Financial Crimes Enforcement Network (FinCEN)

Bureau of Industry and Security (BIS)

  • On July 25, BIS entered into a Settlement Agreement with Harold Rinko, doing business as Global Parts Supply of Hallstead, Pennsylvania (also known as Rinko/Global Parts Supply) to settle a charge of one alleged violation of the Export Administration Regulations (EAR). The company was assessed a $100,000 civil penalty and a denial of export privileges for ten years. Both are suspended so long as the company makes quarterly reports to BIS.
    • Between 2007 and 2011, Rinko/Global Parts conspired and/or acted in concert with others to procure U.S.-origin goods, subject to the EAR, from suppliers in the U.S. to Syria without a license. These included items specifically identified on the Commerce Control List (CCL) or designated as EAR99. For example, in 2008, the company prepared false sales invoices for a multi-gas scanner, used in the detection of chemical warfare agents, and accessories, knowing the items would be transshipped to Syria.

Financial Crimes Enforcement Network (FinCEN)

  • On July 26, Treasury took its first action against a foreign-located money service business, assessing a $110 million civil monetary penalty against BTC-e, a/k/a Canton Business Corporation for willfully violating U.S. anti-money laundering (AML) laws. One of BTC-e’s operators, Russian national Alexander Vinnik, was arrested in Greece, as well. FinCEN assessed a $12 million penalty against him for his role in the violations.
    • BTC-e exchanges fiat currency as well as different convertible virtual currencies, such as Bitcoin. It is one of the largest virtual currency exchanges by volume in the world. BTC-e facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.

For more information, contact: Jeff Snyder, Edward Goetz


MoneyGram’s ex-Chief Compliance Officer, Thomas Haider, on May 3 settled alleged anti-money laundering (AML) compliance violations with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network for $250,000, according to announcements by FinCEN and U.S. Attorney’s Office for the Southern District of New York. It appears to be the largest penalty FinCEN ever has imposed on an individual. The settlement resolves an action that FinCEN brought in federal district court to enforce its penalty against Haider, and also Haider’s counter-claim that the Government violated the Privacy Act by leaking details of its investigation to the media. This appears to be the first time that FinCEN has sought penalties against an individual for mismanagement of an AML compliance program, and only the second time FinCEN has sued to enforce a civil penalty. Haider also agreed to be enjoined from performing compliance functions for a money transmitter for a period of three years.

The settlement comes four months after the United States District Court for the District of Minnesota denied Haider’s motion to dismiss FinCEN’s complaint, rejecting in particular his argument that the Bank Secrecy Act (BSA) did not allow penalties against individual employees of a financial institution for the institution’s willful violations of the BSA’s requirement to implement an effective AML program. FinCEN’s complaint was based on previous allegations that MoneyGram failed to file suspicious activity reports (SARs) or to discipline agents despite repeated evidence of fraud against MoneyGram customers in which those agents appear to have colluded. These allegations included events from 2003 to 2008, and ultimately led to MoneyGram entering into a deferred prosecution agreement (DPA) with the Department of Justice in 2012 and agreeing to forfeit $100 million. FinCEN brought its complaint against Haider two years later, in 2014. The complaint alleged that Haider willfully failed to ensure that MoneyGram implemented an effective AML program, in particular by failing to discipline or terminate MoneyGram agents and outlets that presented a high risk for fraud, and also that he willfully failed to ensure that MoneyGram filed SARs on reports of fraud or money laundering through these agents as required by the BSA. (See our previous alert on the complaint and the district court’s opinion here.)

The settlement amount of $250,000 is less than the $1 million FinCEN sought in its Complaint. The agreed injunction also is narrower than the government’s request in the complaint that Haider be barred from “participating, directly or indirectly, in the conduct of the affairs of any financial institution” for a period of years to be determined at trial. And FinCEN did not obtain an admission from Haider that he willfully violated the BSA, something that FinCEN has sought and obtained in recent settlements against both individuals and institutions. However, the amount is far more than reported AML settlements for individuals with other financial regulators, and appears to be the largest paid by an individual to date.

