The Financial Crimes Enforcement Network (FinCEN) has recently issued an alert cautioning all financial institutions regarding potential investments in the U.S. commercial real estate (CRE) sector, by or on behalf of sanctioned Russian elites, oligarchs, their family members, and entities through which they act. This alert complements sustained efforts of the U.S. government, in response to Russia’s war against Ukraine, to isolate sanctioned Russian persons from the international financial system. It highlights specific vulnerabilities to sanctions evasion in the CRE sector, which may be exploited by Russian elites or their proxies, and is based on a recent review of Bank Secrecy Act (BSA) reporting. It also provides financial institutions with guidance on identifying potential red flags and typologies of sanctions-evasion activities.Continue Reading FinCEN Alert Highlights Potential U.S. Commercial Real Estate Investments by Sanctioned Russian Elites and Their Proxies
Jeffrey's practice focuses on financial services litigation, including complex commercial and securities litigation, internal investigations and government and regulatory enforcement actions. He has represented a wide range of financial institutions, public companies and individuals in federal and state courts and in front of various government agencies, including the SEC, the Department of Justice and various state law enforcement and regulatory agencies.
On December 15, 2022, the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a lengthy Notice of Proposed Rulemaking to implement beneficial ownership information (“BOI”) access and safeguards provision of the Corporate Transparency Act (“CTA”) (the “Access NPRM”). The Access NPRM provides a framework by which authorized recipients may access BOI, providing different tiers of access for agencies and financial institutions who may seek this information in connection with anti-money laundering efforts.Continue Reading FinCEN Issues Notice of Proposed Rulemaking on Access to Beneficial Owner Information
On October 13, 2022, the Board of Governors of the Federal Reserve System (“Board”) announced multiple enforcement actions against former employees of several financial institutions because the former employees made false statements to obtain economic injury disaster loans and grants from the U.S. Small Business Administration (“SBA”) or paycheck protection loans from SBA-approved lenders. The loans and grants were made available to small businesses who were suffering from the impact of COVID-19 and needed emergency financial assistance authorized by the Coronavirus Aid, Relief, and Economic Security (P.L. 116-136, the “CARES Act”). Continue Reading Federal Reserve Exercises Broad Disciplinary Authority to Sanction Former Bank Employees Who Committed PPP Loan Fraud
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network, the National Credit Union Administration, and the Office of the Comptroller of the Currency (collectively the “Agencies”) issued a Joint Statement on July 6, 2022, reminding banks of the “risk-based approach to assessing customer relationships and conducting customer due diligence (CDD).” The Joint Statement reminds banks that the Agencies consider a blanket approach of assessing customer risk, based solely on the type of customer (e.g., casino, auto dealer, etc.), to be inappropriate. Specifically, the Joint Statement urges financial institutions not to simply ascribe the same level of risk to all customers of a particular type. Rather, banks must use a risk-based approach that evaluates the specific customer at issue when creating customer profiles and when establishing and maintaining customer relationships. Further, the Joint Statement expresses a preference for enhanced monitoring rather than exiting customer relationships as part of de-risking.
Continue Reading Bank Regulators Remind Financial Institutions Not to Take a One-Size Fits All Approach to Assessing AML Risks from Customer Relationships
On June 22, 2022, the Financial Crimes Enforcement Network (FinCEN) issued a Statement on Bank Secrecy Act Due Diligence for independent ATM owners and operators. The purpose of the statement is to “provide clarity to banks on how to apply a risk-based approach to conducting customer due diligence (CDD) on independent Automated Teller Machine (ATM) owners or operators, consistent with the requirements set out in FinCEN’s 2016 CDD Rule.”
Under FinCEN’s 2016 CDD Rule, banks are required to establish and maintain written policies and procedures reasonably designed to identify and verify “beneficial owners of legal entity customers.” This Rule extends to conducting CDD on independent ATM owners and operators who maintain bank accounts to supply cash for their ATMs and to settle the electronic funds transfers used to process ATM transactions.Continue Reading FinCEN Issues Statement on BSA Due Diligence for Independent ATM Owners and Operators
On June 3, 2022, the Financial Crimes Enforcement Network (FinCen) issued an Advance Notice of Proposed Rulemaking proposing public comment on the enactment of a no-action letter process. This Advanced Notice follows FinCen’s Report to Congress submitted in June 2021 that was based on FinCen’s consultation with the Attorney General, State bank supervisors, State credit union supervisors, and other Federal agencies and regulators. In its report, FinCen evaluated the difficulties it faces because of the overlap between its enforcement authority and other regulators. FinCen also examined the benefits and concerns on how a no-action letter process could affect illicit finance risks. FinCen stated that the primary benefits of a no-action letter process “are that it could promote a robust and productive dialogue with the public, spur innovation among financial institutions, and enhance the culture of compliance and transparency in the application and enforcement of BSA.” Ultimately, FinCen concluded that it should establish a rulemaking to create a no-action letter process.
Continue Reading FinCEN Proposes No-Action Letter Process
On May 26, three days into her term as Vice Chair of the Federal Reserve, Lael Brainard testified about the Federal Reserve’s Examination of the Benefits and Risks of a U.S. Central Bank Digital Currency (CBDC) before the House Committee on Financial Services. Vice Chair Brainard’s comments reinforced many of the themes from the Fed’s January 2022 discussion paper , echoing the need for “clear regulatory guardrails to provide consumer and investor protection” in the rapidly developing digital assets markets while the Federal Reserve considers whether future conditions may give rise to the need for the United States to adopt a CBDC.
Continue Reading Is the Future of the Dollar Digital? The Fed Talks Updating Greenbacks to the Blockchain
On March 31, 2022, the Federal Deposit Insurance Corporation (FDIC) issued the March 2022 edition of its Consumer Compliance Supervisory Highlights. The publication provides a high-level overview of consumer compliance issues identified in 2021 through the FDIC’s supervision of state-chartered banks and thrifts that are not members of the Federal Reserve System. It provides important guidance regarding compliance priorities for these financial institutions.
Continue Reading FDIC Consumer Compliance Supervisory Highlights for State and Community Banks