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ABA NEWSBYTES

Anti-Money Laundering‌

ABA
 

July 17, 2020 — Vol. 20, Issue 13

 

RECENT DOMESTIC DEVELOPMENTS

Guest Column: AML Compliance Challenges Associated with PPP Loans

The Payroll Protection Program, created under the CARES Act to provide small businesses with an incentive to keep their staff on payroll through the COVID-19 pandemic, has been the source of many discussions of late as the U.S. economy seeks to reopen and return to a semblance of normalcy.

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From the onset of the program, there were anti-money laundering compliance and fraud concerns raised, given the speed with which the program was rolled out and the fact that banks often had to adapt existing processes and platforms to facilitate these loans. Given the vast amount of loans that were processed as a result of this program, as well as the need to ensure adherence to the BSA/AML regulatory requirements, banks may not have had sufficient time or resources to properly document the compliance measures that they implemented to support this effort.

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As we approach the deadline for PPP applications, financial institutions have a chance to revisit their processes and procedures to ensure they continue to meet their ongoing obligations under the Bank Secrecy Act and the USA PATRIOT Act. A commitment to PPP compliance now will not only align with regulator expectations, but can help guide innovation and the introduction of new products in the long run.


These concerns and more are discussed in 'PPP Lending—A Unique Compliance Challenge for Banks' by Sepideh Rowland, published July 10. Rowland’s article will also be covered in a breakout session, AML Hot Topics, at the ABA Risk and Compliance Virtual Conference, July 28 – 30. ‌

 

RECENT DOMESTIC DEVELOPMENTS

FinCEN Alerts Financial Institutions to Convertible Virtual Currency Scam Involving Twitter

The Financial Crimes Enforcement Network yesterday issued an alert regarding a high-profile scam exploiting Twitter accounts to solicit fraudulent payments denominated in convertible virtual currency. Cyber threat actors compromised the accounts of public figures, organizations, and financial institutions to solicit payments to CVC accounts, claiming that any CVC sent to a wallet address would be doubled and returned to the sender. FinCEN urged financial institutions to be vigilant regarding CVC exchanges in order to identify and report suspicious transactions associated with this type of activity as quickly as possible.  Read the alert. For other financial red flag indicators of illicit CVC activity, see FinCEN's advisory

 

RECENT DOMESTIC DEVELOPMENTS

FinCEN Warns of Imposter, Money Mule Scams Connected with COVID-19

Following its promise to provide continuing alerts on potential fraud associated with COVID-19, FinCEN issued an advisory on July 7 alerting financial institutions to imposter scams and money mule schemes connected to the coronavirus pandemic. The advisory also highlights red flag indicators associated with these scams and reminded banks to report any suspicious activity.

 

While these scams are not new, FinCEN identified elements associated with the pandemic. FinCEN noted that COVID-19 impostor scams generally involve fraudsters posing as officials or representatives from the IRS, the Centers for Disease Control and Prevention, the World Health Organization or other healthcare or nonprofit groups and academic institutions. Such scams often seek to coerce victims to provide personal information or send payment in order to receive coronavirus-related government benefits or to share information as part of contact tracing efforts. In addition, money mule scams have been observed during the pandemic, with scammers often using good-Samaritan, romance or work-from-home schemes to entice victims to open new bank accounts that can then be used to move laundered funds. Read the advisory. See ABA's infographic on money mule scams. For more information, contact ABA's Rob Rowe.

 

ADVOCACY

ABA: More Detail Needed in FinCEN Analysis of CTR Burden

A recent FinCEN estimate of the total cost to file currency transaction reports "significantly underestimates" the burden faced by financial institutions, ABA said in a letter to the agency this week. FinCEN estimated the total annual cost to be just more than $54 million.

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While ABA supported FinCEN's efforts to document CTR costs with more precision, the association raised also concerns that FinCEN’s estimate omits several key steps involved with CTR processing, including determining whether a CTR must be filed, and makes incorrect assumptions about the role of automation in CTR filing. The estimate also fails to incorporate expenses and burdens associated with audit, quality control and error resolution and does not provide a clear, quantitative picture of whether the benefits of CTR filings counterbalance the costs, ABA said.