FINRA historically has been the most active regulator in assessing penalties against individual AML compliance personnel. A former global AML chief compliance officer of Brown Brothers Harriman (BBH) and a former AML compliance officer at Raymond James & Associates (RJ) each settled for $25,000 with FINRA in 2014 and 2016, respectively. For purposes of comparison, BBH paid $8 million and RJ paid $17 million to settle the related corporate enforcement actions. The SEC also has prioritized individual accountability, highlighted by an October 2016 enforcement action against the CEO of a Miami-based brokerage firm which resulted in a $50,000 individual settlement. The decision to pursue the CEO was driven by the SEC’s finding that he was ultimately responsible for its AML program and supervision of the firm’s AML officer. Haider’s $250,000 settlement with FinCEN is enough to strike fear into the hearts of AML compliance officers at all financial institutions.

That is particularly true for compliance officers at financial institutions also regulated by New York’s Department of Financial Services, which in June of 2016 adopted new AML rules requiring one or more “senior officers” (which is likely for many institutions to include their chief AML officers) to certify annually that the institution’s AML programs have various mandatory elements similar to those required under federal law, with potential penalties for “false” certifications. In cases where AML officers are deemed to have “willfully” violated BSA rules by failing to properly maintain aspects of their institution’s AML programs, they may risk accusations from the NYDFS that their certifications about the adequacy of these programs were false. (See our alert on the NYDFS rule here.)

Practical Considerations

Two aspects of the Haider settlement provide special guidance to AML compliance officers. First, the settlement notes that Haider chose not to implement a draft policy to discipline or terminate agents with high reported incidents of fraud in part because of opposition from the company’s Sales Department. Second, the fraud and money laundering activity occurring through specific MoneyGram agents was not reported to FinCEN in SARs in part because MoneyGram’s Fraud Department, also under Haider’s management, did not share information on agents that had been the subject of disproportionate reports of fraud with its AML Compliance Department. This also prevented AML Compliance Department staff from targeting audits to address such activity, a further basis for the AML program failures attributed to Haider.

The first lesson that comes from this resolution is that financial institutions need to empower their AML compliance officers to ensure that the goals of sales and other company departments do not prevent the company from making sound compliance decisions and avoiding costly fines. This is consistent with FinCEN’s 2014 guidance recommending a “culture of compliance,” which calls for such empowerment of AML compliance officers. Second, this case makes it clear that FinCEN expects AML compliance officers to stand firm in demanding compliance-related changes to address situations that put the company at risk. In cases where a decision may be overruled by concerns other than compliance, AML compliance officers should document their requests that particular actions be taken to ensure compliance, as well as the rationales for those requests. Third, financial institutions should avoid silos in the sharing and processing of internal alerts, in particular the alerts of internal fraud departments, to ensure that circumstances that merit a SAR are seen by the right people and are reported. Finally, the successful collaboration between FinCEN and the U.S. Attorney’s Office in this case is likely to embolden FinCEN to continue pursuing penalties against individuals for AML program and other violations in egregious cases. This is especially relevant following DOJ’s 2015 “Yates Memo,” which provides an incentive for financial institutions to identify individuals responsible for alleged misconduct in order to receive cooperation credit in criminal cases. In future criminal prosecutions by DOJ of financial institutions for AML program and SAR violations, it is possible to imagine more circumstances where FinCEN will collaborate with DOJ to impose civil penalties on culpable individuals (who also potentially may face prosecution by DOJ).

On February 23, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced the renewal of existing Geographic Targeting Orders (GTOs or Orders) to identify purchasers of luxury real estate in six major metropolitan areas in the United States. The GTOs require title insurance companies to identify and disclose information of individuals behind shell companies used to pay “all cash” for high-end residential real estate. The Order will be effective for additional 180 days beginning on February 24, 2017, and ending on August 22, 2017.

