BSA Enforcement Defense Attorneys
Non-Compliance with the Bank Secrecy Act Can Lead to Steep Penalties. We Represent Clients in All BSA Enforcement Matters
The Bank Secrecy Act (BSA) is one of the federal government’s most potent anti-money laundering (AML) enforcement tools. The BSA imposes various requirements and prohibitions, and it applies to financial institutions, financial services firms, businesses, and individuals. BSA enforcement actions present substantial risks in all cases, and they can potentially lead to civil or criminal prosecution depending on the circumstances involved.
The Financial Crimes Enforcement Network (FinCEN) holds primary responsibility for BSA enforcement. FinCEN is a bureau of the U.S. Department of the Treasury headquartered in Vienna, VA that operates worldwide. It regularly pursues enforcement actions under the BSA, targeting entities and individuals both in the U.S. and abroad. Facing a FinCEN investigation or enforcement proceeding is a serious matter that requires experienced legal representation, and targeted entities and individuals must work with their defense counsel to protect themselves by all means available.
Violations That Can Lead to BSA Enforcement
While there are several violations that can lead to BSA enforcement action, the Federal Deposit Insurance Corporation (FDIC) breaks these violations down into three broad categories. Understanding the nature of a BSA enforcement action (i.e., which type of violation the action is targeting) is a critical first step toward asserting a successful defense. The three broad categories of BSA violations are:
1. Lack of an Effective BSA Compliance Program (or Any Necessary Program “Pillar”)
Financial institutions and other entities can face BSA enforcement action as a result of their failure to implement an effective BSA/AML compliance program. They can also face enforcement action based on their failure to incorporate any necessary component into their BSA/AML compliance programs, which the FDIC and FinCEN refer to as “pillars”.
As the FDIC explains, “BSA program violations must be supported by at least one pillar violation. Violations of individual pillars might, or might not, lead to the conclusion that the bank [or other entity] has suffered an overall BSA/AML program violation. . . . The first possible indication that a BSA program has failed is by the absence of one or more of the required pillars.” With this in mind, financial institutions and other entities targeted for lacking an effective BSA compliance program must promptly work with their defense counsel to assess their BSA/AML compliance programs. They must have the documentation and strategies in place needed to substantiate their good-faith compliance efforts, and they must be prepared to justify any apparent compliance failures (i.e., a prolonged vacancy in their BSA compliance officer position).
2. Systemic and Recurring BSA Violations
BSA enforcement actions can lead to findings of systemic and recurring violations even in the absence of BSA/AML compliance program failures. From inadequate training to negligent and rogue employees, various issues can lead to systemic and recurring violations including:
- Systemic and recurring recordkeeping violations
- Habitually late currency transaction reports (CTRs) or suspicious activity reports (SARs)
- Frequent errors and omissions in CTRs and SARs
- Consistent failure to adequately identify (and confirm the identity of) customers
- Repeated failure to file Reports of Foreign Bank and Financial Accounts (FBARs)
Similar to BSA/AML compliance program failures, systemic and recurring violations present a high risk for substantial penalties. FinCEN and other federal authorities expect entities that are subject to the BSA to take adequate steps to prevent, detect, and report illicit transactions. When entities not only fail to meet this expectation but also fail to identify their own shortcomings, this is a scenario that is ripe for heavy BSA enforcement.
3. Isolated and Technical BSA Violations
The FDIC describes isolated and technical BSA violations as, “limited instances of noncompliance with the financial recordkeeping or reporting requirements of the BSA that occur within an otherwise adequate system of policies, procedures, and processes.” In most cases, these violations will not lead to significant BSA enforcement action on their own, although they may trigger enhanced scrutiny from FinCEN.
Potential Consequences of FinCEN BSA Enforcement Actions
The potential consequences of FinCEN BSA enforcement actions depend on the circumstances involved and the severity of any discovered violations. As outlined by FinCEN, the outcomes of a BSA enforcement action can include:
- No Action – A successful defense may result in FinCEN deciding not to take action against the targeted entity or individual. However, FinCEN may “reopen the matter if [it] obtains new material information . . . or becomes aware of additional or subsequent violations.”
- Warning Letter – If a BSA enforcement action uncovers isolated, technical, or otherwise minor violations of the statute or its enabling regulations, FinCEN may choose to issue a warning letter without further consequence.
- Equitable Remedies – In cases involving ongoing violations or a perceived risk of future violations, FinCEN may seek an injunction or other equitable remedies to enforce compliance.
- Settlement – In appropriate cases, FinCEN will agree to settle BSA enforcement actions, with potential settlement terms including equitable remedies and civil monetary penalties.
