FinCEN Guidance and Managing BSA during the COVID-19 Crisis
April 15, 2020
The Financial Crimes Enforcement Network (FinCEN) has released 3 pieces of guidance on the COVID-19 crisis and BSA/AML requirements.
March 16, 2020
|April 3, 2020
|April 13, 2020
The COVID-19 pandemic presents a perfect storm for BSA compliance. Fraud increases as criminals seek to take advantage of consumers and financial institution distracted by managing the crisis and pre-existing fraud schemes come to light as money becomes tight. Meanwhile, compliance departments are strained by the emergency response to COVID, in many cases dispersed away from the credit union and facing additional complications and challenges.
March 16 Guidance
FinCEN acknowledges the challenges faced by financial institutions and encourages any institution that believes the impact of COVID-19 will delay mandatory reporting to contact FinCEN’s Regulatory Support Section (RSS) at 800.949.2732. The guidance also reminds institutions to remain alert to the common fraudulent and malicious activity associated with the aftermath of natural disasters. These include imposter, investor, and product scams as well as insider trading.
FinCEN refers institutions to its October 31, 2017 Alert related to Natural Disaster Fraud.
April 3 Update to Guidance
Once again, FinCEN acknowledges the challenges provided by COVID-19, but provides little in the way of concrete relief. FinCEN states that the agency “appreciates 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” and that a risk based-based approach to compliance should be taken.
- PPP loans for existing customers will not require re-verification under applicable BSA requirements, unless otherwise indicated by a risk-based approach to BSA
- Non-PPP loans will be continue to be governed by 2018 FinCEN guidance that provided exceptive relief for course of business transactions and existing customers, although FinCEN recognizes that a risk-based approach may result in reasonable delays in compliance
- Changes to CTR filings of transactions involving sole proprietorships and DBAs (see February 6, 2020 FIN-2020-R001) are suspended until further notice.
- FinCEN has created a new portal on their webpage for financial institutions that wish to communicate with the agency about COVID-19 related concerns and BSA compliance.
- Finally, FinCEN reminds financial institutions about its guidance on using innovation and technology to enhance compliance.
April 13 FAQs
The SBA has been issuing FAQs regarding implementation of the CARES Act Paycheck Protection Program (PPP). Some of the SBA FAQs addressed BSA/AML/CFT compliance and therefore FinCEN republished the relevant BSA related FAQs under the FinCEN heading. Lenders may rely on the answers given to the 2 BSA FAQs as a safe harbor against future federal government action.
- The first FAQ deals with Beneficial Owner verification under the PPP. As addressed above, the FAQ notes that an existing customer that has previously been verified does not need to be re-verified. An existing member that has not been verified should be treated in accordance with the risk-based compliance program of the credit union.
- The 2nd FAQ deals with new customers and the lender’s collection of information from natural persons with a 20% or greater ownership interest in the applicant business. In such cases, collection of owner name, title, ownership %, TIN, address, and date of birth from each 20% owner will satisfy the BSA BO requirement. If any ownership interest of 20% or greater in the applicant business belongs to another legal entity, lenders will need to collect appropriate beneficial ownership information for that entity.