
board of directors and one or more regulatory agencies. The content of an MOU may be similar or identical to
more formal enforcement actions, but MOUs are nonpublic documents and, similar to Commitment Letters, not
legally binding.
. Formal Agreements: A Formal Agreement is an agreement between a bank's board of directors and one or
more regulatory agencies. While the contents of a Formal Agreement may mirror those of an MOU, violations of
a Formal Agreement can provide the legal basis for assessing civil money penalties (CMPs) against directors,
officers and other institution-affiliated parties.
o Gonsent Order or Order to Cease and Desist (C&D): Consent Orders and Orders to Cease and Desist are
agreements between a bank's board of directors and one or more regulatory agencies. Violations of a Formal
Agreement can provide the legal basis for assessing civil money penalties (CMPs) aga¡nst directors, offìcers and
other institution-affiliated parties. The regulator's decision to issue a Consent Order or Order to Cease and Desist
rather than a formal agreement is based on its assessment of the severity of the bank's problems.
¡ Civil Money Penalties (CMPs): Civil money penalties are financial penalties that may be imposed by a regulator
against a bank or an individual(s) for a violation of law or regulation or noncompliance with a formal enforcement
action.
o ,,Death Penalt¡/': Under the Annunzio-Wiley Act of 1992, bank regulators have the option - in fact, are obligated
to consider - whether the license/charter of a depository institution that is found guilty or pleads guilty to money
laundering charges should be revoked. The revocation of a license/charter is known as the "Death PenalÇ."
Unlike the formal enforcement actions issued by bank regulators, which are usually very prescriptive as to the actions
that must be taken to address the identified deficiencies, the enforcement actions taken by securities and
futures/commodities regulators generally report findings that detail the nature of the deficiency, but do not prescribe
specific corrective action (and accompanying fines have been modest compared to those levied against banks).
28. Does FinCEN have enforcement authority?
FinCEN does have enforcement action authority, which it often uses in conjunction with a financial institution's
functional regulators.
29. Beyond the actions and penalties that may be imposed by regulators, are U.S.
companies subject to any other potential actions?
Yes. Other actions, such as Deferred Prosecution Agreements (DPA), may result from legal actions.
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30 What is a Deferred Prosecution Agreement?
A DPA is an agreement entered into between a prosecutor and a defendant in a criminal case whereby in exchange
for successful completion of agreed-upon commitments, the criminal charges against the defendant will be dismissed
in their entirety by the prosecutor.
31. What enforcement actions have had a significant impact on the AML landscape?
Certain enforcement actions stand out because of the size of the penalties imposed on the institutions and/or the
media attention they received. Examples would include:
o BankingOrganizations:
ABN Amro: ln December 2005, ABN Amro was assessed an $80 million Civil Money Penalty (CMP) for
failure to implement an adequate system of internal controls reasonably designed to assure compliance
w1h U.S. AML laws and regulations. The CMP cited deficiencies within the North American Regional
Clea¡ng Center (NARCC), a unit within the New York Branch of ABN Amro that operated as a clearing
center for funds transfers in U.S. dollars for members within the ABN Amro network and more than 400
third-party financial institutions. Specific findings included the following:
. Failure to staff the compliance function and train compliance personnel adequately
. Failure to file accurate and timely Suspicious Activity Reports (SARs)
. Lack of formal procedures for collecting and reviewing due diligence and assessing the risks of
foreign financial institutions accessing correspondent banking services
. Lack of adequate monitoring of funds transfers for potentially suspicious activity, particularly
funds transfers conducted by financial institutions independent of the ABN Amro network
. Failure to incorporate information on subjects of previous SAR filings, terminated relationships,
and publicly available information on shell companies into its suspicious activity monitoring
program
. Failure to investigate alerts and utilize the capabilities of its automated monitoring software to
manage its money laundering and terrorist financing risk effectively
American Express: ln August 2007, American Express lnternational Bank (AEIB) was issued a Cease
and Desist (C&D) order and assessed a $20 million CMP and $55 million forfeiture. American Express
Travel Related Services Co. (AETRSC) also was assessed a $5 million CMP. Cross-border payment
made total effective charges, including forfeiture, $65 million. AEIB provided private banking services to
high net worth clients and AETRSC operated as a money services business (MSB). Specific findings
included the following :
. Failure to implement comprehensive customer due diligence (CDD) and enhanced due
diligence (EDD) processes
. Failure to implement effective control measures for bearer shares and other private investment
companies (PlCs)
. Failure to adhere to the internal policies for periodic reviews of high-risk accounts
. lnadequate transaction monitoring system due to data integrity and other problems
r lnadequate independent testing of the AML Compliance Program
. Failure to provide adequate oversight of and accountability for the AML Compliance Program
by management of AEIB and its parent company, AEB
Wachovia: ln March 20'10, the Office of the Comptroller of the Currency (OCC), FinCEN and the U.S.
