Covid-19: the indications of the U.S. Anti-Money Laundering Authority (Financial Crimes Enforcement Network)


In the context of the initiatives that international institutions and individual states have undertaken to tackle the global crisis due to the pandemic of COVID-19, the authorities to monitor and combat money laundering and terrorist financing have also taken steps to issue specific provisions aimed at guarantee the resilience of the system and give indications to the operators concerned to monitor and contrast possible illicit phenomena and vulnerabilities related to the emergency[1].

In this context, in the United States of America, following the national emergency declaration linked to COVID-19 of 13 March 2020, the Financial Crimes Enforcement Network (FinCEN)[2], an AML / CFT competent authority in the United States, has issued several press releases to support and direct the obligated subjects in the specific activity.

With the first press release of March 16, 2020[3], FinCEN has asked financial institutions to report any difficulties that could have caused delays in submitting the reports required by the Bank Secrecy Act (BSA)[4] as – for example – the Suspicious Activity Report (SAR) or the Suspicious Transaction Report (STR).

To this end, FinCEN has activated an e-mail address and a telephone number specifically dedicated to supporting those obliged to solve problems in the application of anti-money laundering legislation during an emergency.

In addition, a few days after the national emergency declaration, FinCEN invited financial institutions to pay particular attention to fraudulent transactions typical of emergency phases following natural disasters or those relating to:

  • Generic scams – with specific reference to crime attempts to solicit donations, steal personal information or distribute malware by impersonating government agencies (e.g. Centers for Disease Control and Prevention), international organizations (e.g. World Health Organization – WHO ) or healthcare organizations;
  • Investment scams – with particular regard to the invitation from the Securities and Exchange Commission (SEC) to be wary of investment offers related to companies that may offer on the market products or services related to potential treatments of COVID-19[5];
  • Product scams – with specific reference to the alerts of the Federal Trade Commission (FTC) and the Food and Drug Administration (FDA) on the fraudulent marketing of consumables related to the management of the COVID-19 emergency, such as some PPE (masks);
  • Insider trading – with particular regard to reports received by FinCEN relating to suspicions of insider trading related to COVID-19.

As regards the reports of suspicious transactions (SAR – STR) connected to COVID-19, FinCEN has asked the intermediaries to indicate in the reporting model precisely the wording “COVID19″[6] in order to trace specific criminal behavior.

April 3 2020[7], in reiterating the importance for national security of compliance with the Bank Secrecy Act, FinCEN has provided some detailed indications regarding the management of economic support procedures issued by the Federal Government (CARES – Coronavirus Aid, Relief, and Economic Security Act[8] and PPP – Paycheck Protection Program[9]). In more detail, the US authority, with regard to customer due diligence obligations in the specific context, has clearly established that a re-verification of customer information is not required if the customer is already registered and no changes have occurred. relating to economic beneficiaries in the case of a legal person. Furthermore, on the one hand taking note of the difficulties caused by the ongoing emergency and on the other, of the importance of immediately carrying out the economic measures adopted by the government, FinCEN recognized the possibility for financial intermediaries to operate even in the presence of “Reasonable delays” in the procedures compliance anti-money laundering in the event of changes, renewals, restructuring in the corporate structure of the client, legal person. In addition, it granted financial institutions an extension of the reporting terms provided for Currency Transaction Report (CTR – Currency Transaction Report)[10], relating to those transactions involving sole proprietorships and companies.

Also in the Communication of April 3, 2020, FinCEN recalls the operation of an online contact mechanism created ad hoc for the emergency COVID-19, encouraging “strongly” to report any difficulty due to the ongoing emergency in order to intervene and respond to the needs of the obliged persons in a concrete way, certainly highlighting a vision of one’s role not only as a Supervisory Authority and control but also to support the system especially in a period of objective difficulty.

Finally, FinCEN encourages financial institutions to consider, assess and, where appropriate, responsibly implement innovative approaches to comply with anti-money laundering obligations, in order to further strengthen the financial system against potential illegal activities and other COVID-19 related fraud.

On May 18, 2020, FinCEN published a further notice[11], intended for financial intermediaries, relating to Reports of Criminal and Suspicious Activities, recalling the obligations of the Bank Secrecy Act (BSA), and has issued further indications related to the COVID-19 pandemic.

As for any Suspicious Activity Report (SAR) connected to COVID-19, the obliged subjects are urged to forward to the Police and to FinCEN all the documentation supporting the reporting of suspicious transaction as quickly as possible, also reiterating the constraint of confidentiality on all information related to reports.

In the document in question, FinCEN identifies the sharing of information between financial institutions as a strategic measure for the identification, communication and prevention of fraud attempts in general, including those relating to the emergency phase COVID-19. In particular, the exchange of information between financial institutions is encouraged if they suspect that an operation may underlie illegal activities, terrorist financing or money laundering.

