The Financial Crimes Enforcement Network (FinCEN) is a service driven by law enforcement agencies to coordinate with covered financial institutions to help locate financial assets and transactions by subjects of criminal investigations, such as tax fraud or money laundering investigations. FinCEN is also a bureau of the U.S. Treasury Department. But did you know that FinCEN has multiple programs and broker-dealers are required to participate in the 314(a) program?
Generally speaking, FinCEN’s 314(a) Program requires broker-dealers to respond to mandatory requests for information made by FinCEN on behalf of federal law enforcement agencies. Below are four frequent questions related to FinCEN 314(a).
What is FinCEN 314(a)?
Section 314(a) is part of the USA PATRIOT Act of 2001 and requires the Secretary of the Treasury to adopt regulations to encourage regulatory and law enforcement authorities to share information with financial institutions. This includes information regarding individuals, entities, and organizations engaged in or reasonably suspected of engaging in terrorist acts or money laundering activities.
First, FinCEN receives requests from law enforcement including the FBI, DEA, and the Department of Justice. Once FinCEN reviews and approves these requests for the program, they then send notifications to the designated contacts at financial institutions across the United States. These notifications are sent once every 2 weeks (or special requests as needed) informing them that new information is available via the secure website portal. The requests contain both individuals and businesses including names, addresses, and additional identifying data to assist firms in performing an adequate search against their records. Finally, the firm compares its records of accounts and transactions against FinCEN’s list of suspicious entities and reports any potential matches.
Who is required to perform FinCEN reviews?
Currently, only broker-dealers are subject to FinCEN program 314(a) and 314(b) requirements. Registered investment advisors do not have a requirement to perform FinCEN reviews. Other covered financial institutions include:
- Banks;
- Casinos and Card Clubs;
- Money Services Businesses;
- Brokers or Dealers in Securities;
- Mutual Funds;
- Insurance Companies;
- Futures Commission Merchants and Introducing Brokers in Commodities;
- Dealers in Precious Metals, Precious Stones, or Jewels;
- Operators of Credit Card Systems;
- Loan or Finance Companies; and
- Associations consisting of the financial institutions above.
How does a firm perform FinCEN 314(a) reviews?
During the initial setup process, firms must designate a contact person to receive the requests and maintain the confidentiality of any requests and responsive reports to FinCEN. Generally, the designated contact is the firm’s AML compliance officer or alternate AML compliance officer. Most importantly, this contact is the only authorized person that FinCEN will communicate with and send notifications to.
Firms must search their records (either manually or electronically) to determine if there are any potential person or business matches. This includes accounts on file with the firm during the preceding 12 months and transactions conducted within the last 6 months. Firms should perform reviews promptly and no later than the due date listed on the notification. If the search does not uncover any account or transaction matches, no reply is required.
What should happen if a firm identifies a potential match?
If a firm identifies an account or a transaction in their records that match an account on FinCEN’s report, it must report relevant information to FinCEN. Firms must report this information directly in the secure portal. The financial institutions must query their records for data matches, including accounts maintained by the named subject during the preceding 12 months and transactions conducted within the last 6 months. Firms should not contact any suspected individual to discuss the potential FinCEN match. Also, it is important to note that Section 314(a) provides lead information only and is not a substitute for a subpoena or other legal process.
What is the difference between 314(a) and 314(b)?
FinCEN program 314(a) relates to information sharing between financial institutions and law enforcement agencies. On the other hand, FinCEN program 314(b) deals with information sharing between approved financial entities only.
MasterCompliance provides expert consulting, outsourcing, and implementation tools in planning and budgeting your firm’s compliance responsibilities. If there are any areas where you would like to explore additional assistance or services, please contact us today.
For a deeper dive into this topic, check out our blog post on FinCEN 314(b) as well.