The renewed Order requires domestic title insurance companies to report on certain covered transactions. For purposes of the GTOs, “covered transactions” include any transaction in which (i) a legal entity (ii) purchases residential property (iii) for a sales price exceeding the following thresholds for each geographic area:

  1. $500,000 or more in Bexar County, Texas, which includes San Antonio.
  2. $1,000,000 or more in Miami-Dade, Broward, and Palm Beach Counties, Florida.
  3. $1,500,000 or more in the Boroughs of Brooklyn, Queens, Bronx, and Staten Island, New York City, New York.
  4. $2,000,000 or more in San Diego, Los Angeles, San Francisco, San Mateo, and Santa Clara Counties.
  5. $3,000,000 or more in the Borough of Manhattan, New York City, New York.

Such purchases must also have been made (iv) without a bank loan or other similar form of external financing, and (v) using currency or a cashier’s check, a certified check, a traveler’s check, a personal check, a business check, or a money order in any form.

Pursuant to the GTOs, title insurance companies are required to collect and report certain identifying information about the beneficial owners behind the shell companies used to purchase residential real estate, including driver’s license, passport, or other similar identifying documentation. For purposes of the GTOs, a “Beneficial Owner” means any individual who, directly or indirectly, owns 25% or more of the equity interests of the Purchaser. Title insurance companies must retain all records relating to compliance with the GTOs for at least five years from the last day that the GTOs were effective.

Financial institutions located in these geographic areas should be aware of the obligations imposed by the GTOs. In particular, title insurance companies and any of its officers, directors, employees, and agents may be liable for civil or criminal penalties for non-compliance with the Order.

Although the six GTOs have been in place since August 2016, FinCEN had already been targeting real estate transactions for over a year. The original GTO came into effect on March 1, 2016, when FinCEN started requiring title insurance companies to identify purchasers of luxury real estate in Manhattan and Miami-Dade County. These six areas have been specifically identified by FinCEN as vulnerable to money laundering.

For further details, please see Crowell’s client alert on the GTOs issued in July 2016.

For more information, contact: Carlton Greene, Cari Stinebower, Eduardo Mathison


On August 25, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) published a Notice of Proposed Rulemaking that would require banks that lack a federal functional regulator to establish and implement anti-money laundering (AML) programs and extend customer identification program (CIP) requirements to certain financial institutions not already subject to these obligations under the Bank Secrecy Act (BSA).

Most banks have been subject to an AML program requirement under the BSA since 2002, but others have not. FinCEN deferred this requirement for banks without a “federal functional regulator,” defined to include the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, Securities and Exchange Commission, and Commodity Futures Trading Commission. The affected banks would include (1) state-chartered, non-depository trust companies; (2) non-federally insured credit unions; (3) private banks; (4) state banks and savings and loan associations that are not FDIC insured; and (5) certain international banking entities that are not FDIC insured but are authorized by Puerto Rico and the US Virgin Islands to provide banking and other services to non-resident aliens. FinCEN estimates that approximately 740 banks lack a “federal functioning regulator.”

The proposed rule would require these entities to adopt and implement an AML program that includes what are often referred to as the “four pillars” of AML programs: (1) a system of internal controls designed to assure ongoing compliance with the BSA; (2) designation of an AML compliance officer; (3) periodic employee training on AML obligations; and (4) an independent audit function to test programs. The rule also would require such institutions to incorporate a fifth AML pillar recognized by FinCEN in a recent final rulefor banks, broker-dealers, mutual funds, and futures commission merchants and introducing brokers in commodities – (5) appropriate risk-based procedures for ongoing customer due diligence. This would include (a) understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile; (b) a requirement that banks without a federal functional regulator obtain beneficial ownership information from their legal entity customers – the natural persons that directly or indirectly own 25 percent or more of the equity interest in the customer, and one person who exercises control over it. The rule further would require that the AML programs be in writing and approved by the institution’s board of directors or an equivalent governing body. The proposed rule also contemplates that such institutions, as part of establishing an AML program, would conduct an overall assessment of the money laundering and terrorism financing risks that arise from their products, customers, distribution channels, and geographic locations.

FinCEN has justified the proposed rule by noting that such institutions may face the same vulnerabilities as federally regulated institutions, and that the rule would prevent regulatory arbitrage by persons seeking to avoid rigorous AML scrutiny.

