I. INTRODUCTION
The purpose of this article is threefold: first, to provide a brief description of the Financial Crimes Enforcement Network (FinCEN), its mission, organization and interrelationship with Bank Secrecy Act reports, recordkeeping and statutory obligations and the reporting of suspicious activities; second, to define “money laundering” both conceptually and legally; and third, to maintain a ready reference of all advisories and related materials issued by FinCEN.
When referring to this article, be aware that in this same Security section of the NBA Compliance Handbook, there are separate articles on the “Bank Secrecy Act & Currency Transaction Reports” and “Suspicious Activity Reports.” FinCEN is the authority that ties these reporting and recordkeeping obligations in the effort to combat money laundering in the United States and abroad. For a more thorough understanding of a bank’s statutory and regulatory duties, these articles should be reviewed in conjunction with this topic.
II. WHAT IS FinCEN?
FinCEN was established by the Secretary of the United States Department of the Treasury on April 25, 1990, pursuant to Treasury Order 105-08. The agency first mission was to focus on the detection of financial crimes by providing analytical support to law enforcement investigations. In October, 1994, the agency was given Bank Secrecy Act (BSA) regulatory responsibilities when the Treasury Department’s Office of Financial Enforcement (OFE) was merged with FinCEN. The merging of FinCEN with the OFE (which had previously administered the BSA) created a single anti-money laundering agency, combining regulatory, intelligence and enforcement authority. Since then, FinCEN’s goals have emphasized the streamlining and simplification of BSA obligations of banks and, at the same time, shaped a reporting system making available data more useful for law enforcement investigations.
Today, FinCEN is the primary federal agency that establishes, oversees, and implements the United States Department of the Treasury’s policies to prevent and detect money laundering. As an arm of the Department of the Treasury, FinCEN provides analytical case support, through the use of technology and intelligence analyses, to many federal agencies and state and local law enforcement. FinCEN also serves as a network – a link between the law enforcement, financial and regulatory communities. Because the changing financial world creates opportunities for criminals, FinCEN works with domestic and international partners to maximize an information-sharing network and to find new methods in preventing and detecting financial crime.
FinCEN administers the BSA – an anti-money laundering law that requires reporting and recordkeeping by financial institutions to preserve a financial trail for investigators to follow as they track alleged criminals and their assets. The BSA requires the reporting of suspicious currency transactions that, in turn, may trigger investigations. FinCEN maintains a BSA hotline number – 1-800-949-2732 – to answer questions regarding BSA compliance and to deter and detect money laundering in partnership with the financial community.
FinCEN provides intelligence and analytical support to law enforcement, concentrating on combining information reported under the BSA with other government and public information which is then disclosed to FinCEN’s customers in the law enforcement community in the form of intelligence reports. These reports help them build investigations and plan new strategies to combat money laundering. FinCEN’s analysts provide case support to more than 150 federal, state, and local agencies, issuing approximately 8,000 intelligence reports each year. Using technology and various data sources, FinCEN links various financial elements of the crime, to help federal, state and local law enforcement “find the missing pieces to the criminal puzzle.” Through Project Gateway, FinCEN works with law enforcement officials in each state so that they have on-line access to FinCEN’s databases. Project Gateway enables each state to have electronic access directly to financial information.
FinCEN is also engaged in international efforts to build effective counter-money laundering policies and cooperation throughout the world, in order to fight against financial crimes and the corresponding corruption of international economies. FinCEN supports the G-7 Financial Action Task Force (FATF) that is under the presidency of the United States for the seventh round (1995-96). FinCEN also coordinates with financial intelligence units (FIUs) in several countries, including Britain, France, Belgium and Australia. FinCEN is helping to establish FIUs worldwide.
III. WHAT IS MONEY LAUNDERING?
In general, money laundering involves disguising financial assets so they can be used without detection of the illegal activity that produced them. Through money laundering, an individual transforms the monetary proceeds derived from criminal activity into funds with an apparently legal source.
