Friday FinCEN Update
Written by Brandy Bruyere, Director of Regulatory Compliance
It's been a bit of a slow week, but when you work in compliance sometimes no news is good news. After all, that means no new rules to learn this week, right? Today I'd like to highlight two items that recently came out of FinCEN a proposed rule that would require investment advisers' to adopt formal Anti-money laundering (AML) programs and report suspicious activity, and a FinCEN consent order involving Caesar's Palace.
FinCEN Proposal. A few of our members have asked about this proposed rule so here's a very brief overview. On Tuesday, September 1st, FinCEN published a proposed rule that would extend particular Bank Secrecy Act (BSA) requirements to investment advisers. Specifically, under this proposal, an investment advisor would be required to establish written AML programs, report suspicious activity to FinCEN and follow recordkeeping requirements.
Keep in mind that federal credit unions cannot directly offer products like securities, but there are some FCUs that have relationships with CUSOs which sell products like securities. Thus, this proposal may impact a credit union more tangentially, such as through due diligence obligations with regards to third-party relationships. However, the proposal defines investment adviser as [a]ny person who is registered or required to register with the SEC under section 203 of the Investment Advisers Act of 1940 Thus, whether this rule impacts a particular credit union's relationships will depend in large part on if any of a credit union's CUSOs have obligations to register with the Securities Exchange Commission under this cross-referenced statute. This is not the first time FinCEN has issued such a proposal, so time will tell if or when this could be finalized.
FinCEN and Caesars Palace Reach Settlement. While not specific to credit unions, this story caught my eye given some of the facts surrounding the case. Caesars Place, which earlier this year filed for Chapter 11 bankruptcy, agreed to pay an $8 million civil money penalty and implement changes to its BSA/AML program. The case involves allegations that the casino had systemic and severe AML compliance deficiencies particularly with its private gaming salons reserved for the wealthiest of gamblers who provided a minimum front money deposit of $300,000. According to the consent order, it was not uncommon for this high-end clientele to gamble millions of dollars in a single visit. Must be nice, right? I have a hard enough time purchasing a lottery ticket! But back to FinCEN
The casino permitted wealthy patrons to gamble anonymously without appropriate [AML] scrutiny that would meet these heightened risks and failed to file over 100 SARs for a variety of suspicious activities including potential money laundering. As part of the consent order, Caesars agreed to several conditions:
- undertake improvements to its BSA/AML program, including fostering a culture of compliance;
- retain a qualified external auditor to perform independent reviews of its program;
- properly train staff;
- perform a SAR lookback and file as necessary after reviewing the deficient time period; and
- report to FinCEN annually for three years.
While this case involves a casino, sometimes these kinds of conditions from a consent order can be useful as illustrations of regulatory expectations.
Enjoy Friday and have a great weekend!