Financial Crimes Enforcement Network (FinCEN)
Financial Crimes Enforcement Network (FinCEN) is a network, a means of bringing people and information together to fight the complex problem of money laundering.
Money Services Business Guidance on Registration and De-Registration
USA PATRIOT Act
Section 326 of the USA PATRIOT Act - On October 26, 2001, President Bush signed into law the USA PATRIOT Act, Pub. L. 107-56. Title III of the Act, captioned “International Money Laundering Abatement and Anti- terrorist Financing Act of 2001,” adds several new provisions to the Bank Secrecy Act (BSA), 31 U.S.C. 5311 et seq. These provisions are intended to facilitate the prevention, detection, and prosecution of international money laundering and the financing of terrorism.
Under Section 326 of the Act, financial institutions must institute a Customer Identification Program (CIP) that contains reasonable risk-based procedures to:
Section 326 of the Act provides that the regulations must require, at a minimum, financial institutions to implement reasonable procedures for (1) verifying the identity of any person seeking to open an account, to the extent reasonable and practicable; (2) maintaining records of the information used to verify the person's identity, including name, address, and other identifying information; 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. In prescribing these regulations, the Secretary is directed to take into consideration the various types of accounts maintained by various types of financial institutions, the various methods of opening accounts, and the various types of identifying information available.
Commercial Product Suggestion & Link to Product Web:
IDENTITY CHEK compliant with newly released Section 326 of the USA PATRIOT Act
Financial institutions must consider how this specific section will impact day-to-day business. Section 326 requires financial institutions - defined as banks, insurance companies, credit card companies, money service businesses, mutual funds broker/dealers and casinos - to establish minimum procedures for identity verification when new customers and others open accounts. This section also requires cross checking account holder and/or requester names against all government lists of known or suspected terrorist organizations (also known as Restricted or Denied Party Lists).
IDENTITY CHEK from Primary Payment Systems, will bring your institution into full enterprise wide compliance with Section 326 as it qualifies as a non-documentary verification method. In addition to using non-documentary methods to address situations when a customer opens an account without appearing in person, the Treasury and its agencies encourage non-documentary methods even when the customer has provided identification documents. **Primary Payment Systems, Inc. (PPS), an affiliate of First Data Corp., has been at the forefront of fraud loss prevention throughout the financial services industry.
Frequently Asked Questions USA PATRIOT Act, Section 326
Q: Who is impacted?
A: The following are impacted:
- Banks and trust companies
- Savings associations
- Credit unions
- Securities brokers and dealers
- Futures merchants and brokers
- Mutual funds
Q: What accounts are covered?
A: An “account” is defined by the Act as any interaction in which a formal banking relationship is established to provide or engage in services, dealings or other financial transactions. The following matrix outlines samples of what is included and what is excluded from this definition.
| Included | Excluded |
| Deposit Account | Wire Transfer |
| Checking Account | Check cashing |
| CD | Travelers checks |
| Credit Card | Accounts opened for participating in an employee benefit plan established pursuant to the Employee Retirement Income Security Act |
| Loan | Accounts acquired through acquisition, merger, purchase of assets, or assumption of liabilities from a third party |
| Mortgage | Sub accounts held through a deposit broker |
| Safe deposit box | Money orders |
| Custodian or trust services |
Q: Who qualifies as a customer?
A: A customer is defined as any person or entity opening an account. The following table provides examples of what is included and what is excluded from this definition.
| Included | Excluded |
| Individual | Person with existing account at FI, provided institution reasonably believes it knows its customer |
| Minor | Financial institution regulated by a Federal functional regulator |
| Non-Profit | Bank or thrift regulated by a state bank regulator |
| Civic Club | Municipality or other local, state, or federal government entity |
| Corporation | Any entity whose stock or analogous equity interests are listed on the NYSE, NASDAQ, or the ASE. |
| Trust | |
| Partnership or Association |
Q: What is the difference between documentary & non-documentary verification?
A: The Act distinguishes between two types of validation: documentary (verifying the physical documents), and non-documentary (using an automated validation system).
Q: What should we do if the customer does not have proper identification?
A: Restricting access to the customer's account while obtaining complete identifying information is a good approach to Section 326 compliance. It is important that the institution document the procedures for this within their CIP. These procedures should not only specify risk-based procedures for restricting access, but should also specify the period of time that the account will be maintained, and procedures for closing the account in the event that the information cannot be obtained or verified.
Q: For how long do records need to be retained?
A: The final rule takes a two-pronged approach to the record retention requirement:
Q: What terrorist lists are required by Section 326?
- The minimum required information (Name, Taxpayer ID number, Date of Birth, Physical Address) must be retained for five years after the date the account is closed or, in the case of credit card accounts, five years after the account becomes dormant.
- All basic identifying information (Name, Taxpayer ID number, Date of Birth, Physical Address), descriptions of any documents used, descriptions of any non-documentary methods used and the results, and resolutions of any discrepancies must be retained by the institution for five years from account opening.
A: There is currently no “government list” for purposes of Section 326. When a list is so designated, it will be clear that it is a Section 326 government list. FIs’ CIP must include procedures for determining whether the customer appears on any such list, along with a requirement to make such a determination within a reasonable period of time after the account is opened, or earlier.