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The association urged FinCEN—which has also sought comment on its methodology for calculating Suspicious Activity Report burden—to continue its work to understand the costs of these filings. ABA also called for greater transparency regarding CTR data, noting that "in the long run, greater transparency would help the industry and FinCEN focus better on the costs and benefits of the CTR process." This transparency is especially important to enlighten discussions about raising the threshold for CTR filings. Read ABA's letter. For more information, contact ABA’s Rob Rowe.

 

CONGRESS

Banking Trade Groups Call for Inclusion of AML/CFT Bill in NDAA

In a letter to Senate Armed Services Committee leaders on June 27, ABA joined six other financial trade organizations calling for the inclusion of the Anti-Money Laundering Act of 2020 as part of the 2021 National Defense Authorization Act. The bill includes critical provisions for law enforcement investigations into organized transnational criminal operations, human trafficking, terrorism financing and other unlawful activity.

  

Among other things, the bill would direct FinCEN to create and maintain a secure beneficial ownership registry of legal entities. The bill also modernizes anti-money laundering control and processes, enabling financial institutions to better assist law enforcement efforts to detect and deter financial crime and terrorism, the groups noted. Read the letter.

 

RECENT DOMESTIC DEVELOPMENTS

FinCEN Issues BSA/AML Guidance on Hemp-Related Businesses

FinCEN on June 29 issued guidance to help institutions conduct due diligence on hemp-related businesses. Banks are required to confirm that hemp-related businesses are licensed. Banks also should have policies and procedures in place for hemp-related businesses and should obtain basic identifying information about hemp-related businesses according to their customer identification programs and risk-based due diligence processes, FinCEN said. The guidance also noted that institutions are not required to file a Suspicious Activity Report on customers solely because they are engaged in the growing or cultivation of hemp. Read the guidance. For more information, contact ABA’s Rob Rowe

 

RECENT DOMESTIC DEVELOPMENTS

FinCEN's "Innovation Hours" Marks One-Year Milestone

FinCEN on July 8 announced that its Innovation Hours Program marks over a year of providing valuable insight in a series of in-person meetings with industry. FinCEN announced the creation of the Innovation Hours Program in May 2019 as part of a broad initiative to promote responsible anti-money laundering/countering the financing of terrorism innovation.

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During the first year, the program hosted 32 companies from 14 states as well as four countries. Although ABA has encouraged FinCEN to conduct these sessions as more of a give-and-take dialogue, the meetings have provided FinCEN with critical and timely information related to several key themes including artificial intelligence/machine learning and natural language processing; virtual currency and other blockchain-enabled applications; digital identity; customer risk assessment and mitigation; secure and confidential information sharing; legal entity resolution and beneficial ownership; and sanctions compliance solutions, among others.  Read more.

 

RECENT DOMESTIC DEVELOPMENTS

FinCEN Updates List of AML/CFT Jurisdictions

FinCEN released a revised list of the jurisdictions that are subject to countermeasures or enhanced due diligence resulting from deficiencies in their anti-money laundering and combating of terrorist financing efforts, as well as jurisdictions with AML/CFT deficiencies that are working to correct them. The list is based on guidance from the Financial Action Task Force issued on June 30. Iran and North Korea will remain in the category requiring countermeasures. An additional 18 countries remain on the list of jurisdiction requiring enhanced monitoring, and while Iceland and Mongolia have substantially completed their action plans they will remain on the list until FATF can conduct on-site visits to each country. Read more.

 

RECENT DOMESTIC DEVELOPMENTS

FinCEN Issues Spanish Language Version of Advisory on Medical Scams Related to COVID-19

FinCEN on July 9 issued a Spanish language version of its advisory on medical scams related to COVID-19, which was published on May 18. Translated versions of other FinCEN COVID-19 advisories will follow.