- Civil Monetary Penalties – In addition to imposing civil monetary penalties as a condition of settlement, FinCEN also has the authority to impose civil monetary penalties directly.
- Criminal Referral – In cases involving apparent criminal violations of the BSA, FinCEN will refer entities and individuals to the U.S. Department of Justice (DOJ) for prosecution in federal court. Criminal BSA violations can carry penalties including fines and imprisonment.
As BSA/AML violations have the potential to lead to substantial civil or criminal penalties, targeted entities and individuals must execute a comprehensive and strategic defense regardless of the circumstances involved. This means engaging experienced defense counsel, and it means working with defense counsel to identify all relevant risks and defenses.
Defense Strategies for Entities and Individuals Targeted Under the BSA
Financial institutions, financial services firms, businesses, and individuals can use a variety of defense strategies to avoid (or mitigate) liability in BSA enforcement actions. However, the specific defense strategies that are viable in any particular case will depend on the circumstances involved. With this in mind, some possible defense strategies in BSA enforcement cases include:
Demonstrating BSA Compliance
In the words of the FDIC, “The best defense is a good offense. . . . To avoid the most serious violations and the implications that can result when those violations are cited, banks [and other entities] must have a strong BSA/AML compliance program.” The FDIC recommends that, at a minimum, a comprehensive BSA compliance program should include:
- Comprehensive Risk Assessment
- Appropriate Policies and Procedures
- Adequate Monitoring Programs
- Strong Training Programs
- Thorough Independent Testing
- Qualified Employee Overseeing Day-to-Day Operations
The FDIC refers to these as “best practices for BSA/AML compliance.” But while these are all critical steps for avoiding penalties due to BSA enforcement, they are not sufficient on their own. To withstand scrutiny from FinCEN and other federal authorities, financial institutions and other entities must work with their counsel to implement comprehensive BSA/AML compliance programs that are custom-tailored to their specific risks and needs.
In cases involving FBAR violations and other reporting failures, targeted entities and individuals may be able to mitigate their liability exposure by making a voluntary disclosure to FinCEN or the Internal Revenue Service (IRS). Voluntary disclosures are subject to strict terms and conditions, and the requirements for making a valid voluntary disclosure depend, in part, on whether the violation has criminal implications.
Proactive Participation in FinCEN’s BSA Enforcement Investigation
Proactive participation in FinCEN BSA enforcement efforts allows targeted entities and individuals to steer the bureau’s inquiry toward a favorable resolution. By cooperating as warranted and challenging FinCEN’s investigative methods as necessary, targets can often secure efficient, favorable, and discrete resolutions.
Keeping FinCEN’s BSA Enforcement Action Civil
When targeted entities and individuals are at risk for substantial penalties under the BSA, keeping FinCEN’s enforcement action civil can mitigate the risks involved. Keeping BSA enforcement actions civil in nature keeps criminal fines and prison time off of the table, and avoiding these consequences can constitute a favorable result in some cases.
Strategic Courtroom Defense
Finally, when necessary, entities and individuals targeted in BSA enforcement actions can protect themselves by executing a strategic courtroom defense. At Oberheiden P.C., our former DOJ prosecutors have combined experience handling high-stakes civil and criminal prosecutions from both sides, and we rely on this experience to effectively represent our clients.
FAQs: Defending Against FinCEN BSA Enforcement Actions
What Should Banks and Businesses Do When Facing Scrutiny from FinCEN?
When facing scrutiny from FinCEN, there are several steps that banks and businesses need to take promptly. For example, they must promptly conduct an internal BSA/AML compliance assessment, and they must quickly seek to discern the scope and nature of FinCEN’s investigation.
What Are the Potential Penalties in BSA Enforcement Proceedings?
The potential penalties in BSA enforcement proceedings depend on whether the proceedings are civil or criminal in nature. In civil cases under the BSA, targeted entities and individuals can face injunctive penalties and civil fines. In criminal cases, targets can face substantial fines (i.e., six, seven, or eight-figures) and years of federal imprisonment.
Should I Engage Outside Counsel for BSA Enforcement Defense?
Due to the challenges and risks involved in facing BSA enforcement actions, all targeted entities and individuals should engage outside counsel. If you, your financial institution, or your business is facing scrutiny from FinCEN, we encourage you to contact us promptly for a free and confidential consultation.
Speak with a BSA Enforcement Defense Attorney at Oberheiden P.C.
To arrange a free and confidential consultation with a BSA Enforcement Defense Attorney at Oberheiden P.C., please contact us today. Call 888-680-1745 or tell us how we can reach you online to schedule an appointment as soon as possible.