FinCEN: What Is the Financial Crimes Enforcement Network?

FinCEN's regulations cover a range of types of financial institutions, which are defined by the regulatory definition of "financial institution" in 31 CFR 1010.100(t). These are entities doing business in the following capacities:

• Banks, including commercial banks, savings and loan associations, savings banks, credit unions
• Brokers or dealers in securities, such as mutual funds and futures commission merchants
• Money services business, such as currency exchange, check cashing, and money transmitting
• Casinos and card clubs, because of their potential to handle large cash transactions

If that list weren't thorough enough, the regulatory definition that FinCEN follows also includes "a person subject to supervision by any state or federal bank supervisory authority," where "person" refers to any type of legal entity or institution.

How does the Financial Crimes Enforcement Network prevent financial crime?

FinCEN uses a number of strategies and tools to prevent and identify illicit use of financial infrastructure as a way to promote national security. One of the most important is the bureau's regulatory framework, which sets out specific tasks financial institutions must do to help detect and thwart illicit financial activities and increase financial intelligence. Reporting is central to this process. FinCEN sets out specific reporting requirements for financial institutions to follow, such as a mandate that they file Suspicious Activity Reports (SARs) or Currency Transaction Reports (CTRs) about financial transactions or activities that might suggest money laundering, fraud, or other criminal behavior.

FinCEN makes good use of the reporting it receives. FinCEN's data can help identify patterns and trends of illicit use of funds, and trace how criminals leave financial trails that might indicate threats or problems. The agency then shares this information with other stakeholders, such as domestic and international law enforcement agencies, other regulatory agencies, and members of the financial services community. FinCEN also cooperates with international counterparts to coordinate investigating financial crimes and developing measures to combat money laundering and terrorist financing.

FinCEN is authorized to enforce its rules and regulations designed to prevent money laundering and other illicit use of money. The agency can impose penalties, sanctions, and other measures to enforce compliance and maintain the integrity of financial oversight.

How does the Financial Crimes Enforcement Network relate to the Bank Secrecy Act?

The Financial Crimes Enforcement Network administers the Bank Secrecy Act (BSA), the central anti-money laundering statute of the U.S. "Bank Secrecy Act" is the working title for the Currency and Foreign Transactions Reporting Act of 1970, its amendments, and related statutes, and is sometimes called the "anti-money laundering" (AML) law or “BSA/AML."

The BSA requires institutions in a number of industries to take precautions to combat money laundering and other financial crimes. It does so by authorizing the Treasury Department to establish reporting and other requirements on financial institutions, such as the requirements that they keep records of cash purchases of negotiable instruments, and report transactions above $10,000 or other suspicious transactions. These reports help provide important financial intelligence to regulators and law enforcement investigations.

How will the Financial Crimes Enforcement Network enforce the Corporate Transparency Act?

It is FinCEN's job to enforce the CTA. To do so, FinCEN seeks to collect the reporting (Beneficial Ownership Information Report) from corporations, LLCs, and other similar entities about their beneficial owners. There are 23 types of exempt entities, but others will be required to comply.

FinCEN will establish and maintain a secure, confidential database for this information to assist law enforcement and other stakeholders in combatting financial crime. The agency will also follow procedures to verify the reported information.

What must be reported to the Financial Crimes Enforcement Network under the CTA?

The CTA requests that certain entities provide FinCEN with information about their beneficial owners—individuals who directly or indirectly control at least 25% of the entity's ownership interests or exercise substantial control over it. Entities provide their legal name and address and each beneficial owner's full legal name, date of birth, current address, and unique ID number from an acceptable identifying document, along with a copy of the ID document itself, such as a passport or driver's license.

The CTA gives FinCEN the authority to issue regulations about what verification procedures are acceptable. 

Be on the lookout for Financial Crimes Enforcement Network and CTA scams

New requests often serve as an opening for scammers to take advantage of confusion about the changes. Be on the lookout for scams related to FinCEN and the CTA.

Scammers may impersonate FinCEN officials, other financial authorities, or government personnel to request or demand information or money. Always independently verify the identity of any official claiming to be associated with FinCEN, and know that official communications about compliance issues are typically sent by U.S. mail.

Phishing scams may often involve a company claiming to assist with CTA reporting for a fee. Reporting entities can report easily through FinCEN via its secure network and should not need assistance with this process.