 

INTERNATIONAL DEVELOPMENTS

FATF Plenary Asks Members to Remain Vigilant against New ML/TF Threats; Announces Report on Money Laundering and the Illegal Wildlife Trade

The Financial Action Task Force on June 24 concluded its virtual plenary meeting by calling on its members to remain vigilant in fighting new money laundering/terrorist financing threats and vulnerabilities during the COVID-19 crisis. This plenary is the last meeting under the Chinese Presidency. The FATF presidency of Marcus Pleyer of Germany started on July 1 and will be the first FATF president with a two-year term.

 

During the plenary, the FATF discussed the completion of its 12-month review of progress made by jurisdictions on implementing the new FATF standards on virtual assets and virtual asset service providers. The report finds that, overall, both the public and private sectors have made progress in implementing the revised FATF standards, in particular in the development of technological solutions to enable the implementation of the 'travel rule' for VASPs. See the 12-month review of the revised FATF standards

 

The plenary also discussed the report to the G20 on so-called 'stablecoins,' a type of crypto-assets that aims to maintain a stable value relative to a specified asset, or a pool or basket of assets The report confirms that the FATF standards apply to so-called stablecoins and that no further amendments to the Standards are required at this time. The FATF also discussed the strategic review of the FATF global network assessment process and expects to complete it in 2021.

 

Finally, FATF released a report on criminals misusing the formal financial sector and front companies under the guise of the legal wildlife trade to launder illicit proceeds. The report confirms that the FATF standards are a useful framework to stop money laundering through the illegal wildlife trade but that greater political commitment and continued focus on the issue is needed. Read the report on money laundering and the illegal wildlife tradeRead the outcomes from the FATF virtual plenary.

 

INTERNATIONAL DEVELOPMENTS

FATF Announces German Presidency for 2020 – 2022

Financial Action Task Force President Marcus Pleyer of Germany presented his objectives for the first two-year Plenary period (July 2020 – June 2022) at the 2020 Virtual Plenary meeting on June 24.

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FATF President Pleyer announced that he will prioritize work in the following areas:‌

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  • Digital Transformation of AML/CFT
  • Financing of ethnically or racially motivated terrorism
  • Money laundering and migrant smuggling
  • Environmental crime, and
  • Illicit arms trafficking.


Read more.  

 

INTERNATIONAL DEVELOPMENTS

FATF Proposes to Amend Recommendation 1 

The Financial Action Task Force is proposing to amend FATF Recommendation 1 on the risk-based approach and its interpretive note. The revisions would require financial institutions and designated non-financial businesses and professions to assess the risks of breach and non-implementation and evasion of targeted financial sanctions related to proliferation financing and then take appropriate mitigating measures commensurate with the level of risks identified. The amendments would not expand existing FATF Recommendation obligations on financial institutions and DNFBPs to combat money laundering and terrorist financing. Read the draft text of proposals for amendments. Responses to FATF.Publicconsultation@fatf-gafi.org are due by Aug. 31, 2020.

 

QUOTE OF THE WEEK

"FinCEN has consistently been a leader in exploring innovative ways to advance the national security of the United States and the integrity of the financial system. We remain committed to seeking the best and brightest ideas from the private sector, and will continue using the virtual format to exchange innovative ideas in a very dynamic industry," said FinCEN Director Kenneth A. Blanco in remarks at FinCEN’s "innovation hours" one-year milestone, July 8.

 

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Experts on Call—ABA staff experts are the best resource for information and insights on the banking industry. Questions? Call ABA First!

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FINANCIAL CRIMES

Wedding Planning Company Owner Charged with PPP Fraud, Money Laundering

Fahad Shah of Murphy, Texas, was charged with three counts of wire fraud, one count of false statements to a bank, and four counts of money laundering in a scheme to file fraudulent loan applications seeking more than $3 million in PPP loans under the Coronavirus Aid, Relief, and Economic Security Act.

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Shah allegedly submitted fraudulent PPP applications to two different SBA-approved lenders. He received over $1.5 million in PPP loan funds and used the funds primarily for personal purposes. Shah was arrested on June 23 and appeared before U.S. Magistrate Judge Christine A. Nowak of the Eastern District of Texas. Read more.

