BSA/AML Compliance During the COVID-19 Pandemic
It can be challenging for credit unions to meet their obligations under the Bank Secrecy Act (BSA) and anti-money laundering (AML) regulations as the COVID-19 pandemic continues to develop. Federal regulators have offered guidance on how to manage compliance obligations during the pandemic. Although credit unions are still required to satisfy their BSA/AML obligations, the agencies recognize that the current environment requires some flexibilities. This blog covers guidance recently issued by the Financial Crimes Enforcement Network (FinCEN).
On March 16, FinCEN released a statement to financial institutions concerning the COVID-19 pandemic. In the statement, the agency encouraged financial institutions, including credit unions, to communicate concerns related to the COVID-19 pandemic and to remain alert to related illicit financial activity. The statement covered two main topics:
First, FinCEN encouraged financial institutions, including credit unions, that have concerns over potential delays in their ability to file any required Bank Secrecy Act (BSA) reports – suspicious activity reports (SARs) and currency transaction reports (CTRs) – to contact FinCEN and their functional regulator as soon as practicable. FinCEN’s Regulatory Support Section (RSS) can be reached at 1-800-949-2732, option 6 or via e-mail at FRC@fincen.gov.
Second, FinCEN advised financial institutions to “remain alert about malicious or fraudulent transactions similar to those that occur in the wake of natural disasters.” FinCEN identified the following emerging trends connected to COVID-19:
- Imposter Scams – In this type of scam bad actors attempt to solicit donations, steal personal information, or distribute malware by impersonating government agencies.
- Investment Scams – False investment opportunities, such as promotions that falsely claim that the products or services of publicly traded companies can prevent, detect, or cure the coronavirus.
- Product Scams – such as selling unapproved or misbranded products that make false health claims pertaining to COVID-19, or fraudulent marketing of COVID-19-related supplies, such as certain facemasks.
- Insider Trading.
In addition, FinCEN directed financial institutions to review FinCEN’s advisory FIN-2017-A007 from October 31, 2017 “for descriptions of other relevant typologies, such as benefits fraud, charities fraud, and cyber-related fraud.” FinCEN also encouraged financial institutions to enter “COVID19” in Field 2 of the SAR-template when reporting suspected suspicious transactions linked to COVID-19. We covered this and other recently issued guidance in a recent compliance blog.
On April 03, FinCEN issued a second advisory to assist financial institutions in complying with BSA obligations during the pandemic. In this advisory, FinCEN acknowledged that “financial institutions are taking actions to protect employees, their families and others in response to the COVID-19 pandemic, which has created challenges in meeting certain BSA obligations, including the timing requirements for certain BSA report filings”.
The advisory also provided some flexibility with regard to beneficial ownership Information collection requirements for existing customers. For Paycheck Protection Program (PPP) loans to existing customers, eligible federally insured depository institutions and federally insured credit unions, will not require re-verification under applicable BSA requirements, unless otherwise indicated by the institution’s risk-based approach to BSA compliance. For non-PPP loans, FinCEN reminds financial institutions of it’s September 7, 2018 ruling (FIN-2018-R004) offering certain exceptive relief from beneficial ownership requirements, and to the extent that renewal, modification, restructuring, or extension for existing legal entity customers falls outside of the scope of that ruling, “FinCEN recognizes that a risk-based approach taken by financial institutions may result in reasonable delays in compliance.”
FinCEN also suspended implementation of the February 6, 2020 ruling FIN-2020-R001 on CTR filing obligations when reporting transactions involving sole proprietorships and entities operating under a “doing business as” (DBA) name.
The agency additionally created a COVID-19-specific helpline for financial institutions to communicate to FinCEN COVID-19-related concerns while adhering to their BSA obligations. You can access it following these steps:
- Go to www.FinCEN.gov;
- Click on “Need Assistance”; and
- Select “COVID19” in the subject drop-down list.
Even though these communications are not mandatory, they are strongly encouraged by the agency. Likewise, FinCEN encouraged institutions to “consider, evaluate, and, where appropriate, responsibly implement innovative approaches to meet their BSA/AML compliance obligations”.
It is important to point out that none of FinCEN’s guidance extended the regulatory reporting deadlines. As a result, credit unions may want to stay vigilant during these challenging times. If any COVID-19-related delays arise, affected credit unions may want to contact FinCEN and the NCUA as soon as possible to avoid any potential penalties and consequences.