FinCEN notes that, despite having been exempt from an AML program requirement, the affected institutions already must comply with a wide variety of BSA obligations. For example, they must file currency transaction reports (CTRs), suspicious activity reports (SARs), and maintain certain records, including funds transfer records. FinCEN anticipates that most institutions affected by the proposed rule already have some policy framework in place to comply with these obligations, and will be able to leverage such policies to meet the new requirements. Additionally, as with other institutions subject to an AML program requirement, affected institutions would be able to outsource some aspects of their programs to third-party service providers, while remaining responsible for the effectiveness of their programs.

The proposed extension of the CIP requirement to banks without a federal functional regulator will require these institutions, like other banks, to implement procedures for account opening that include: (1) verifying the identity of any person seeking to open an account; (2) maintaining records of the information used to verify the person’s identity; and (3) determining whether the person appears on any lists of known or suspected terrorists or terrorist organizations provided to the financial institution by any government agency. Notably, however, covered institutions apparently would not be able to take advantage of the safe harbor that allows most banks to rely on another financial institution to conduct CIP obligations for shared customers, because the safe harbor allows reliance only on financial institutions regulated by a federal functional regulator.

Written comments on the proposed rule were due by October 24, 2016. FinCEN requested comments on all aspects of the proposed rule, including: (1) whether certain banks without a federal functional regulator should be excluded from the rule; (2) whether there are additional bank categories that may be affected by the rule; (3) whether banks without a federal functional regulator should be subject to the beneficial ownership and other requirements of FinCEN’s new customer due diligence rule; and (4) when covered institutions should be required to implement any new requirements. We expect that FinCEN will finalize the proposed rule after reviewing and considering any comments.

Accordingly, banks not currently regulated by a federal functional regulator should begin planning to implement a comprehensive AML program along the lines of those administered by banks subject to federal functional regulators, beginning with a full risk assessment across the institution’s customers, products, distribution channels, and geographic locations, and including express CIP and CDD requirements. Banks that already have AML programs in place should consider whether their programs meet the requirements of the proposed rule. The biggest hurdle for smaller banks will be the operational challenges and costs that come with hiring compliance professionals, training employees, and testing a robust AML program.


FinCEN has looked under the hood of luxury real estate purchases in Manhattan and Miami, does not like what it sees, and now has expanded its investigation to include six major metropolitan areas.

On July 27, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced new Geographic Targeting Orders (GTOs or Orders) temporarily requiring certain U.S. title insurance companies that receive the Orders to identify and report the natural-person beneficial owners of legal entities used to purchase high-end residential properties without external financing in six major metropolitan areas.

Title insurance companies that receive the GTOs also will be required to report details about the natural person that represents the legal entity making the purchase and about the legal entity itself. The new Orders take effect on August 28, 2016, and last until February 23, 2017.

They expand on GTOs FinCEN issued in January of this year for purchases of luxury real estate in Manhattan and Miami-Dade County (the January GTOs), which are set to expire on August 27, 2016. The expanded GTOs deepen FinCEN’s efforts to investigate and take action against the use of residential real estate for money laundering, and increase the likelihood that FinCEN eventually will issue new rules on real estate under the Bank Secrecy Act (BSA).

The January 2016 GTOs for Manhattan and Miami-Dade

The January GTOs require that title insurance companies receiving the Order identify the beneficial owners of legal entity purchasers in certain real estate purchases valued at more than $3 million in Manhattan and more than $1 million in Miami-Dade County. These include purchases that were made at least in part using currency, money orders, or various types of checks, and without external financing.

The Orders require affected title insurers to obtain copies of driver’s licenses or passports for beneficial owners and to report information from these documents to FinCEN. Please see Crowell & Moring’s previous analysis of those Orders here.

The Orders define beneficial owners as individuals who, directly or indirectly, own 25 percent or more of the equity interests of the entity that purchased the property. The Orders also require affected title insurance companies to obtain and report similar information on the primary representative for any legal entity purchaser and for the entity itself. The Orders require title insurers to record copies of the documents used to verify identity, to store these and other records relating to the insurer’s compliance with the GTO for five years in a reasonably accessible manner, and to make them available to FinCEN or to “any other appropriate law enforcement or regulatory agency, upon request.”