 

FOREIGN CORRUPT PRACTICES ACT

Two Individuals Charged for Roles in Bribery and Money Laundering Scheme Involving Odebrecht

Luis Enrique Martinelli Linares and Ricardo Alberto Martinelli Linares, who served as intermediaries for bribe payments involving Brazilian construction conglomerate Odebrecht S.A., were each charged in federal court in Brooklyn, New York, with one count of conspiracy to commit money laundering.

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Odebrecht in 2016 pleaded guilty in the Eastern District of New York to conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act and was ordered to pay at least $2.6 billion. Odebrecht paid millions of dollars to government officials around the world in order to obtain businesses in those countries. Bribes were paid through a complex network of companies, off-book transactions and off-shore bank accounts.

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The defendants are alleged to have participated in the scheme by, among other things, serving as intermediaries for approximately $28 million in bribe payments made by and at the direction of Odebrecht to a then high-ranking government official in Panama, who was a close relative of the defendants. Read more.

 

Separately, the Department of Justice and the Securities and Exchange Commission updated their guidance on compliance with the FCPA. A Resource Guide to the U.S. Foreign Corrupt Practices Act, originally issued in November 2012, has been updated with examples of improper payments, the parameters for a good compliance program and considerations the agencies will use when determining whether to open an investigation.

 

ENFORCEMENT ACTIONS

Amazon Settles OFAC Violation

The U.S. Department of the Treasury's Office of Foreign Assets Control on July 8 announced a $134,523 settlement agreement with Amazon.co​m, Inc., to settle its potential civil liability for apparent violations of multiple OFAC sanctions programs. OFAC alleges that Amazon, due to deficiencies in its sanctions screening processes, provided goods and services to persons sanctioned by OFAC, including persons located in the sanctioned region or countries of Crimea, Iran and Syria as well as individuals located in or employed by the foreign missions of countries sanctioned by OFAC. Read more

 

ENFORCEMENT ACTIONS

UAE Manufacturer Settles Potential Violations of North Korea Sanctions Regulations

Essentra FZE Company Limited, a UAE-based cigarette filter and tear tape manufacturer, agreed to pay OFAC $665,112 to settle its potential civil liability for apparent violations of the North Korea Sanctions Regulations. According to OFAC, Essentra FZE exported cigarette filters to North Korea through a network of front companies in China and other countries using deceptive practices. The company received payment for the shipment of these goods into its bank accounts at the foreign branch of a U.S. bank between September 2018 and December 2018. Read more.

 

OFAC UPDATES

Amendment of Nicaragua Sanctions Regulations; Publication of Nicaragua-related General License; Amendment of Ukraine-related General Licenses

OFAC this week amended the Nicaragua Sanctions Regulations to incorporate the provisions of the Nicaragua Human Rights and Anticorruption Act of 2018. OFAC is also adding a general license authorizing certain U.S. government activities. This amendment will take effect upon publication in the Federal Register on July 17, 2020.

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In addition, OFAC is amending two general licenses related to GAZ Group by issuing Ukraine-related General License No. 13O, "Authorizing Certain Transactions Necessary to Divest or Transfer Debt, Equity, or Other Holdings in GAZ Group," and Ukraine-related General License 15I, "Authorizing Certain Activities Involving GAZ Group." 

 

OFAC UPDATES

OFAC Reminder: File 2020 Annual Report of Blocked Property by September 30

OFAC reminds holders of blocked property to file the comprehensive list of blocked property report held as of June 30 pursuant to OFAC regulations. Property that was unblocked by OFAC or was previously blocked pursuant to a now-terminated sanctions program on or before June 30, 2020, is not considered blocked property and should not be reported. Similarly, a restricted account of a person ordinarily resident in Iran is not blocked, and should not be reported, unless there is an interest in the account of a person whose property and interests are blocked pursuant to an applicable OFAC sanctions authority.

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Persons filing the 2020 ARBP are required to use spreadsheet form TD-F 90-22.50. Completed forms should be sent to ofacreport@treasury.gov by Sept. 30. Failure to file is a violation of the Reporting, Procedures and Penalties Regulations. Read more.