Money laundering is fuel for drug dealers, terrorists, arms dealers, and other criminal activities, contributing to the operation and expansion of criminal enterprises. The manipulation of financial systems in the United States and abroad further a wide range of illegal activities. Money laundering erodes the integrity of financial institutions. The dimension of money laundering activity increases rapidly when one considers white-collar crime, trade fraud and tax evasion subject to the money laundering statutes. Bank, medical, and insurance fraud entails significant laundering of fund. As a result of money laundering activities, banks and bank regulators have witnessed a change in attitude and compliance since the 1970, when the BSA was passed into law. Current regulatory and banking industry efforts have transformed anti-money laundering from the simple reporting of large currency transactions to the reporting of suspicious activity. As banks are required to prevent and detect money laundering, some money laundering activities have moved to nonbank entities. Recent federal legislation has shifted beyond the subject of banks to money remitters, casinos, check cashers and other money servicers.
More specifically, the provisions of key money laundering statutes are reproduced below. Since these laws are applicable to banks, bankers and bank customers alike, you would be advised to at least familiarize yourself with the broad coverage that the money laundering statutes encompass. As you will note, almost any illicit activity involving money, directly or indirectly involving the bank, could be subject to these anti-money laundering provisions.
18 U.S.C. § 1956. Laundering of monetary instruments
(a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity -
(A)(i) with the intent to promote the carrying on of specified unlawful activity; or
(ii) with intent to engage in conduct constituting a violation of section 7201 or 206 of the Internal Revenue Code of 1986; or
(B) knowing that the transaction is designed in whole or in part -
(i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or
(ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both.
(2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States -
(A) with the intent to promote the carrying on of specified unlawful activity; or
(B) knowing that the monetary instrument or funds involved in the transportation, transmission, or transfer represent the proceeds of some form of unlawful activity and knowing that such transportation, transmission, or transfer is designed in whole or in part-
(ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $500,000 or twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer, whichever is greater, or imprisonment for not more than twenty years, or both.
For the purpose of the offense described in subparagraph (B), the defendant’s knowledge may be established by proof that a law enforcement officer represented the matter specified in subparagraph (B) as true, and the defendant’s subsequent statements or actions indicate that the defendant believed such representations to be true.
(3) Whoever, with the intent -
(A) to promote the carrying on of specified unlawful activity;
(B) to conceal or disguise the nature, location, source, ownership, or control of property believed to be the proceeds of specified unlawful activity; or
(C) to avoid a transaction reporting requirement under State or Federal law, conducts or attempts to conduct a financial transaction involving property represented to be the proceeds of specified unlawful activity, or property used to conduct or facilitate specified unlawful activity, shall be fined under this title or imprisoned for not more than 20 years, or both. For purposes of this paragraph and paragraph (2), the term “represented” means any representation made by a law enforcement officer or by another person at the direction of, or with the approval of, a Federal official authorized to investigate or prosecute violations of this section.
(b) Whoever conducts or attempts to conduct a transaction described in subsection (a)(1) or (a)(3), or a transportation, transmission, or transfer described in subsection (a)(2), is liable to the United States for a civil penalty of not more than the greater of -
(1) the value of the property, funds, or monetary instruments involved in the transaction; or
(2) $10,000.