The Expanded GTOs

The new Orders expand these same reporting and recordkeeping requirements to include six major metropolitan areas, including the Boroughs of New York City; Miami-Dade County and two counties immediately north; Los Angeles County; the counties covering the San Francisco area; San Diego County; and the county that includes San Antonio, Texas. Each area has separate real estate threshold values for reporting purposes:

  1. $500,000 or more in Bexar County, Texas, which includes San Antonio.
  2. $1,000,000 or more in Miami-Dade, Broward, and Palm Beach Counties, Florida.
  3. $1,500,000 or more in the Boroughs of Brooklyn, Queens, Bronx, and Staten Island, New York City, New York.
  4. $2,000,000 or more in San Diego, Los Angeles, San Francisco, San Mateo, and Santa Clara Counties.
  5. $3,000,000 or more in the Borough of Manhattan, New York City, New York.

The Orders provide that covered entities and their officers, directors, employees and agents may be subject to civil and criminal penalties for violations of the orders.

The Possibility of New AML Rules for Real Estate

FinCEN is using the GTOs to assess the risk that “corrupt foreign officials or transnational criminals” may be purchasing premium residential real estate in the name of shell corporations as a means of investing the proceeds of criminal activity while disguising their involvement. Information reported under the GTOs is shared with law enforcement agencies. FinCEN also anticipates that the GTOs will make it more difficult for individual purchasers behind covered transactions to disguise their involvement, mitigating the key vulnerability of such “all cash” transactions.

In a press release announcing the expanded GTOs, FinCEN confirmed that the January GTOs have provided law enforcement with valuable information about possible criminal activity and about additional assets relating to existing criminal suspects, and relied on these findings as a basis for expanding the GTOs to include premium real estate in other major metropolitan areas.

FinCEN is seeking information on real estate purchases without external financing in part because its existing regulations already provide some insight into and protection against financed real estate purchases through anti-money laundering (AML) regulation of banks, housing-related government sponsored enterprises, and residential mortgage loan originators. FinCEN estimates that existing Bank Secrecy Act (BSA) regulations already cover 78 percent of real estate purchases, and is using the GTOs to investigate the remaining 22 percent of purchases that fall outside coverage because they are made without external financing.

The agency also has taken other, broader steps to increase the availability of beneficial ownership information. On May 6, 2016, FinCEN issued a rule that now explicitly requires banks, brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities to obtain and periodically update beneficial ownership information for their legal entity customers as part of their AML program obligations under the BSA. Please see Crowell & Moring’s analysis of that rule here.

These actions on beneficial ownership come against the backdrop of media reporting that the leaked “Panama papers” documents identify the use of shell companies by persons allegedly involved in criminal activity to purchase real estate assets anonymously in Miami and elsewhere, as well as a recent $1 billion civil forfeiture complaint by the Department of Justice alleging the use of proceeds of official corruption to purchase real estate in Manhattan, Los Angeles and Beverly Hills, all locations covered by the expanded Orders.

FinCEN has hinted that its GTOs may lead to new rules imposing AML obligations with respect to real estate. In the press release announcing the expanded GTOs, FinCEN said that the January GTOs were “informing future regulatory approaches” and that the new GTOs likewise would help the agency to “determine our future regulatory course.” In a presentation to industry in April of this year, FinCEN’s Director said that data collected from the GTOs would “help us gather information while furthering our incremental, risk-based approach to regulating this industry.”

The BSA allows FinCEN to impose AML requirements on “persons involved in real estate closing and settlements” because such persons are within the Act’s broad definition of “financial institutions.” In 2003, FinCEN published an Advance Notice of Proposed Rulemaking (ANPRM) specifically to consider the imposition of AML requirements on persons involved in real estate settlements and closings. In the ANPRM, the agency recognized that real estate had been and might continue to be used for money laundering, and suggested that its definition of the term “persons involved in real estate closing and settlements” might include: “[a] real estate broker or brokers … [o]ne or more attorneys, who represent the purchaser or the seller, … [a] bank, mortgage broker, or other financing entity, … [a] title insurance company, … [a]n escrow agent, and … [a]n appraiser.” Ultimately, however, the agency never issued a rule. In her April 2016 presentation, FinCEN’s Director noted that “[w]e have more data now than in 2003 to inform our decision-making.”

