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Bank Secrecy Act Violations Now Come with Significantly Higher Penalties

The Financial Crimes Enforcement Network (FinCEN), the bureau of the US Department of the Treasury responsible for oversight and enforcement of the The Financial Crimes Enforcement Network (BSA), has issued an interim final rule (Rule) that significantly increases the statutory penalties for various violations of the BSA and its applicable regulations. Prior to the Rule, FinCEN had not increased its civil money penalty (CMP) amounts for more than a decade, and in some cases, for several decades.

The increases are being issued in response to the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015 (the Act). The Act requires Executive Branch and independent agencies to make annual adjustments for inflation to CMP dollar amounts, as well as an initial “catch-up” adjustment based on a formula set forth in the Act. Although the Act was part of the contentious budget bill that was passed in the early morning of October 30, 2015, and avoided a government shutdown, the Act did not receive much independent coverage, and the increases may be unexpected to some businesses subject to the BSA.

Based on the formula set forth in the Act, many of FinCEN’s maximum penalty amounts or penalty ranges for BSA violations have doubled or nearly doubled, including the penalty for

  • recordkeeping violations for funds transfers, which has increased from $10,000 to $19,787;

  • failure to register as a money transmitter, which has increased from $5,000 to $7,954; and

  • willful violations of BSA requirements, which has increased from a range of $25,000–$100,000 to a range of $53,907–$215,628.

The increased amounts will apply to any CMP assessed by FinCEN after August 1, 2016, on associated violations that occur after November 2, 2015 (the date the bill containing the Act was signed into law).

Because the Act is applicable to all Executive Branch and independent agencies, other financial regulators (such as the Office of the Comptroller of the Currency, the Federal Deposit Insurance Commission, the US Securities and Exchange Commission, and the US Commodity Future Trading Commission) will be required to implement similar “catch-up” CMP adjustments that may apply to BSA and anti-money laundering (AML) violations by the entities that those agencies supervise. Not all such CMP adjustments are likely to be as large as FinCEN’s—many of the agencies have made more recent CMP adjustments than has been the case for FinCEN. But, in light of the overall recent heightened regulatory interest in BSA/AML violations, it is possible that regulatory agencies and self-regulatory organizations that are not subject to the Act but are notably active in BSA/AML enforcement (e.g., FINRA and state agencies such as the New York Department of Financial Services) will make similar or proportional upward adjustments to their penalties.

Copyright © 2019 by Morgan, Lewis & Bockius LLP. All Rights Reserved.


About this Author

Melissa R.H Hall, Financial services attorney, Morgan Lewis
Of counsel

Melissa R. H. Hall represents US and overseas banks, nonbank financial services companies, investors in financial services, and technology companies in regulatory and corporate matters. She advises them on a wide range of state and federal financial regulatory laws and regulations. She provides counsel on financial regulatory compliance and enforcement, including state and federal licensing requirements, consumer financial products and compliance, payment systems, corporate and transactional matters, financial institution investment and acquisition, and the development...

Ignacio Sandoval, Morgan Lewis, Securities lawyer

A member of the firm’s securities industry practice, Ignacio A. Sandoval advises broker-dealers on matters relating to their obligations under federal securities laws and self-regulatory organization rules. Prior to joining Morgan Lewis, he was a special counsel in the Office of Chief Counsel in the SEC’s Division of Trading and Markets. Ignacio’s SEC experience includes matters involving domestic and foreign broker-dealer registration matters, anti-money laundering obligations, alternative trading systems, and high-frequency traders.