(c) As used in this section -
(1) the term “knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity” means that the person knew the property involved in the transaction represented proceeds from some form, though not necessarily which form, of activity that constitutes a felony under State, Federal, or foreign law, regardless of whether or not such activity is specified in paragraph (7);
(2) the term “conducts” includes initiating, concluding, or participating in initiating, or concluding a transaction;
(3) the term “transaction” includes a purchase, sale, loan, pledge, gift, transfer, delivery, or other disposition, and with respect to a financial institution includes a deposit, withdrawal, transfer between accounts, exchange of currency, loan, extension of credit, purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument, use of a safe deposit box, or any other payment, transfer, or delivery by, through, or to a financial institution, by whatever means effected;
(4) the term “financial transaction” means (A) a transaction which in any way or degree affects interstate or foreign commerce (i) involving the movement of funds by wire or other means or (ii) involving one or more monetary instruments, or (iii) involving the transfer of title to any real property, vehicle, vessel, or aircraft, or (B) a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree
(5) the term “monetary instruments” means (i) coin or currency of the United States or of any other country, travelers’ checks, personal checks, bank checks, and money orders, or (ii) investment securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes upon delivery;
(6) the term “financial institution” has the definition given that term in section 5312(a)(2) of title 31, United States Code, or the regulations promulgated thereunder;
(7) the term “specified unlawful activity” means -
(A) any act or activity constituting an offense listed in section 1961(1) of this title except an act which is indictable under subchapter II of chapter 53 of title 31;
(B) with respect to a financial transaction occurring in whole or in part in the United States, an offense against a foreign nation involving -
(i) the manufacture, importation, sale, or distribution of a controlled substance (as such term is defined for the purposes of the Controlled Substances Act);
(ii) kidnapping, robbery, or extortion; or
(iii) fraud, or any scheme or attempt to defraud, by or against a foreign bank (as defined in paragraph 7 of section 1(b) of the International Banking Act of 1978);
(C) any act or acts constituting a continuing criminal enterprise, as that term is defined in section 408 of the Controlled Substances Act (21 U.S.C. 848);
(D) an offense under section 152 (relating to concealment of assets; false oaths and claims; bribery), section 215 (relating to commissions or gifts for procuring loans), any of sections 500 through 503 (relating to certain counterfeiting offenses), section 513 (relating to securities of States and private entities), section 542 (relating to entry of goods by means of false statements), section 545 (relating to smuggling goods into the United States), section 549 (relating to removing goods from Customs custody), section 641 (relating to public money, property, or records), section 656 (relating to theft, embezzlement, or misapplication by bank officer or employee), section 657 (relating to lending, credit, and insurance institutions), section 658 (relating to property mortgaged or pledged to farm credit agencies), section 666 (relating to theft or bribery concerning programs receiving Federal funds), section 793, 794, or 798 (relating to espionage), section 875 (relating to interstate communications), section 1005 (relating to fraudulent bank entries), section 1006 (relating to fraudulent Federal credit institution entries), section 1007 (relating to Federal Deposit Insurance transactions), section 1014 (relating to fraudulent loan or credit applications), section 1032 (relating to concealment of assets from conservator, receiver, or liquidating agent of financial institution), section 1201 (relating to kidnapping), section 1203 (relating to hostage taking), section 1708 (theft from the mail), section 2113 or 2114 (relating to bank and postal robbery and theft), section 2319 (relating to copyright infringement), or section 2320 (relating to trafficking in counterfeit goods and services), of this title, a felony violation of the Chemical Diversion and Trafficking Act of 1988 (relating to precursor and essential chemicals), section 590 of the Tariff Act of 1930 (19 U.S.C. 1590) (relating to aviation smuggling), section 422 of the Controlled Substances Act (relating to transportation of drug paraphernalia), section 38(c) (relating to criminal violations) of the Arms Export Control Act, section 11 (relating to violations) of the Export Administration Act of 1979, section 206 (relating to penalties) of the International Emergency Economic Powers Act, section 16 (relating to offenses and punishment) of the Trading with the Enemy Act, any felony violation of section 15 of the Food Stamp Act of 1977 (relating to food stamp fraud) involving a quantity of coupons having a value of not less than $5,000, or any felony violation of the Foreign Corrupt Practices Act; or
(E) a felony violation of the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.), the Ocean Dumping Act (33 U.S.C. 1401 et seq.), the Act to Prevent Pollution from Ships (33 U.S.C. 1901 et seq.), the Safe Drinking Water Act (42 U.S.C. 300f et seq.), or the Resources Conservation and Recovery Act (42 U.S.C. 6901 et seq.).
(8) the term “State” includes a State of the United States, the District of Columbia, and any commonwealth, territory, or
(d) Nothing in this section shall supersede any provision of Federal, State, or other law imposing criminal penalties or affording civil remedies in addition to those provided for in this section.
(e) Violations of this section may be investigated by such components of the Department of Justice as the Attorney General may direct, and by such components of the Department of the Treasury as the Secretary of the Treasury may direct, as appropriate and, with respect to offenses over which the United States Postal Service has jurisdiction, by the Postal Service. Such authority of the Secretary of the Treasury and the Postal Service shall be exercised in accordance with an agreement which shall be entered into by the Secretary of the Treasury, the Postal Service, and the Attorney General. Violations of this section involving offenses described in paragraph (c)(7)(E) may be investigated by such components of the Department of Justice as the Attorney General may direct, and the National Enforcement Investigations Center of the Environmental Protection Agency.