Practical Considerations

In the same April 2016 speech, FinCEN’s Director also said that”[i]t was troubling to read that some legal and real estate experts mobilized immediately after the [January] GTOs were announced to provide suggestions about ways to evade the reporting requirements.” This seems a clear warning from the agency about attempts to evade the terms of the GTOs, and should be read in conjunction with provisions in the BSA that prohibit the structuring of transactions to avoid BSA reporting requirements, including GTOs. Title insurance companies should be on the lookout for transactions that appear structured so as not to trigger reporting under the GTOs; changes made after the insurer informs potential purchasers of its obligations under the GTOs are especially suspect.

Title insurance companies that receive GTOs also should consider how they will gather the required information and who will be responsible for obtaining and reporting it. FinCEN’s new beneficial ownership rule provides some guidance for reporting on beneficial ownership, including standard forms used to obtain this information that may be useful in deciding how to respond to the GTOs. Although that rule allows some reliance on representations by company officers of who the beneficial owners of a legal entity customer are, financial institutions receiving certifications of beneficial ownership still appear to be responsible for incorrect reporting where there are “facts that would reasonably call into question the reliability of such information.”

Title insurance companies should be on the lookout for instances where there is an obvious disconnect between the information provided by the legal entity or its representative and other information available to the title insurer.

Title insurers also should consider the impact of any beneficial ownership information they receive on their obligations under sanctions administered by the Treasury Department’s Office of Foreign Assets Control (OFAC).

Beneficial ownership information may reveal that sanctioned parties hold an interest in legal entity clients or in a real estate transaction, and prohibit U.S. persons from being involved.

Finally, title insurers should consider whether beneficial ownership information imparts actual or constructive knowledge that the transaction involves the proceeds of criminal activity, such that further participation in the transaction may give rise to criminal liability for money laundering.


On January 8, the United States District Court for the District of Minnesota denied a motion by Thomas Haider, MoneyGram’s former chief compliance officer, to dismiss a government complaint seeking to hold him personally liable for a $1 million civil penalty for MoneyGram’s violations of the Bank Secrecy Act (BSA).

In particular, the court upheld the government’s theory that the BSA allows individual liability for willful violations of the Act’s requirement to maintain an effective anti-money laundering (AML) program, and that such violations can occur when a compliance officer fails to prevent willful AML program violations by his financial institution.

This represents only the second time that the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has sued to enforce a civil penalty (the last was in 1994), and this decision appears to be the first to interpret FinCEN’s authority to impose individual liability for AML program violations. It will add fuel to a broader effort by FinCEN and other regulators to hold individuals accountable for AML related failures at their institutions.

MoneyGram entered into a deferred prosecution agreement in 2012 with the Department of Justice in which it admitted to willfully violating the BSA by failing to maintain an effective AML program in relation to repeated incidents of fraud conducted through MoneyGram agents.

FinCEN then assessed a $1 million individual civil penalty against Haider in December 2014, alleging that he violated the BSA’s AML program and suspicious activity reporting provisions by willfully failing to ensure that MoneyGram complied with its BSA obligations on the same facts. The United States Attorney for the Southern District of New York simultaneously brought suit on FinCEN’s behalf to obtain a judgment enforcing the assessed penalty, and also sought to bar Haider from participating in the affairs of a financial institution for a period of years to be determined at trial, the first time FinCEN has sought such an injunction.

Haider argued that he could not be held liable for violations of 31 U.S.C. § 5318(h) because it refers only to the obligation of “financial institutions” to maintain AML programs and does not specify any obligation for individuals, in contrast to other requirements that do. The court rejected this argument, reasoning that the statute’s general civil penalties provision at 31 U.S.C. § 5321(a), establishing penalties for any “domestic financial institution” or “partner, director, officer, or employee” thereof that willfully violates any provision of the BSA except for two excepted provisions, implied the availability of individual liability in non-excepted sections like § 5318(h).

