FinCEN, Financial Crimes Enforcement Network, receives 1,500 suspicious activity reports (SARs) every month, said director Kenneth A. Blanco this Thursday.
FinCEN is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes.
Blanco disclosed this information during his interview at the 2018 Chicago-Kent Block (Legal) Tech Conference.
He proclaimed the huge number of SAR’s filed every month as a success for law enforcement authorities such as U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) along with his own.
A Suspicious Activity Report (SAR) or Suspicious Transaction Report (STR) is a report made by a financial institution about suspicious or potentially suspicious activity. The criteria to decide when to report, according to the Federal Financial Institutions Examination Council is as follows:
- Criminal violations involving insider abuse in any amount.
- Criminal violations aggregating $5,000 or more when a suspect can be identified.
- Criminal violations aggregating $25,000 or more regardless of a potential suspect.
- Transactions conducted or attempted by, at, or through the bank (or an affiliate) and aggregating $5,000 or more, if the bank or affiliate knows, suspects, or has reason to suspect that the transaction:
- May involve potential money laundering or other illegal activity (e.g., terrorism financing).
- Is designed to evade the BSA or its implementing regulations.
- Has no business or apparent lawful purpose or is not the type of transaction that the particular customer would normally be expected to engage in, and the bank knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.
Blanco lauded financial institutions for their role in law enforcement by providing critical leads through SAR’s. The information included beneficial ownership information, jurisdictional information, and financial institutions contacts for new leads.
SAR reporting is of critical importance to our work in the virtual currency space to help identify emerging threats and typologies, (a) for the sake of the victims that are targeted, (b) for financial institutions to better understand and effectively report on these threats, and (c) for public trust and reliance in the good work being done in the financial innovation space.
Discussing FinCEN’s role in the crypto space, Blanco explained how his organization is dedicated to protect and secure the financial system from those who seek to misuse important technological advancements for nefarious purposes — harming victims while undermining the trust in the financial system.
Our goal is to ensure that all virtual currency money transmitters undergo regular, routine compliance examinations, just like every other U.S. financial institution, to help illuminate weaknesses and strengthen protocols before a lapse occurs.
Blanco also shed light on FinCEN’s standing on inter-currency trading stating that as per March 2013 guidance, FinCEN’s rules apply to all transactions involving money transmission—including the acceptance and transmission of value that substitutes for currency, which includes virtual currency. This means that FinCEN’s regulations cover both transactions where the parties are exchanging fiat and convertible virtual currency, but also to transactions from one virtual currency to another virtual currency.
Talking about the potential illicit finance and fraud surrounding Initial Coin Offerings (ICOs), Blanco ensured that FinCEN is committed to protect the financial system against any risks.
While ICO arrangements vary and, depending on their structure, may be subject to different authorities, one fact remains absolute: FinCEN, and our partners at the SEC and CFTC, expect businesses involved in ICOs to meet all of their [anti-money laundering/combating the financing of terrorism] obligations. We remain committed to taking appropriate action when these obligations are not prioritized, and the U.S. financial system is put at risk.
Regarding anonymous services, Blanco clarified that any businesses which seeks to conceal the source of the transmission of virtual currency are still money transmitters when they accept and transmit convertible virtual currency, and therefore, have regulatory obligations under The Bank Secrecy Act (BSA).
Concluding, Blanco vowed to protect the integrity of the financial system by improving understanding in the emerging technologies and pursuing individuals and companies who do not take their obligations under U.S. law seriously, whether by targeting victims or by enabling those who do.