FinCEN Addresses Two BSA Concerns

The fear of criminal action being taken by the Department of Justice for Bank Secrecy Act violations has led to two principal consequences, according to William J. Fox, Director of Financial Crimes Enforcement Network (FinCEN). In testimony before the U.S. House or Representatives Committee on Financial Services on May 26, Mr. Fox said FinCEN believes many institutions are now filing some of their suspicious activity reports "defensively". In other words, institutions are filing on activity that does not meet the threshold set forth for filing by the regulations and guidance issued about when to file a report. If current filing trends continue, Mr. Fox said, FinCEN estimates the total number of SARs filed this year will far surpass about 700,000, an increase of more than 37% over last year. Such defensive filing results in the data base becoming cluttered with reports that should not have been filed, diluting the value of the information in the database and implicating privacy concerns.

Secondly, they believe that concern about the regulatory and reputation risk associated with BSA has led many financial institutions to reassess the risks associated with some of their customer base such as money services businesses, embassy banking and certain correspondent banking relationships. Rather than take the chance of running afoul of BSA requirements and facing criminal action, the banks are closing those accounts. If those account relationships continue to be terminated on a widespread basis, FinCEN believes many of those who use these services could go "underground", creating an even larger problem.

Director Bill Fox closed his statements by listing the several steps FinCEN is taking to help alleviate the concerns connected with these two problems. Included in the actions is the work being done with the regulators to develop a consistent examination for BSA, due out the end of June. Also, free training sessions for regulators, examiners and bankers will be put on by FinCEN.

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 5, 6/05