The court also rejected Haider’s argument that the government’s assessment of a civil penalty against him without a prior administrative hearing before a neutral arbiter denied him due process. The court agreed with the government that the assessment itself did not deprive Haider of any property interest because the government was required under the structure of the BSA to file a civil action to enforce it, with factual issues of liability to be determined at trial on a de novo standard of review after full discovery. This holding is consistent with previous BSA actions, but represents a significant difference between enforcement under the BSA and enforcement by other financial regulators, where administrative proceedings before the assessment of a penalty result in a deferential standard of review by federal courts on a record compiled by the agency.

Although it means a harder road for FinCEN to enforce its assessments, FinCEN’s action against Haider demonstrates a willingness to pursue in court such enforcement in cases where settlement cannot be reached, and to take risks to reach individual liability.

The court further upheld the government’s use of criminal grand jury information from the MoneyGram prosecution to support its civil assessment and complaint, declining to review another court’s order permitting disclosure of the materials under 18 U.S.C. § 3322(b). Section 3322(b) allows courts to order disclosure of matters occurring before a grand jury in an investigation of a “banking law violation” (defined to include the BSA) to a “Federal or State financial institution regulatory authority” for “use in relation to any matter within the jurisdiction of such regulatory agency.” Reported cases on this section are rare, and this is the first to suggest that FinCEN may avail itself of this provision.

Banks and other financial institutions should anticipate going forward that FinCEN may use information from money laundering and other banking law grand jury investigations as a basis to bring its own civil enforcement actions under the BSA.

The court deferred ruling to allow further factual development on Haider’s arguments that: (1) the government’s claim for equitable relief is punitive in nature and therefore barred by the general statute of limitations at 28 U.S.C. § 2462 for civil penalties; and (2) alleged bias by FinCEN’s Director and alleged leaks by FinCEN personnel about the case deprived him of due process. The court also deferred ruling on whether FinCEN’s penalty determination would be reviewed on an abuse of discretion standard, as has been the practice in other BSA cases.

FinCEN’s action continues a trend toward holding individual corporate officers, and in particular compliance officers, liable for failings at financial institutions. These include: (1) the Financial Industry Regulatory Authority’s (FINRA) February 2014 penalty against Brown Brothers Harriman’s global AML compliance officer for AML violations there; (2) the DOJ’s September 2015 “Yates memo” announcing changes to DOJ policy to further leverage corporate cooperation credit in order to prosecute culpable individuals; (3) the Securities and Exchange Commission’s (SEC) April 2015 penalty against the chief compliance officer of Black Rock Advisors, LLC, for contributing to breaches of conflict of interest reporting requirements; (4) the SEC’s June 2015 settlement with the chief compliance officer of SFX Financial Advisory Management Enterprises for compliance failures that contributed to a corporate officer’s alleged misappropriation of client funds; and (5) a rule proposed in December 2015 by the New York Department of Financial Services that would impose detailed requirements for the operation of AML and sanctions-related compliance programs and require compliance officers to certify annually that programs at their institutions comply with these requirements, with criminal penalties for false or incorrect certifications.


On January 13, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced that it has issued Geographic Targeting Orders (GTOs) for Manhattan and Miami-Dade County, temporarily requiring certain U.S. title insurance companies to identify and report natural persons who use legal entities to acquire high-end residential properties without external financing.

FinCEN already requires Residential Mortgage Lenders and Originators (RMLOs) to have AML programs in place and to file Suspicious Activity Reports (SARs). The new GTOs are an expansion of FinCEN’s efforts to mitigate money laundering in the real estate sector.

The GTOs require that the beneficial owners of legal entity purchasers be identified and reported in deals valued at more than $3 million in Manhattan and more than $1 million in Miami-Dade County. The orders define beneficial owners as individuals who, directly or indirectly, own 25 percent or more of the equity interests of the entity that bought the property, a definition of beneficial ownership similar to one FinCEN has proposed in a draft rule on customer due diligence. FinCEN is covering certain title insurance companies because title insurance is common in real estate transactions.

