(Sept. 17, 2021) Online child sexual exploitation (OCSE) crimes are on the rise, and the Treasury’s top enforcement unit is highlighting some financial trends related to the crimes, as well as issuing new suspicious activity report (SAR) filing instructions to address the uptick, the agency said in a notice issued this week.
“Crimes related to OCSE, including the funding, production, and distribution of child sexual abuse materials (CSAM), have increased during the COVID-19 pandemic, according to multiple law enforcement authorities,” Treasury’s Financial Crimes Enforcement Network (FinCEN) said in its notice.
A review of SARs, the agency said, showed some trends, including: that from 2017 to 2020, there was a 147% increase in OCSE-related SAR filings, including a 17% year-over-year increase in 2020. FinCEN said it also observed that OCSE offenders are increasingly using convertible virtual currency (CVC, some of which provide anonymity), peer-to-peer mobile applications, the darknet, and anonymization and encryption services to try to avoid detection. CVC, the agency said, is increasingly the payment method of choice for OCSE officers to make payments to websites that host CSAM.
SAR filing instruction changes made by FinCEN in response to the uptick in OCSE actions include:
- Financial institutions reference only this notice in SAR field 2 (Filing Institution Note to FinCEN) using the keyword OCSE-FIN-2021-NTC3. “This keyword should also be referenced in the narrative to indicate a connection between the suspicious activity being reported and the activities highlighted in this notice,” FinCEN said. “Financial institutions may highlight additional advisory keywords in the narrative, if applicable.”
- Financial institutions should also select SAR Field 38(z) (Other) as the associated suspicious activity type to indicate a connection between the suspicious activity reported and OCSE activity and include the term “OCSE” in the text box. “If known, enter the subject’s internet- based contact with the financial institution in SAR Field 43 (IP Address and Date),” the agency said.
- If human trafficking or human smuggling are suspected in addition to OCSE activity, financial institutions should also select SAR Field 38(h) (Human Trafficking) or SAR Field 38(g) (Human Smuggling), respectively.
- Reporting entities should use the Child Sexual Exploitation (CSE) terms and definitions in the appendix of the notice when describing suspicious activity, which FinCEN would assist its analysis of the SARs.
LINK:
FinCEN Calls Attention to Online Child Sexual Exploitation Crimes
(Feb. 26, 2021) A comment letter supporting NCUA’s proposed rule about credit union exemptions from filing suspicious activity reports (SARs) has been submitted by NASCUS, which also some recommendations for changes in the proposal.
The letter supports NCUA’s proposed rule on the Bank Secrecy Act (BSA) providing the agency leeway to grant federally insured credit unions (FICUs) exemptions from NCUA rules implementing SAR filing requirements. More specifically, in its proposal, the agency suggested that innovative approaches and technological developments in the areas of SAR monitoring, investigation and filings may involve a variety of techniques, including automated form population, automated or limited investigation processes and enhanced monitoring processes
NASCUS wrote that emphasizing substantive SAR results over procedural compliance will result in “SAR data that is potentially of greater use to law enforcement and national security stakeholders and is consistent with the intent and spirit of the BSA.”
The association made recommendations for improvements in the proposal, intended to clarify the rule and reduce regulatory burden for credit unions. Among those recommendations:
- Commit to consulting with the appropriate state regulator when evaluating a request for an exemption;
- Clarify what “classes” or “select groups” may apply for an exemption or have a third party apply for an exemption on their behalf from certain SAR filings;
- Specify to which NCUA office to send a request for exemption.
“NASCUS and state regulators remain committed to working with stakeholders and with NCUA to ensure the credit union system is protected from bad actors that would seek to exploit that system in furtherance of criminal enterprise,” NASCUS wrote. “We strongly encourage NCUA to consider how the exemption process will be implemented within the context of affiliated or collaborating credit unions such as in shared branches or services centers, centralized CUSO compliance, and shared back-office situations.”
LINK:
NASCUS Comment letter: Proposed Rule: Bank Secrecy Act – RIN 3133–AF25
(Jan. 8, 2021) Two new summaries – of an NCUA proposal on exemptions for suspicious activity reports (SARs) and exemption thresholds for consumer reporting requirements – have been published by NASCUS.
Both are available to members only.
Late last month, the NCUA Board proposed modifying requirements for federally insured credit unions to file SARs under Bank Secrecy Act (BSA) requirements that would exempt some credit unions which develop “innovative solutions” to meet BSA requirements, when requested.
In its proposal, NCUA suggested that innovative approaches and technological developments in the areas of SAR monitoring, investigation and filings may involve a variety of techniques, including automated form population, automated or limited investigation processes and enhanced monitoring processes
The agency said requests for exemptive relief pertaining to innovation or other matters may involve, among other things, for SARs: expanded investigations and timing issues, disclosures and sharing, continued filings for ongoing activity, outsourcing of responsibilities and practices, as well as the role of agents of FICUs, the use of shared utilities and shared data, and the use and sharing of de-identified data. “The NCUA expects that new technologies will continue to prompt additional innovative approaches related to SAR filing and monitoring,” the agency said.
However, NCUA added, any exemptions it grants would not relieve a credit union from its obligation to comply with Treasury’s Financial Crimes Enforcement Network (FinCEN) SARs regulations, where appropriate.
The second summary looks at a regulatory alert issued by NCUA, also late last month, on annual adjustments for exemption thresholds for 2021 under the Truth in Lending Act (Regulation Z) and the Consumer Leasing Act (Regulation M). The new thresholds (which took effect Jan. 1) are the same as the 2020 thresholds, specifically: for higher price mortgage loans exemption, $27,200; for consumer credit and consumer lease exemptions, $58,300.