Again with a view to issuing precise and schematic indications to “educate” US intermediaries on the behavior to be followed in relation to the ongoing emergency, FinCEN lists the various government agencies responsible for investigating and combating criminal activity related to coronavirus. ; in this context, it invites the same subjects obliged to report potential offenses connected with the COVID-19 emergency to the competent agencies on the basis of the type of offense found which groups into four types: fraud related to COVID-19[12], cyber crime[13], identity theft[14] and federal tax fraud[15].

Finally, FinCEN announces that it has temporarily expanded its program for the recovery of funds stolen through fraud, theft and other financial crimes related to the emergency phase, urging financial intermediaries, if necessary, to request immediate assistance, for the recovery of funds, to the FBI or to the United States Secret Service (USSS). This request for assistance, specifies FinCEN, does not exempt intermediaries from the obligation to report the suspicious transaction (SAR).

Confirming the very concrete approach that the US Anti-Money Laundering Authority is having in supporting financial institutions, again on May 18, 2020, it issued a further notice describing some best practices to identify elements of risk of scams focused on the medical-health sector related to COVID-19[16]. The document, in addition to illustrating some operations to combat fraud relating to the medical sector that the United States authorities carried out in the month of March and April 2020, identifies indicators of suspicion which distinguishes them with “Red Flags”(22 in total) and which groups into three macro areas. FinCEN specifies that in the presence of these indices, the obliged party will have to acquire further information, before determining whether the transaction is to be considered suspect with respect to the parameters dictated by the Bank Secrecy Act.

The three risk sectors have been classified as follows:

  • medical related fraud such as cures, tests, vaccines and related scams; in fact, from the first information obtained from various Federal Agencies, FinCEN has identified some suspicious indicators, such as, for example, advertising on the web of the sale of serological tests for COVID-19, the presence of transactions to or through personal accounts for the sale of medical supplies, the sale of goods at prices not in line with those of the market, the request for payments in unusual ways with respect to normal market operations (prepaid cards, virtual currencies, electronic transfer of funds to risky jurisdictions);
  • failure to deliver goods or services; FinCEN observes a series of scams for non-deliveries carried out by fictitious companies that advertise medical material (tests, masks, medicines and other goods related to COVID-19). The victims of these scams, which occur mainly via the internet, can be unsuspecting companies, hospitals, governments and consumers[17]. From the first experiences gained in the field, FinCEN lists a series of alert to be taken into consideration for financial intermediaries such as, for example, the absence of a company history in the sector of the sale of healthcare supplies, the vague company names or, in any case, not present in the database of the obliged subject, the difficulty in understanding the model of the seller’s business and the difficulty in determining the true nature of the company and its operations, the lack of traceability of the shipment, the lack of certification of the origin of the goods marketed, the presence of previous reports, also from foreign Authorities, regarding of the seller;
  • selling price and hoarding of medical items; FinCEN reports some risk factors attributable to possible market manipulations and to the unjustified increase in the prices of sanitary equipment (e.g. PPE or hand sanitizer) or in any case goods related to the COVID-19 pandemic. In this context, the “Red Flags“Examples concern the use of personal accounts for commercial purposes and the creation of medical supply companies after January 2020, or the sending / receiving, by the customer, of funds to newly established companies that do not have a physical presence known, as well as movements of money not in line with the customer profile.

The press release of 18 May concludes with the indication of specific instructions on how to prepare and archive reports of suspicious transactions. FinCEN believes that the Suspicious Activity Report (SAR) are essential to identify possible financial crimes related to the COVID-19 pandemic, as well as financial fraud and offenses associated with domestic and foreign crime, political corruption, money laundering and terrorist financing. In order to improve the intervention capacity to effectively “attack” cases related to COVID-19, FinCEN comes to give precise indications for the compilation / forwarding of SAR communications, requesting financial institutions to insert in some fields of the reporting format a series of specific codes that allow to trace them to the pandemic in progress.

