COVID-19 & U.S. Financial Institutions: FinCEN’s guidance

FinCEN reiterated the importance of remaining compliant with the BSA as it is a mechanism to combat money laundering, terrorist financing and other illicit financial activity. However, FinCEN acknowledges the challenges that financial institutions are facing during the COVID-19 pandemic, especially the timing requirements for certain BSA report filings. 

As such: FinCEN suspends the implementation of the February 6, 2020 ruling (FIN-2020-R001) on CTR filing obligations when reporting transactions involving sole proprietorship and entities operating under a “doing business as” (DBA) name (the “2020 Ruling”) until further notice. The institutions who have already implemented these necessary changes do not need to revert to any prior practice and can report CTRs in accordance with the now suspended-ruling.

Paycheck Protection Program (PPP) loans for existing customers will not require re-verification under applicable BSA requirements for eligible federally insured depository institutions and federal insured credit unions, unless otherwise indicated by the institution’s risk based approach to BSA compliance. While not requiring re-verification under the above conditions was intended to ease the burdens caused by the pandemic, there may be more specific BSA guidelines in place at an institution that may require re-verification. The updates provided by FinCEN do not nullify previous risk based approaches to BSA compliance already in place at an institution.  

For non-PPP loans, there is certain exceptive relief to beneficial ownership requirements. FinCEN recognizes that a risk-based approach taken by financial institutions may result in reasonable delays in compliance, including; having to contact multiple parties for documents, an entity having lack of access to information, and extra security measures due to working off location. 

As the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is implemented, FinCEN will continue to assess reasonable risk-based approaches to BSA obligations. 

FinCEN has created a COVID-19 specific online contact mechanism for financial institutions to communicate their COVID-19 related concerns while adhering to the BSA obligations. Institutions that want to communicate with FinCEN must do the following:

• Visit www.FinCEN.gov > Click on “Need Assistance” > Select “COVID-19” in the drop down list

FinCEN will review COVID-19 related communication, however, it may respond via an automated message confirming receipt to communication regarding delays in filing of BSA reports due to the volume of such communications. FinCEN further notes that financial institutions contact their functional regulator(s) or other BSA examining authority if they are facing BSA compliance concerns because of COVID-19.

As Covid-19 continues, there has been a recorded increase in criminal activity related to the financial industry. While face-to-face interactions are limited and digital, contactless payments increase during the pandemic, criminals and terrorists are using this situation to exploit gaps and weaknesses in national anti-money laundering/counter-financing of terrorism (AML/CFT) systems. 

Criminals are using the COVID-19 pandemic to execute financial fraud and exploitation scams, including, but not limited to advertising and trafficking in counterfeit medicines, offering fraudulent investment opportunities, and engaging in phishing schemes that prey on virus-related fear. 

There has been a rise in criminals invoking the COVID-19 pandemic pretending to be from the government, or making illegal medical or health care pitches, among other topics. As this criminal activity continues to rise, compliance with BSA is should be regarded with the upmost importance. 

The U.S. Federal Trade Commission (“FTC”) has published some statistics in regards to the number of complaints they have received due to COVID-19. The table below outlines the number of fraud complaints the FTC has received since January 2020 in relation to the pandemic. From January 1 until May 3rd, 2020, the FTC has gotten 18,235 reports related to COVID-19, and people reported losing $13.44 million dollars to fraud.

Financial institutions should consider, evaluate, and implement innovative approaches to meet BSA/AML compliance obligations resulting from the COVID-19 pandemic. More specifically, financial institutions need to:

• Work with regulators to communicate any reporting delays, or AML violations by customers due to the COVID-19 Pandemic.

• Bolster your cyber security awareness and communication to customers as Phishing and cyber crimes are becoming more prevalent. 

• Consider implementing additional KYC measures for online banking to combat ML/TF, especially for retail banking activities as in-person transactions are decreasing and online transactions are increasing. One example could be requiring photos of customers making certain higher risk transactions. 

Each financial institution is required to do its part to strengthen the financial system against fraud and illicit financial activity on an ongoing basis, and especially during the ongoing COVID-19 pandemic. 

Sia Partners is ready to assist with your AML/BSA compliance needs. Sia Partners has extensive AML capabilities and former US regulators on staff that can be utilized to navigate these uncertain times. Sia Partners remains current on all current regulation and updates, in order to provide the most accurate and necessary assistance on all compliance matters.