 

OFAC UPDATES

OFAC Issues Venezuela-related General License 5D and Amends FAQ

OFAC amended Venezuela-related General License to authorize certain transactions after Oct. 20, 2020. General License 5D, "Authorizing Certain Transactions Related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or after October 20, 2020" replaces and supersedes General License No. 5C, dated April 10, 2020. OFAC is also amending a related Frequently Asked Question.

 

OFAC UPDATES

OFAC Revokes Venezuela General License 37

OFAC on July 2 announced that it is revoking and archiving on its website Venezuela-related General License 37 "Authorizing the Wind Down of Transactions Involving Delos Voyager Shipping Ltd, Romina Maritime Co Inc, and Certain Vessels." As a result of this action, OFAC has removed eight entities from its list of Specially Designated Nationals and Blocked Persons.​ Read more.

 

OFAC UPDATES

OFAC Removes Somali Individual from SDN List

OFAC on July 10 removed an individual from its Specially Designated Nationals List pursuant to Somalia Sanctions Regulations, 31 C.F.R. part 551. No additional information was released by OFAC regarding this action. Read more.

 

TREASURY DESIGNATIONS

OFAC Targets Russian Financier's Network

OFAC designated three individuals and five entities directly involved with Russian financier Yevgeniy Prigozhin and his operations in Sudan as well as helping him evade U.S. sanctions. Prigozhin was designated by OFAC in 2018 for financing the Internet Research Agency, a Russian entity that tampered with or altered information in order to interfere with the 2016 U.S. election. Prigozhin is also believed to be the financier behind Private Military Company Wagner, a designated Russian Ministry of Defense proxy force.

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The designees also have directly facilitated Prigozhin's global operations and attempted to suppress and discredit protestors seeking democratic reforms in Sudan. OFAC prohibits transactions with the designees and freezes any assets they may have under U.S. jurisdiction. Read more.

 

TREASURY DESIGNATIONS

Terrorist Financing Targeting Center Designates MSBs, Individuals for ISIS Support

The Terrorist Financing Targeting Center, a joint venture between the U.S. and six Middle Eastern countries, this week designated six entities and individuals affiliated with ISIS. TFTC is a collaboration between the U.S. and the Kingdom of Saudi Arabia, the Kingdom of Bahrain, the State of Kuwait, the Sultanate of Oman, the State of Qatar, and the United Arab Emirates to fight terrorist financing.  

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Three entities and one individual located in Turkey and Syria were designated for providing critical financial and logistical lifeline to ISIS, its branches, and its global facilitation networks. The three designated entities are money services businesses: al Haram Exchange, Tawasul Company, and al-Khalidi Exchange. These money services businesses have played a vital role in transferring funds to support Syria-based ISIS fighters and have provided hundreds of thousands of dollars to ISIS leadership, including the now deceased, former ISIS finance emir Fawaz al Rawi, who was designated by the U.S. Department of the Treasury in December 2016. 

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An Afghanistan-based organization, Nejaat Social Welfare Organization, and the organization's director, Sayed Habib Ahmad Khan, also were designated for using a charitable organization to facilitate the transfer of funds for and to support the activities of ISIS's branch in Afghanistan, ISIS-Khorasan. Read more.

 

TREASURY DESIGNATIONS

U.S. Sanctions Chinese Government Entity and Officials for Human Rights Abuses in Xinjiang

OFAC sanctioned one Chinese government entity and four current or former Chinese government officials for serious human rights abuses in the Xinjiang Uyghur Autonomous Region. The region is home to Uyghurs, ethnic Kazakhs, ethnic Kyrgyz, and other traditionally Muslim minority groups. The designees are accused of human rights abuses in Xinjiang targeting these ethnic minorities, which include mass arbitrary detention and severe physical abuse, among other abuses. Since at least 2017, more than one million Muslims have been held in these detention camps.

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The designees are Chen Quanguo, the Communist Party Secretary of XUAR, and Zhu Hailun, a former Deputy Party Secretary of the XUAR. Also designated is the Xinjiang Public Security Bureau, as well as the current Director and Communist Party Secretary of the XPSB, Wang Mingshan, and the former Party Secretary of the XPSB, Huo Liujun.