[2] The Financial Crimes Enforcement Network was established with the Treasury Order no. 105-08 of the United States Secretary of the Treasury on April 25, 1990. After a series of regulatory changes that have extended and integrated its powers and responsibilities over the years, FinCEN is currently integrated into the United States Treasury Department and its director is appointed by the Secretary of the Treasury. The institutional mission of FinCEN is to protect the financial system from illegal activities and combat money laundering and promote national security through the collection, analysis and dissemination of financial information and the strategic use of financial authorities. FinCEN carries out its mission by receiving and storing financial transaction data; it also analyzes and disseminates such data for law enforcement purposes and cooperates globally with the counterparts organizations of the other States (FIU) and with the international bodies (GAFI, Egmont Group). FinCEN exercises regulatory functions mainly pursuant to the Currency and Transaction Reporting Act of 1970 (the legislative framework of which is commonly referred to as the “Bank Secrecy Act” – “BSA”), modified by Title III of the Patriot Act of 2001, as well as by various rules which have extended and integrated the powers and competences. The BSA is the first and most comprehensive federal statute that dictates the lines to combat money laundering and terrorist financing. The BSA authorizes the Secretary of the Treasury to issue regulations that require banks and other financial institutions to adopt a series of precautions against financial crimes, including the establishment of AML programs and the filing of reports related to investigations and criminal proceedings. , tax and regulatory issues, including in the field of intelligence and counter-terrorism. The Secretary of the Treasury delegates the Director of FinCEN to implement, administer and enforce the Bank Secrecy Act and other sector regulations. The United States Congress has assigned specific powers to FinCEN to collect, analyze and disseminate centrally the information related to monitoring the financial system in support of public authorities and the financial industry at federal, state, local and international. To fulfill its responsibilities for supervising and fighting financial crimes, FinCEN:

  • issues and interprets the regulations authorized by the statute;
  • supports and imposes compliance with regulations;
  • supports, coordinates and analyzes the data relating to the compliance functions with respect to their compliance with the other regulations issued by the Federal Regulators;
  • manages the collection, processing, storage, dissemination and protection of the data collected in the context of its functions;
  • maintains a government-level access service to the data in its possession;
  • supports investigations and judicial proceedings;
  • summarizes the data to issue recommendations on how to allocate resources in areas at greatest risk of financial crime;
  • shares the information and coordinates with the counterparts of the foreign FIUs;
  • conducts analyzes to support the political authority, federal agencies, foreign FIUs and the financial sector in general.
[4] The Bank Secrecy Act or BSA approved by the United States Congress in 1970 (Currency and Reporting Transaction Act) requires US financial institutions to support government agencies to detect and prevent money laundering. In particular, the law requires intermediaries to track cash financial movements, report cash transactions in excess of $ 10,000 (total daily amount) and report suspicious activities that could underlie money laundering, tax evasion or other criminal activities. The BSA is sometimes referred to as the “anti-money laundering” (“AML”) or jointly “BSA / AML” law. Over the years it has been repeatedly modified increasing its range of action.
[8] The Coronavirus Aid, Relief and Economic Security (CARES) Act, approved by Congress and signed by President Trump on March 27, 2020, is a $ 2 trillion economic aid package to provide quick and direct economic assistance to workers, families and American small businesses and preserving US jobs.
[9] The Paycheck Protection Program (PPP) is a support program for SMEs which provides for the provision of loans originating from the Coronavirus Law on Aid, Rescue and Economic Security (CARES). It is a program managed by Small Businness Administration (SBA), Federal Authority established in 1953 with the Small Businness Act. The PPP initially allocated $ 349 billion to small American companies employing no more than 500 employees. The program guarantees, through the SBA, 100% of the bank loans granted to small businesses that must be used to cover personnel costs, the payment of interest on previously opened mortgages, rental fees and utilities. Applicants must submit self-certification and other supporting documents to banks and financial institutions are expected to comply with US anti-money laundering legislation. In mid-April, given the huge number of requests (1.7 million applications), the funds were exhausted and on April 24 the budget was increased by an additional $ 310 billion
[10] The CTR is an obligation for U.S. financial institutions to report to FinCEN any deposits, withdrawals, currency exchanges or other payments or transfers from, through or to the financial institution for transactions in excess of $ 10,000.
[12] The Department of Justice (DOJ) calls on COVID-19 to report fraud suspects by reporting the National Center for Disaster Fraud (NCDF) or, in the case of fraud related to the CARES Economic Aid Act (Coronavirus Aid, Relief, and Economic Security Act) or other financial crimes, to report to the United States Secret Service (USSS).
[13] Federal Bureau of Investigation’s (FBI) – Crime Complaint Center, the CISA National Cybersecurity Communications and Integration Center (NCCIC) of the DHS (Department of Homeland Security) and the HSI (Homeland Security Investigations) – Operation Stolen Promise Fraud Intake.
[14] Federal Trade Commission and Social Security Administration.
[15] Fraud involving federal tax payments must be reported to the Treasury Inspector General for Tax Administration.
[17] In a notice of March 27, 2020 to the healthcare industry, the FBI asked the medical community to exercise constant control and implement due caution when dealing with unknown vendors and when interfacing with unknown brokers. “FBI Warns Health Care Professionals of Increased Potential for Fraudulent Sales of COVID-19-Related Medical Equipment”.

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