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FinCEN Director Continues to Push Value of SARs and Other BSA Data

As we just blogged, Financial Crimes Enforcement Network (“FinCEN”) Director Kenneth Blanco recently touted the value of Suspicious Activity Reports (“SARs”) in the context of discussing anti-money laundering (“AML”) enforcement and regulatory  activity involving digital currency.  Shortly thereafter, Director Blanco again stressed the value of SARs, this time during remarks before the 11th Annual Las Vegas Anti-Money Laundering Conference and Expo, which caters to the AML concerns of the gaming industry.

It is difficult to shake the impression that Director Blanco is repeatedly and publically emphasizing the value of SARs, at least in part, in order to provide a counter-narrative to a growing reform movement — both in the United States and abroad — which: (i) questions the investigatory utility to governments and the mounting costs to the financial industry of the current SAR reporting regime, and (ii) has resulted in proposed U.S. legislation which would raise the minimum monetary thresholds for filing SARs and Currency Transaction Reports (“CTRs”), and require a review of how those filing requirements could be streamlined.

Director Blanco began his address by stressing the importance of SAR information:

As a firsthand user of BSA information for many years, I can tell you that the information is critical, and now that I can see it from the FinCEN perch, I can tell you that the information is priceless.

As many of you know, BSA data is one of the first lines of defense in our fight against all kinds of crime and bad acts, including terrorism.

I want to share with you briefly how BSA information is used.

  • Nearly 500 federal, state, and local law enforcement and regulatory agencies have access to FinCEN’s database of BSA records.  And within these agencies, there are an estimated 11,000 active users of BSA data.
  • This includes 149 SAR Review Teams located all around the country, covering all 94 federal judicial districts—including one in each state, DC, and Puerto Rico.
  • Law enforcement, regulatory users, and FinCEN analysts have made over 10 million queries of the BSA database over the past five years.
  • SARs and CTRs are vital for law enforcement investigations and regulatory matters and are used to map key national security threats.
  • Over 20 percent of FBI investigations utilize BSA data, and for some types of crime, including organized crime, that number is nearly 60 percent.
  • FinCEN receives nearly 1,900 SARs related to terrorist financing each year.  Keep in mind that those SARs are only the ones that the financial institutions filing the reports have identified as potentially relating to terrorism; we then take those and connect them to other SARs and other BSA information, which can generate further leads.

To me, these numbers are indicative of the vigilance of our nation’s financial institutions in keeping our nation, our communities, and our families safe.

Another important fact to mention is that out of 97 recent domestic terrorism cases reviewed by FinCEN, 25 of them—over a quarter —had BSA reporting prior to a person’s arrest.

After discussing two significant enforcement actions arising from BSA filings by casinos, Director Blanco acknowledged that FinCEN was attempting to provide financial institutions “better and more consistent feedback on how we use BSA data,” thereby noting another key issue which has been raised by those seeking reform of the current SAR filing regime – government feedback regarding what actually works.

Other Issues For the Gaming Industry and Financial Institutions

In the remainder of his remarks, Director Blanco discussed the following other topics:

  • Information sharing across components of a particular gaming enterprise, and the fact that FinCEN issued guidance in January 2017 stating that a casino that has filed a SAR may share that SAR, or any information that would reveal the existence of the SAR, with each office or other place of business located within the U.S. of either the casino itself or a parent or affiliate of the casino;
  • Information sharing across financial institutions through the Section 314(b) program, in which participating financial institutions voluntarily may share with each other information regarding suspected money laundering or terrorist financing; Director Blanco noted that the number of casinos participating in Section 314(b) information sharing has dipped from 200 to 183, even though over 6,400 financial institutions participate in the Section 314(b) program.  Director Blanco noted, “[t]his trend is surprising to me.”
  • “Emerging technology” – in particular, digital currency.  According to Director Blanco, “Whether you are integrating virtual currencies into your casinos or just creating a new platform to deal with sports betting after the Supreme Court decision, let us make sure that we do so in a responsible manner that is mindful of your obligations under the BSA.”
Copyright © by Ballard Spahr LLP

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About this Author

 Peter D. Hardy, Ballard Spahr, Philadelphia lawyer, White Collar Defense lawyer, Internal Investigations, Consumer Financial Services, Privacy and Data Security, Tax
Partner

Peter Hardy advises corporations and individuals in a range of industries against allegations of misconduct—including tax fraud, money laundering, Bank Secrecy Act, mortgage fraud and lending law violations, securities fraud, health care fraud, public corruption, Foreign Corrupt Practices Act violations, and identity theft and data breach.

Mr. Hardy has extensive trial and appellate court experience. He oversees internal investigations, advises in potential disclosures to the Internal Revenue Service, and has litigated complex criminal matters at the trial and appellate levels. He...

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Terence Grugan, Attorney, Ballard
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Terence M. Grugan is an associate in the firm's White Collar Defense/Internal Investigations and Commercial Litigation Practice Groups. In his white collar practice, Terence represents individuals and entities who are targets, subjects, or witnesses in criminal, regulatory, or administrative government investigations, including investigations conducted by the Department of Justice, Internal Revenue Service, Securities and Exchange Commission, state attorneys general, local, state, or federal inspectors general, and local law enforcement. Terence has defended clients from the preliminary stages of an investigation through trial in state and federal courts. As a member of the federal Criminal Justice Act appointment panel, Terence regularly represents in court individuals subject to federal criminal investigation and prosecution.

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Mary Treanor Lawyer Ballard Spahr
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Mary Treanor focuses her practice on representing energy and commodity companies, financial institutions and trade associations in a variety of regulatory, compliance, litigation, and transactional matters. Her work includes representing clients in enforcement matters before the Commodity Futures Trading Commission, Federal Energy Regulatory Commission and Chicago Mercantile Exchange, as well as advising on regulatory matters and assisting with transactions.

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