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OFAC's action is taken pursuant to Executive Order 13818, "Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption," which builds upon and implements the Global Magnitsky Human Rights Accountability Act. Read more.

 

TREASURY DESIGNATIONS

U.S. Issues Advisory on Businesses in the Xinjiang Region

The U.S. Departments of State, Commerce, Homeland Security, and Treasury issued an advisory​ regarding businesses in the Xinjiang Uyghur Autonomous Region of China. The advisory alerts businesses to the risks involved in doing business with entities in the region that engage in human rights abuses.

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The U.S., as it continues to fight human rights abuses, reminds businesses that the Chinese government continues to carry out a campaign of repression in Xinjiang, targeting Uyghurs, ethnic Kazakhs, ethnic Kyrgyz, and members of other Muslim minority groups. Specific abuses include mass arbitrary detentions, severe physical and psychological abuse, forced labor and other labor abuses, oppressive surveillance used arbitrarily or unlawfully, religious persecution, political indoctrination, forced sterilization, and other infringements of the rights of members of these groups in Xinjiang.  Read more.

 

TREASURY DESIGNATIONS

OFAC Targets Iranian Metals Companies, Foreign Subsidiaries and Sales Agents

OFAC on June 25 designated four steel, aluminum and iron companies operating in Iran's metals sector, including one subsidiary of Mobarakeh Steel Company—Iran's largest steel manufacturer. Treasury also designated one Germany-based and three United Arab Emirates-based sales agents owned or controlled by Mobarakeh Steel Company. OFAC designated these entities and individuals for providing support to the Iranian regime and Iran's terror network.

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OFAC's action is taken pursuant to Executive Order 13871, which imposes sanctions with respect to the iron, steel, aluminum and copper sectors of Iran. See the full list of designees. Read more

 

TREASURY DESIGNATIONS

U.S. Sanctions Five Ship Captains for Delivering Gasoline to Venezuela

OFAC designated five Iranian captains who delivered gasoline to the regime of Venezuelan President Nicolás Maduro. Specifically, the designees captained five Iranian flagged tankers—CLAVEL, PETUNIA, FORTUNE, FOREST and FAXON—to deliver gasoline and gasoline components to Venezuela. Those designated, Ali Danaei Kenarsari, Mohsen Gohardehi, Alireza Rahnavard, Reza Vaziri, and Hamidreza Yahya Zadeh have now been added to OFAC's Specially Designated National and Blocked Persons List.  Read more.

 

MONEY SERVICES BUSINESS

FinCEN Updates MSB List

FinCEN has updated the MSB Registrant Search webpage, previously called the Money Services Business list. The Registrant Search webpage contains entities that have registered as MSBs pursuant to FinCEN's Bank Secrecy Act regulations.

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The site as of July 10, contains data on 23,219 registered MSBs, an increase of 46 registrants since July 6. For more information, visit MSB Registrant Search.

 

FINCEN 314 UPDATES

Terrorism and Money Laundering Aggregates Published

The FinCEN 314(a) Updates section is published on a periodic basis to better capture the trend line for 314(a) usage. Section 314(a) of the USA PATRIOT Act provides for information sharing between law enforcement and the private sector and allows law enforcement to ask banks to search their records for a match between named individuals and entities and bank records. The figures reflect aggregate totals from the time FinCEN started collecting information in late 2002 (FinCEN does not provide the data in any other format).

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As of July 14, 2020, the 314(a) Program Office has processed 4,719 requests pertinent to the following significant criminal investigations since the program started in late 2002:

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  • Terrorism/Terrorist Financing – 665 cases (increased from 656 cases reported March 24, 2020)
  • Money Laundering – 4,054 cases (increased from 3,925 cases reported March 24, 2020)

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Data from April 2019/2020 through June 2019/2020 is as follows:

 

Terrorist Financing

Money Laundering

 
 
 

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ABA Newsbytes: Anti-Money Laundering is edited by ABA's Rob Rowe.

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