Department of Justice (DOJ) announced that Wachovia Bank, N.4., had agreed to a Deferred
Prosecution Agreement with a forfeiture of $110 million with the DOJ, a civil money penalty of $50
million, a C&D with the OCC, and a civil money penalty (CMP) of $1 l0 million with FinCEN. FinCEN
agreed its CMP would be satisfied by the payment of the DOJ forfeiture. Specifìcfindings included the
following:
. Failure to implement adequate policies, procedures and controls for bulk cash transactions
conducted by high-risk casas de cambìo and other foreign correspondent banking customers
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. Failure to conduct monitoring of the high volume of monetary instruments through casas de
cambio and other foreign correspondent customers using Remote Deposit Capture (RDC)
servlce
. Failure to monitor sequentially numbered traveler's checks used by casas de cambio and other
foreign correspondent customers in a manner compliant with internal policy on these
transactions
. Failure to institute appropriate risk-based monitoring of foreign correspondent banking
customers - primarily as a result of setting alert parameters based on staffing capacity
. Failure to file timely SARs on several foreign correspondent banking customers
. Failure to report cash structuring activity
HSBC: ln October2010, the Federal Reserve Board announced that it had issued a Cease and Desist
Order between HSBC North America Holdings, lnc, (HNAH), New York, New York, a registered bank
holding company (BHC), and the Federal Reserve Board. The order requires HNAH to take corrective
act¡on to improve its firm-wide compliance risk management program, including its anti-money
laundering compliance risk management. Concurrent with the Federal Reserve Board's announcement
of its enforcement action, the Office of the Comptroller of the Currency announced its issuance of a
Cease and Desist Order against HSBC Bank USA, N.4., Mclean, Virginia (HBUS, a subsidiary of
HNAH), for violating the Bank Secrecy Act and its underlying regulations.
HSBC was directed to use its financial and managerial resources as a source of strength for its bank
subsidiaries, and in particular HBUS, to ensure that it complies with the OCC Consent Order regarding
HBUS' BSA/AML program. lt was also directed to 'retain an independent consultant acceptable to the
[Chicago Federal] Reserve Bank to complete a review of the effectiveness of the firm-wide BSA/AML
Compliance Program adopted by HNAH (the 'BSA/AML Review'), and to prepare a written report of
findings and recommendations (the 'BSA/AML Report')." ln another section of the Order, HNAH was
directèd to 'submit to the [Chicago Federal] Reserve Bank an acceptable written program designed to
reasonably ensure the identifìcation and timely, accurate, and complete reporting by HNAH and its
subsidiaries of all known or suspected violations of law or suspicious transactions to law enforcement
and supervisory authorities, as required by applicable suspicious activity reporting laws and
regulations.'
The OCC Order states that the agency found deficiencies in HBUS' BSAJAML Compliance Program - in
particular, deficiencies in internal controls for customer due diligence, procedures for monitoring
suspicious activity and independent testing. The Order also cited aggravating factors 'such as highly
suspicious activity creating a significant potential for unreported money laundering or terrorist financing."
Specific cited deficiencies included special handling of wire transfers of customers domiciled in
countries risk-rated as 'standard' or'medium,' resulting in limited and ineffective BSA/AML monitoring
of two{hirds of the bank's wire activity; failure from 2006 to 2009 to monitor bulk cash transactions with
foreign affìliates; failure to perform customer due diligence or enhanced due diligence for its foreign
affiliates, inhibiting its assessment of customer risk and the identification of suspicious activity in
accounts of those affiliates; failure to address a backlog of suspicious activity alerts (due to inadequate
staffing), which caused the bank to file many late SARs; and failure to appropriately designate
customers as 'high-risk'for BSA/AML monitoring, even when a customeis association with PEPs could
harm the bank's reputation. ln July 2012, HSBC was the subject of a hearing held by the Senate
Permanent Subcommittee on lnvestigations entitled 'U.S. Vulnerabilities to Money Laundering and
Terrorist Financing: HSBC Case History.'
Citibank: ln April 2012, the OCC issued a Cease and Desist Order against Citibank, N.A. for violations
of the Bank Secrecy Act (BSA) and underlying regulations. According to the OCC, the order requires
the bank to take comprehensive corrective actions to improve its BSA compliance program.