U. S. Money Laundering Threat Assessment, December 2005
On January 11, 2006, the Treasury Department and its partner agencies announced the release of the U.S. Money Laundering Threat Assessment (MLTA).
The 2005 Money Laundering Threat Assessment (MLTA) is the first government-wide analysis of money laundering in the United States. The purpose of the MLTA is to help policy makers, regulators, and the law enforcement community better understand the landscape of money laundering in the United States and to support strategic planning efforts to combat money laundering.
Money Laundering Threat Assessment (MLTA)
Online Payment Systems
New and innovative online payment services are emerging globally in response to market demand from individuals and online merchants. Individuals, some of whom may not have a bank account or are unable to qualify for a credit card, are looking to online payment services to enable online shopping, electronic bill payment, and person-to-person funds transfers. And some online merchants are demonstrating a willingness to accept new electronic methods of payment that are less expensive than credit cards. These payment services function as online payment systems, accepting funds in a variety of ways for the purpose of transferring payment either to a merchant or an individual.Individuals wanting to shop online or participate in an online auction can use an existing bank account, credit card, wire transfer, money order, and even cash to fund an account with an online intermediary that will facilitate the payment. Some online payment services exist to facilitate transactions for online gambling and adult content sites that U.S.-based money transmitters typically will not service U.S. citizens can access payment services online that are based outside of the United States and transfer funds either electronically or by mail.
Online merchants, particularly those in sectors with high “chargeback” rates, are generating demand for new payment methods. These markets embrace online payment systems that set their own clearing and settlement terms absent any consumer protection or financial regulation. Typically, transactions through these service providers are considered final with no recourse for individuals who believe they have been defrauded. The consequence, according to federal law enforcement agencies, is that these systems have become favorite payment mechanisms for online perpetrators of fraudulent investment schemes and other illegal activity.
Some online payment services defy conventional business models. “Digital currency” dealers, for example, use precious metals (gold, palladium, platinum, and silver) as the store of value for online transactions and split the transaction process between two business entities: the digital currency exchange service and the digital currency dealer. Despite the appropriation of the term “digital currency” to describe the use of precious metals for online payments, digital currency remains one of many common phrases with “digital,” or “cyber” or “e–,” used to refer to any electronic payment initiated online.
The systems work as follows: A person wanting to use gold for an online purchase would first open a gold account with a digital currency dealer and then fund the account through an exchange service. Each exchange service sets its own terms, so that while some may only accept transfers from bank or credit card accounts, others will accept cash and money orders. Similarly, each exchange service offers different options for receiving funds. The result is that some service providers pose a greater risk for money laundering. **http://www.ustreas.gov/offices/enforcement/pdf/mlta.pdf
Financial Action Task Force (FATF)
The FATF is an inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing. The FATF is therefore a "policy-making body" created in 1989 that works to generate the necessary political will to bring about legislative and regulatory reforms in these areas. The FATF has published 40 + 9 Recommendations in order to meet this objective.
FATF Documents on the Forty Recommendations
The Forty Recommendations provide a complete set of counter-measures against money laundering covering the criminal justice system and law enforcement, the financial system and its regulation, and international co-operation.
They have been recognized, endorsed, or adopted by many international bodies. The Recommendations are neither complex nor difficult, nor do they compromise the freedom to engage in legitimate transactions or threaten economic development. They set out the principles for action and allow countries a measure of flexibility in implementing these principles according to their particular circumstances and constitutional frameworks. Though not a binding international convention, many countries in the world have made a political commitment to combat money laundering by implementing the Forty Recommendations.
Initially developed in 1990, the Recommendations were revised for the first time in 1996 to take into account changes in money laundering trends and to anticipate potential future threats. More recently, the FATF has completed a thorough review and update of the Forty Recommendations (2003). The FATF has also elaborated various Interpretative Notes which are designed to clarify the application of specific Recommendations and to provide additional guidance.
Interpretative Notes to the Forty Recommendations (2003)
Office of Foreign Assets Control
OFAC - The Office of Foreign Assets Control maintains a list of Specially Designated Nationals and Blocked Entities (SDNs). This list represents individuals and entities that are owned, controlled by, or acting for or on behalf of the governments of the targeted countries or are associated with international drug trade or terrorism. Financial institutions, securities firms, and insurance companies are prohibited from dealing with SDNs, and obligated to block or “freeze” property and payment of any funds transfers or transactions, and to report all blockings to OFAC.
Office of Foreign Assets ControlTerrorist Financing
At an extraordinary Plenary on the Financing of Terrorism held in Washington, D.C. on 29 and 30 October 2001, the Financial Action Task Force (FATF) expanded its mission beyond money laundering. It will now also focus its energy and expertise on the world-wide effort to combat terrorist financing. More on this
Office of Terrorism and Financial Intelligence (TFI)
The Office of Terrorism and Financial Intelligence (TFI) marshals the department's intelligence and enforcement functions with the twin aims of safeguarding the financial system against illicit use and combating rogue nations, terrorist facilitators, money launderers, drug kingpins, and other national security threats. The TFI gathers and analyzes information from the intelligence, law enforcement, and financial communities as to how terrorists and other criminals earn, move, and store money.
Take appropriate policy, regulatory, or enforcement action based on this analysis, to include the following:
Office of Terrorism and Financial Intelligence (TFI)