The Financial Crimes Enforcement Network (FinCEN) is a program under Rule 31 CFR Part 1010.520 that requires certain financial institutions to search their records and identify if they have responsive information with respect to the particular investigative subject. This provides a service to law enforcement by providing an additional layer to help locate financial assets and recent transactions of individuals, entities, and organizations engaged in or reasonably suspected, based on credible evidence, of engaging in terrorist acts or money laundering activities.

Who is required to perform FinCEN reviews?

Currently, only broker-dealers are subject to FinCEN program 314(a) 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.

As a covered financial institution, you must ensure you have policies and procedures in place to that provides the who, what, when and how you will comply with the rule. Below are key considerations when establishing or updating your policies and procedures.

314(a) Request Registration

Firm’s must ensure that a contact person is registered to receive FinCEN requests. This may include one or more parties. Depending on the type of institution, you may be required to register directly with FinCEN or through another platform that FinCEN pulls this data from.

Designation of a FinCEN Contact Person

If the Firm is a broker-dealer, this is done by designation of the Anti-Money Laundering contact (and the Alternate Anti-Money Laundering contact) in the FINRA CRD Firm Gateway. FinCEN will pull this data from CRD. If the Firm is not a broker-dealer, you must review your specific requirements on designation of appropriate contacts.

Conducting a Records Search

Firm’s should have a process in place for the FinCEN contact or designated reviewer to perform searches, including frequency of review.

Requests are generally delivered in the FinCEN Secure Information Sharing System (“SISS”) to the Firm every other Tuesday and Firms should complete requests, which is normally fourteen (14) calendar days after the request is transmitted. Some requests are delivered outside of this time frame, so Firm’s should have a procedure in place for these occurrences.

Financial Institutions should perform a one-time search of its records of the current clients or clients within the last twelve (12) months for a named suspect and to identify any transaction conducted outside of an account by or on behalf of a named suspect during the preceding six (6) months. FinCEN will provide guidance on the specific search parameters and will provide guidance if they are different from the normal parameters. Information to be considered may include but is not limited to name, address (including mailing), city, state, country, tax identification, social security number, passport number, beneficial owners etc. If the search does not uncover any matching of accounts or transactions, the financial institution is instructed not to reply to the 314(a) request.

Escalation Procedures for Potential Matches

Firm’s should have a process in place for any potential matches noted in the system. This process should include sending potential matches through the designated section in the SISS system before the response date. Firm’s are prohibited from sharing and using this information except to

  • Reporting to FinCEN as provided in this section;
  • Determining whether to establish or maintain an account,
    or to engage in a transaction; or
  • Assisting the institution in complying with any requirement
    of 31 C.F.R. Part 103.

Information Security

All records including escalation should be kept confidential. Firm’s should ensure they have procedures in place to protect and safeguard this information. Any person responsible for conducting searches should use discretion to maintain confidentiality and ensure records are stored in a secure location.

Books and Records Documentation

Documentation of FinCEN reviews should also be added to the Firms processes and procedures. Firm’s should ensure that a log is reviewed and results are well documented for a reasonable time period.

For helpful FAQ’s on this topic, check out our blog post on FinCEN 314(a) Program FAQs

FinCEN also provides a fact sheet to covered institutions. Review the most updated version here.

MasterCompliance provides expert consulting, outsourcing, and implementation tools in planning and budgeting for your firm’s compliance responsibilities. If there are any areas where you would like to explore additional assistance or services, please contact us.