Financial Crime is a nuisance for everyone in every sense. People lose trust in the financial system due to fraud and Money Laundering. As the governments are active against Money Laundering and other crimes, they have made the system more stringent than ever. That’s why there are a number of regulatory bodies combating Fincrime. In this article, we shall provide detailed information about FinCEN which is a regulatory authority in the USA. Also, we will be focusing on the basic FinCEN KYC Requirements for regulatory compliance.
What is FinCEN?
FinCEN is a short form of The Financial Crimes Enforcement Network. Basically, it is a bureau in the United States Department of Treasury. It was established in 1990 with the purpose of fighting Money Laundering and Terrorist Funding. Primarily, FinCEN collects, analyzes, and reports financial intel reports to law enforcement and regulatory agencies. Also, FinCEN acts as a mediator between the compliance and regulatory bodies.
FinCEN KYC Requirements
Generally, FinCEN Requirements for KYC Compliance have few guidelines and procedures. Firms that are concerned with KYC need to understand the basic Requirements for KYC issued by FinCEN. Specifically, these requirements for KYC are only applicable within the USA premises. However, the USA being the world’s superpower has control over other economies as well. So, the following are a few of those main requirements:
- Bank Secrecy Act (BSA)
In 1970, Bank Secrecy Act was passed by the Congress of the United States. Basically, it requires the regulated entity to establish and maintain an effective AML (Anti-Money Laundering) program. Also, it requires those entities to actively and timely report suspicious or flagged transactions to the government.
However, disclosing such information to the general public may not be ideal or required. Hence, keeping a close watch and staying updated with the latest developments in the BSA requirements will be helpful.
- Currency Transaction Report (CTR)
It is a small yet basic FinCEN KYC Requirement for every regulated entity to report every transaction above $ 10000 to the authorities. To keep a close watch on the money laundering activity, one must report the transaction, whether in currency or other forms.
- Suspicious Activity Report (SAR)
Similarly, in case of any suspicious transaction or activity, banks and other financial institutions must file a report to the Financial Intelligence Unit (FIU). Notably, these suspicions are of Money Laundering and/or Fraud. These transactions can be the ones that mismatch the customer’s profile. Financial institutions usually report highlighted trends, red flags, or large amounts of transactions that are above the customer’s financial scale in SAR.
- Customer Due Diligence (CDD)
Despite being a part of KYC Regulations, it is also a FinCEN KYC Requirement that identifies and verifies customers. Moreover, it is necessary to do the CDD for beneficial owners and if the customer is high-risk, the requirement is to advance to EDD (Enhances Due Diligence).
Role of FinCEN KYC Requirements in AML
As mentioned above, the FinCEN KYC Requirements are aimed to combat Money Laundering and other Financial crimes. Truly, FinCEN has its critical importance in KYC AML Guide for the customers and general public in the US. As it issues guidelines and policies on various aspects of KYC. Now, the industry recognizes FinCEN as an authentic source of guidelines and information for KYC and AML. Here the central focus is kept on the basic KYC process i.e. Customer Identification, Risk Assessment, and Ongoing Monitoring.
Below are a few cases in which FinCEN has shown notable contributions in fighting Money Laundering.
Western Union Case:
In 2017, Western Union, a recognized international money transfer company, violated AML laws. FinCEN and The US Department of Justice brought them to an agreement of paying $586 million to settle the charges. Outrightly, FinCEN identified and investigated violators and carried out the procedure.
Wachovia Bank Case:
In 2010, one of the largest banks in the US, Wachovia Bank, agreed to pay $160 million against charges of failing to comply with the AML program. FinCEN investigative reports revealed that Wachovia Bank facilitated Mexican and Colombian Drug Cartels for Money Laundering through its accounts.
Conclusively, FinCEN has contributed a lot in mitigating Money Laundering and Terrorism Funding. It played a key role in making KYC and AML systems stringent to prevent criminals from misusing them. Overall, the regulatory framework in the US is closing in on criminals through strict policies against criminals. It is to be noted that with the advancement of technology, regulatory compliance like FinCEN KYC Requirements also need to embrace the new era. eKYC is an emerging concept and has shown visible improvements in the compliance area for everyone.