FinCEN: U.S. AML & Ownership Regulator

The Financial Crimes Enforcement Network (FinCEN) is a key bureau of the U.S. Department of the Treasury, tasked with combating money laundering and financial crimes while enhancing transparency in financial systems. Established in 1990, FinCEN collects, analyses, and shares relevant financial intelligence with domestic and international regulatory and enforcement bodies.

In simpler terms, FinCEN acts as an overseer of the financial landscape, ensuring that entities comply with anti-money laundering (AML) and counter-terror financing (CFT) regulations by reporting suspicious activities and maintaining beneficial ownership information (BOI).

(Ref. FinCEN)

Imagine an individual attempting to funnel illicit proceeds through a bank account opened under a shell company. FinCEN works with financial institutions to monitor, identify, and report such activities, creating transparency while safeguarding the integrity of financial systems.

FinCEN is a cornerstone of the U.S. financial system’s AML and CFT infrastructure. It enforces compliance with the Bank Secrecy Act (BSA) and supports regulatory coherence through collaboration with several agencies, including the FBI, IRS, and SEC.

Key Functions:

• Guidance Under the Bank Secrecy Act (BSA): FinCEN ensures adherence to the Act by requiring financial institutions to maintain records and report certain monetary transactions.
• Suspicious Activity Reporting (SAR): Financial institutions must file SARs when suspecting transactions involving illicit activities.
• Inter-agency Coordination: FinCEN collaborates with domestic institutions (FBI, SEC) and international bodies for intelligence sharing and enforcement.
• Support for AML Compliance: It provides frameworks for financial organisations to design effective AML compliance programs.
  

LSEG Risk Intelligence can help support financial institutions in SAR filings and AML compliance by offering integrated platforms for monitoring customer transactions and detecting unusual patterns. This helps meet FinCEN’s regulatory expectations while enhancing risk mitigation.

With the introduction of the Corporate Transparency Act (2020), FinCEN oversees the collection and reporting of Beneficial Ownership Information (BOI). This statute aims to prevent criminals from using anonymous corporate structures to conceal the origins of illegal assets.

Mandatory Changes Brought by CTA

1. Beneficial Ownership Reporting: LLCs, corporations, and similar entities must disclose ownership details.
2. FinCEN Identifier System: A unique FinCEN ID system enables entities or individuals to submit information without repetitive filings.
3. Broad Applications: BOI disclosure applies across all U.S.-registered small businesses, corporations, and partnerships.

Example of BOI Reporting

A small business with three beneficial owners would need to identify and provide details for each owner through the FinCEN portal, ensuring transparency to regulatory bodies.

FinCEN reporting mechanisms impose diverse requirements on financial institutions and corporate entities to enhance compliance.

1. Beneficial Ownership Information (BOI): Required starting from January 2024, it involves the declaration of ownership details under the CTA.
2. Suspicious Activity Reports (SARs): Filed when financial institutions suspect illicit activities tied to a transaction.
3. Currency Transaction Reports (CTRs): Mandatory for transactions exceeding $10,000 in cash. (Ref. IRS)
4. Foreign Bank and Financial Accounts (FBARs): Individuals holding foreign accounts above $10,000 must report annually. (Ref. FinCEN)
5. Business Registration: Money Service Businesses (MSBs), including cryptocurrency platforms, must register with FinCEN.
   

FinCEN rules are applicable across several industries and entities to ensure systemic transparency.

Industries Requiring Compliance

• Financial Institutions: Banks, credit unions, and investment funds.
• Non-financial Companies: Real estate developers, insurers, and casinos.
• MSBs: Including firms offering money transfers or currency exchanges.
• Cryptocurrency Operators: Custodial wallet providers and crypto exchange platforms.

Under CTA’s BOI Requirements

Nearly all U.S. businesses, including LLCs and partnerships, must file BOI reports to FinCEN – underscoring the Act’s expansive reach.

The FinCEN Identifier simplifies reporting obligations for entities with recurring BOI filings.

Steps to Obtain a FinCEN ID

1. Accessing e-Filing Systems: Visit the official FinCEN portal to begin registration. (Visit here.)
2. Submitting Information: Entities or individuals can file their ownership details.
3. Usage in Declarations: The ID will link to respective BOI reports to eliminate redundant entries.
   

Protecting sensitive data is a significant focus for FinCEN. BOI data is restricted to specific agencies and financial institutions requiring it for Customer Due Diligence (CDD).

Who Can Access Data?

1. Law Enforcement Bodies: Includes agencies like the FBI and IRS.
2. Financial Institutions: Only for CDD and compliance purposes.
3. Regulators with Proper Authorisation: Operating under strict data sharing protocols.

FinCEN ensures robust systems to protect sensitive data, limiting misuse risks.