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Not If But When: How to Avoid Becoming the Next Target of FinCEN AML Enforcement

byLowers & Associates | January 21, 2016

If you run a business that facilitates or conducts money transactions, or transactions in other liquid commodities, you are no doubt aware of FinCEN. Rest assured that FinCEN is aware of you, too. And we predict it’s only a short matter of time before their foreshadowing of AML enforcement actions against the cash servicing and transport industry becomes a harsh reality.

The Financial Crimes Enforcement Network (FinCEN) is the arm of the U.S. Treasury charged with investigation and enforcement of Bank Secrecy Act provisions intended to block the financial sources of illegal and terrorist organizations. Traditionally, the BSA applied to common financial institutions like banks and credit unions. But as banks began to offload services to third party vendors and the number of money-related businesses like check cashers and wire transfers proliferated, the BSA has been applied to an ever-wider array of businesses.

Most of these newer businesses are collectively known as Money Service Businesses (MSB). Businesses that transmit money, issue money orders, cash checks, deal in foreign currencies, or a number of other types of transactions, are required to register with FinCEN and maintain an effective Anti-Money Laundering (AML) program.

We recently summarized a presentation FinCEN gave to the Secure Cash & Transport Industry last October. Alan Cox, Acting Associate Director of the Liaison Division for FinCEN, sent a very clear and powerful message to the industry: Comply with AML requirements or face significant enforcement actions.

Exemptions are Few and Far Between

Cox explained that the exemptions to FinCEN rules are extremely narrow, specifically with respect to currency transportation. A currency transporter can be exempted from FinCEN if it has ONLY a custodial interest in the currency or other valuable. But the conditions that define what is “custodial” are very limited and precise.

The Treasury and its implementing laws aim to throw a broad net over currency transactions, and use the resulting data in numerous legal investigations. Some recent FinCEN enforcement actions show that the agency defines MSB broadly, includes even small businesses, and takes punitive action when it deems a business is out of compliance:

B.A.K. Precious Metals, Inc. received a civil money penalty of $200,000, December 2015: Failed to establish and maintain an effective AML program for its precious metals business despite repeated compliance reviews; failed to assess or monitor clients; failed to report transactions.

Oaks Card Club received a civil money penalty of $650,000, December 2015: Failed to establish an effective AML program for its gambling business; alerted customers when they were about to pass the $10,000 threshold requiring a currency transaction report (CTR); failed to file suspicious activity reports (SARs)

Lee’s Snack Shop received a civil money penalty of $60,000, June 2015: Failed to establish and maintain a compliance program; failed to conduct adequate testing; failed to file currency transaction reports.

King Mail & Wireless received a civil money penalty of $12,000, June 2015: Failed to establish an effective AML program for its money wire transfer business; failed to file suspicious transaction reports.

Ripple Labs Inc received a civil money penalty of $700,000, May 2015: Failed to register as a Money Service Business; failed to establish an AML program for a virtual currency (Ripple); failed to file suspicious activity reports.

Aurora Sunmart Inc. received a civil money penalty of $75,000, March 2015: Failed to re-register the check cashing service as an MSB on a timely basis; failed to establish an effective AML program; failed to report transactions over $10,000; failed to establish effective internal controls.

If there is even a remote chance that your business is a Money Service Business, look at the FinCEN requirements and determine if you should be registered with FinCEN. If your business is an MSB, you could face significant penalties for failure to comply.

Learn more about how to ensure your compliance by referencing our last article on this topic, “FinCEN’s Alan Cox Foreshadows AML Enforcement Actions in Armored Car Industry Address”.


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Lowers & Associates provides comprehensive enterprise risk management solutions to organizations operating in high-risk, highly-regulated environments and organizations that value risk mitigation.
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