The compliance program allegedly had defìciencies with respect to internal controls, customer due
diligence, the independent BSA and the anti-money laundering audit function, monitoring of its remote
deposit capture and international cash letter instrument processing in connection with foreign
correspondent banking, and suspicious activity reporting related to that monitoring. These fìndings
resulted in violations by the bank of statutory and regulatory requirements to maintain an adequate BSA
compliance program, file suspicious activity reports, and conduct appropriate due diligence on foreign
correspondent accounts.
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As part of the Order, the Bank is required to arrange for an independent look back for suspicious activity
covering areas (and presumably time frames) to be designated by the bank's Examiner-in-Charge.
. Broker-Dealers:
o E"TRADE: ln January 2009, FINRA assessed a $1 million penalty against E"Trade Securities and E"
Trade Clearing LLC for failure to implement AML policies and procedures to reasonably detect and
report potentially suspicious securities transactions. Alerts triggered in the automated monitoring system
were limited to those with money movements, thereby eliminating detection and review of potentially
suspicious matched or washed trades. The firms relied upon analysts to monitor high-volume online
trading activity for potentially suspicious activity manually, without providing necessary automated
monitoring tools.
Additionally, in July 2008, both firms reached a $1 million settlement with the SEC for failure to
document their Customer ldentification Program (ClP) and verify the identities of more than 65,000
clients from October 2003 to June 2005.
r Money Services Businesses (MSBs):
Sigue Corporation: ln January 2008, FinCEN assessed a $12 million CMP on Sigue Corporation for
faiiure to implement an effective AML Compliance Program in all four core elements as defined in the
USA PATRIOT Act: internal controls, designation of compliance officer/personnel, training, and
independent testing. The U.S. Department of Justice assessed a $15 million forfeiture and entered into
a Deferred Prosecution Agreement (DPA). Payment of the forfeiture satisfied the FinCEN penalty.
Specific findings included the following:
. Lack of defined roles and responsibilities of the compliance function
. Failure to implement a risk-based suspicious activity monitoring program commensurate with
dollar volume and geographic reach
'
Lack of effective supervision and control over agents (e.9., agents advising customers to
structure transactions to evade AML reporting requirements)
. Failure to investigate alerts in a timely manner
'
'
Failure to file complete, accurate or timely Suspicious Activity Reports (SARs)
lnadequate and untailored training program and/or training program not completed by all
employees/agents
. lnadequate independent testing (e.g., not risk-based, insufficient testing, narrow scope) that
failed to identify system problems within the AML Compliance Program
From 2010 to 2011, seven MSBs were subject to enforcement actions primarily for failure to register
with FinCEN as an MSB. All were acting as independent money transmitters. A summary of fìndings
included the following :
. Failure to register as an MSB or complete biennial renewals with FinCEN
. Failure to implement an AML program as required for money transmitters
. Failure to report potentially suspicious transactions on SARs
. Structuring currency transactions to evade BSA reporting requirements
. Conspiracy to commit food stamp fraud
32. What have been the most common deficiencies in AML Compliance Programs?
Some common themes have been:
Program Violations: Overall failures supported by'pillaf violations, i.e., the failure of an institution to address
adequately its obligation to designate a qualified AML compliance officer; develop and implement appropriate
policies, procedures and controls; provide adequate training; and perform periodic independent testing of its AML
Compliance Program.
Systemic and Recurring Violations: Pervasive control breakdowns
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. lsolated and Technical Violations: Limited instances of noncompliance that do not threaten overall program
effectiveness
Some common problems and issues include, but are not limited to, the following:
¡ AML compliance officer (as well as other employees) lacks sufficient experience andior knowledge regarding
AML policies, procedures and tools
¡ lnsufficienVinadequate resources dedicated to AML compliance
o Lack of specific and customized training of employees with critical functions (e.9., account opening, transaction
processing, risk management)
r Failure to conduct adequate risk assessments (e.g., customer risk assessment, business line risk assessment,
OFAC risk assessment)
o Failure to incorporate risk assessments into a transaction-monitoring process, customer acceptance standards,
audits, testing or training
r lnadequate Know Your Customer (KYC) procedures (e.9., ClP, CDD and EDD at or after account opening,
including inadequate controls over required fìelds, inadequate methods of obtaining and/or maintaining current
informatlon, lack of reporting capabilities over missing information, and lack of verification procedures)
r Poor documentation maintained for investigations that did not lead to SAR fìlings
. Poorfollow-up on SAR actions (e.9., close, monitor)
. Lack of reporting of key SAR information to senior managemenVboard of directors
o lnadequate tuning, validation and documentation of automated monitoring systems
o Overreliance on software to identify transactions for which CTRs and/or SARs must be filed without fully
understanding how the software is designed and what information it does/does not capture
r Exclusion of certain products from transaction monitoring (e.g., loans, letters of credit, capital markets activities)
. Lack of timeliness when filing CTRs and SARs (e.g., reports are manually fìled via certified mail, and the date
postmarked is not noted)
o Lack of or inadequate independent testing of the AML Compliance Program
o Lack of or untimely corrective actions to prior examination or audit findings
To identify potential gaps in a fìnancial institution's AML Compliance Program, regulatory enforcement actions for
AML defiðiencies agãinst other (similar) financial institutions should be reviewed to identify the specific violations and
related action steps-. This enables fìnancial institutions to recognize and correct any potential weaknesses of their
own before their next regulatory examination.