(f) There is extraterritorial jurisdiction over the conduct prohibited by this section if -
(1) the conduct is by a United States citizen or, in the case of a non-United States citizen, the conduct occurs in part in the United States; and
(2) the transaction or series of related transactions involves funds or monetary instruments of a value exceeding $10,000.
(g) Notice of Conviction of Financial Institutions. - If any financial institution or any officer, director, or employee of any financial institution has been found guilty of an offense under this section, section 1957 or 1960 of this title, or section 5322 or 5324 of title 31, the Attorney General shall provide written notice of such fact to the appropriate regulatory agency for the financial institution.
(h) Any person who conspires to commit any offense defined in this section or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy.
18 U.S.C. § 1957. Engaging in monetary transactions in property derived from specified unlawful activity
(a) Whoever, in any of the circumstances set forth in subsection (d), knowingly engages or attempts to engage in a monetary transaction in criminally derived property of a value greater than $10,000 and is derived from specified unlawful activity, shall be punished as provided in subsection (b).
(b)(1) Except as provided in paragraph (2), the punishment for an offense under this section is a fine under title 18, United States Code, or imprisonment for not more than ten years or both.
(2) The court may impose an alternate fine to that imposable under paragraph (1) of not more than twice the amount of the criminally derived property involved in the transaction.
(c) In a prosecution for an offense under this section, the Government is not required to prove the defendant knew that the offense from which the criminally derived property was derived was specified unlawful activity.
(d) The circumstances referred to in subsection (a) are -
(1) that the offense under this section takes place in the United States or in the special maritime and territorial jurisdiction of the United States; or
(2) that the offense under this section takes place outside the United States and such special jurisdiction, but the defendant is a United States person (as defined in section 3077 of this title, but excluding the class described in paragraph (2)(D) of such section).
(e) Violations of this section may be investigated by such components of the Department of Justice as the Attorney General may direct, and by such components of the Department of the Treasury as the Secretary of the Treasury may direct, as appropriate and, with respect to offenses over which the United States Postal Service has jurisdiction, by the Postal Service. Such authority of the Secretary of the Treasury and the Postal Service shall be exercised in accordance with an agreement which shall be entered into by the Secretary of the Treasury, the Postal Service, and the Attorney General.
(f) As used in this section -
(1) the term “monetary transaction” means the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument (as defined in section 1956(c)(5) of this title) by, through, or to a financial institution (as defined in section 1956 of this title), including any transaction that would be a financial transaction under section 1956(c)(4)(B) of this title, but such term does not include any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution;
(2) the term “criminally derived property” means any property constituting, or derived from, proceeds obtained from a criminal offense; and
(3) the term “specified unlawful activity” has the meaning given that term in section 1956 of this title.
IV. WHY DO WE NEED FINANCIAL INVESTIGATIONS?
Financial investigations are integral in beating criminals at their trade – whether it’s drug trafficking, organized crime, money laundering or bank fraud. Following the money often leads to the top of the criminal organization. Such investigations are often extremely complex and difficult to conduct because it takes many years of working in the financial industry to understand all its intricacies and no single agency possesses a sufficiently broad or cross-jurisdictional focus and information base to track financial movements. In addition, the size, variety, and change occurring in the financial industry make financial investigations even more difficult. A money launderer’s tools vary from complex financial transactions (e.g., carried out through webs of wire transfers and networks of shell companies) to old-fashioned currency smuggling. As a rule, when law enforcement learns the intricacies of a new laundering technique and takes action to the activity, the money launderers substitute the technique with a different, often more sophisticated method.
V. WHAT FINCEN NOTICES AND ADVISORIES HAVE BEEN ISSUED?
FinCEN Advisories may be ordered by writing to: Financial Crimes Enforcement Network, U.S. Department of the Treasury, 2070 Chain Bridge Road, Vienna VA 22182, (703) 905-3773. To view any advisory, visit the FinCEN web site at http://www.fincen.gov/. Requests for information or for copies of FinCEN publications may also be faxed to (703) 905-3885. Questions or comments regarding the contents of the FinCEN Advisory should be addressed to the Office of Communications, FinCEN.