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Welcome to the March 2024 summary of news you can use as your bank or other financial institution attempts to stay up to date on the world of BSA/AML compliance. Our monthly series of curated news about financial crime developments, resources and stories.
In this edition, three main stories emerge:
- Court rules Corporate Transparency Act exceeds Constitution’s limits on Congress’s power
- FinCen reveals analysis of two years’ SARs activity in Puerto Rico
- Russian national’s guilty plea highlights how money launderers are enabling Russia with US-made military grade electronics
Court rules Corporate Transparency Act exceeds Constitution’s limits on Congress’s power
On March 1, 2024, in the case of National Small Business United v. Yellen, a federal district court in the Northern District of Alabama entered a final declaratory judgment. It concluded that the Corporate Transparency Act exceeds the Constitution’s limits on Congress’s power and enjoined the Department of the Treasury and FinCEN from enforcing the Corporate Transparency Act against the plaintiffs. The Justice Department, on behalf of the Department of the Treasury, filed a Notice of Appeal on March 11, 2024.
Despite the district court setback, FinCEN will continue to implement the Corporate Transparency Act as required by Congress, while complying with the court’s order. So, other than the particular individuals and entities subject to the court’s injunction (Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association), reporting companies are still required to comply with the law and file beneficial ownership reports as provided in FinCEN’s regulations.
Read here for further details:
54_Notice_of_Appeal.pdf (fincen.gov)
FinCen reveals analysis of two years’ SARs activity in Puerto Rico
Just several months after FinCEN fined Puerto Rico-based Bancredito International Bank and Trust Corporation $15 million for willful violations of the BSA (a first-of-its kind action against an International Banking Entity in Puerto Rico), FinCen has released findings around two years of SARs activity in Puerto Rico.
Here are some of the Puerto-Rico-specific key findings:
- More than 47,000 SARs were filed between January 1, 2022 and December 31, 2023 that listed Puerto Rico as the activity branch location.
- Reports of suspected check fraud increased by 66% year over year.
- Suspected money laundering was the most frequently reported suspicious activity subtype. Specific examples include transactions out of pattern, transactions below the recordkeeping threshold, and suspicious use of multiple locations.
- Some of the largest percentage increases in reporting were for transactions involving a high-risk jurisdiction and for those involving healthcare or health insurance.
- In the “Other” category, SAR filers commonly reported a high volume of financial activity, concerns about the destination of funds, high dollar amounts, and possible tax evasion.
Read here for further details:
FinCEN fined Puerto Rico-based Bancredito International Bank and Trust
Russian national’s guilty plea highlights how money launderers are enabling Russia with US-made military grade electronics
The U.S. Department of Justice announced on February 29, 2024 that a Russian international money launderer pled guilty to illicitly procuring large quantities of U.S.-manufactured dual-use, military grade microelectronics for Russian entities.
As we noted in this previous blog post, a September 2023 Financial Trend Analysis (FTA) report by FinCen found that the majority of companies identified in SARs (suspicious activity reports) filed between June 2022 and July 2023 appear to be associated with—or directly facilitating—Russian export control evasion specific to the electronics industry. This case reflects that significant trend.
According to court documents, Maxim Marchenko, a Russian citizen living in Hong Kong operated several Hong Kong-based shell companies to run an illicit procurement network in Russia, Hong Kong, and other countries. Marchenko’s procurement network fraudulently obtained from U.S. distributors large quantities of dual-use, military grade microelectronics, specifically OLED micro-displays, on behalf of Russia-based end users. The technology that Marchenko and his co-conspirators fraudulently procured have significant military applications, such as in rifle scopes, night-vision googles, thermal optics and other weapon systems.
Read here for further details:
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