AML Compliance Program
33. What types of financial institutions are required to comply with AML laws and
regulations?
Under the USA PATRIOT Act, the definition of 'financial institutions" was expanded to include more than 20 different
types of businesses that provide financial services, including, but not limited to, broker-dealers, currency exchangers,
¡ñiurance companies, trust compan¡es, dealers in precious metals, stones or jewels, and issuers of travele/s checks,
money orders or similar instruments.
For additional guidance on the other types of financial institutions now required to comply with AML laws and
regulations, please refer to the !lQ!Sl[lQ[-¿þ! and
sections.
34. What are the key components of an AML Compliance Program?
Key components of an AML Compliance Program include, but are not limited to, the following:
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o Designated Compliance Officer - For further guidance, please refer to the Desionation of AML Comoliance
section
. Risk Assessments -
Risk Assessment, Customer Risk Assessment and OFAC Risk Assessment sections.
. Customer Acceptance and Maintenance Program - For further guidance, please refer to the Know Your
Hioh Rirk¿u#12=
sections.
For further guidance, please refer to the Enterorise-wide Risk Assessment, Business Line
r Large Currency Monitoring and Currency Transaction Report Filing Program -
refer to the Currencv Transaction Reoorts section.
¡ Monitoring, lnvestigating and Suspicious Activity Report Filing Program -
refer to the
"nd
For further guidance, please
For further guidance, please
and Susoicious Activity Reoorts sections.
. Sanctions Program -
r lnformation Sharing - For further guidance, please refer to , Section 314(bl Reouirements -
and National Securitv Letters sections.
¡ Recordkeeping and Retention Program - For further guidance, please refer to the Funds Transfer
Monetarv lnstruments, Form 8300 and
. lndependent Testing -
. Training -
o Management and Board Reporting -
For further guidance, please refer to the Offìce of Foreion Assets Control section.
sections.
For further guidance, please refer to the lndeoendent Testino section.
For further guidance, please refer to the AML Traininq section.
For further guidance, please refer to the Desiqnation of AML Comoliance
section.
It is important to note that not all types of financial institutions are required to have each of the key components listed
above. For additional guidance on the AML requirements of nonbank financial institutions, please refer to the
Nonbank Financial lnstitutions and Nonfinancial Businesses section.
35. How can technology be used to support a financial institution's AML program?
Technology can be used, for example, to support:
r Monitoring for Suspicious Transactions and Facilitating Suspicious Activity Report Filing -
For further
guidance, please see the
sect¡on.
o Monitoring for Large Currency Transactions and Facilitating Currency Transaction Report Filing - For
further guidance, please see the
Software section.
o Verifìcation of Gustomer lnformation (e.9., CIP) -
Software section.
. Storage of Customer lnformation (e.g., GlP, EDD) -
For further guidance, please see the Customer Veriflcation
For further guidance, please see the Customer
lnformation Database and Customer Risk Assessment Software section.
r Calculation of Customer Risk Ratings -
For further guidance, please see the Customer lnformation Database
and Customer Risk Assessment Software section.
. Searching Against Special Lists of Prohibited and/or High-Risk lndividuals/Entities (e.9., Office of Foreign
Assets Control [OFAC], 31a(a), Subpoenas, Media Searches, lnternal "Deny' Lists, Politically Exposed Persons
[PEPs])for Customers and Transactions - For further guidance, please see the lnterdiction Software and List
Providers sections.
r AML Training -
. Case Management -
For further guidance, please see the Trainino Software section.
For further guidance, please see the Case Manaoement Software section.
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