Information reported will be shared with law enforcement agencies, providing insight into the natural persons involved in transactions vulnerable to abuse for money laundering. FinCEN anticipates that the GTOs will make it more difficult for individual purchasers behind the covered transactions to disguise their involvement, mitigating the key vulnerability of such “all cash” transactions.

The program only covers two markets and is of limited duration, taking effect on March 1, 2016 and expiring on August 27, 2016. If FinCEN finds suspicious activity in many sales, it reportedly plans to develop permanent reporting requirements for the entire U.S. real estate market.

The Bank Secrecy Act provides for the imposition of an AML program requirement on “persons involved in real estate closing and settlements” because such persons are part of the Act’s broad definition of “financial institutions.” However, FinCEN has exempted such persons and certain other businesses defined as “financial institutions” under the Act from this requirement while it studies the extent to which AML programs are appropriate for those industries. In 2003, FinCEN published an Advance Notice of Proposed Rule Making specifically to consider the imposition of AML requirements on persons involved in real estate closing and settlements, in which it recognized that real estate had been and might continue to be used for money laundering, but never issued a final rule.

On December 24, 2015, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) published notice in the Federal Register of the availability of a Regulatory Impact Assessment (RIA) and Initial Regulatory Flexibility Analysis (IRFA) relating to its proposed new Customer Due Diligence (CDD) rule for banks, brokers and dealers in securities, mutual funds, and futures commission merchants and introducing brokers in commodities. Comments on these documents must be received on or before January 25, 2016. While the publication of the RIA and IRFA will further delay implementation of a final CDD rule, the move appears to be aimed at addressing concerns expressed by industry about the costs of the proposed rule.

For several years, FinCEN has been working toward finalization of a new CDD rule for banks and other financial institutions that would clarify and strengthen their anti-money laundering (AML) requirements and would, for the first time, require covered financial institutions to seek to ascertain the beneficial ownership of their corporate-entity customers. According to FinCEN, the primary purpose of the proposed new CDD requirement is to “assist financial investigations by law enforcement” and to “impair criminals’ ability to exploit the anonymity provided by the of use legal entities to engage in financial crimes including fraud, money laundering, terrorist financing, corruption, and sanctions evasion.”

FinCEN received more than 130 comments in response to its Notice of Proposed Rulemaking (NPRM) published in the Federal Register on August 4, 2014. As explained by FinCEN in its December 24 notice, a “large number of commenters” asserted that the NPRM “substantially underestimated” the implementation and compliance-related costs that the rule would impose. Based in part on these comments, FinCEN concludes that these costs “may exceed $100 million annually, making this rulemaking an ‘economically significant regulatory action,'” and triggering a requirement under Executive Orders 13563 and 12866 to complete a regulatory impact analysis. FinCEN accordingly asked the Treasury Department’s Office of Economic Policy to prepare the current RIA. The RIA evaluates the economic costs and benefits of the CDD rule, as well as alternatives to it. The RIA estimates that the ten-year quantifiable cost of the proposed rule ranges from $700 million to $1.5 billion. However, it concludes that even a very small reduction—less than one percent—in the estimated $300 billion in annual illicit proceeds from financial crime as a result of the rule would justify it, and that such a reduction is likely.

The other analysis—the IRFA—is required under the Regulatory Flexibility Act if a proposed rule would have a “significant economic impact” on a “substantial number” of small businesses. FinCEN had previously sought to avoid the need for completing an IRFA by certifying that the rule would not have such an impact. However, in response to comments to the NPRM, FinCEN determined that it would undertake and publish an IRFA. The IRFA concludes that while the proposed rule would impose burdens such as training and additional time at the account opening stage, it would not have a significant economic impact on a substantial number of small entities.

Financial institutions have been awaiting finalization of the proposed CDD rule for some time. The fact that FinCEN undertook these intermediate steps of publishing and receiving comments on the RIA and the IRFA means there will be a further delay in implementation of a final rule, and the analyses also confirm significant potential costs for one. However, FinCEN’s decision to conduct an in-depth analysis weighing the costs and benefits of its proposal will put the agency in a stronger position to support any final rule, and makes eventual issuance of such a rule more likely.