The Financial Crimes Enforcement Network (“FinCEN”) released two announcements of note in January. One involves a proposed rule involving digital transactions. The rule is aimed at tightening gaps for potential money laundering due to the increase in popularity of virtual currency. The second announcement involved an enforcement action against Capital One (“the Bank”). The enforcement action noted the Bank’s failures in their Anti-Money Laundering (“AML”) Procedures and the Bank’s failure to report red flag transactions to FinCEN. 

Proposed Digital Currency Transaction Rule

FinCEN announced extending the comment period for the recent proposed rulemaking regarding digital transactions involving convertible virtual currency or digital assets. All comments to the proposed notice must be submitted before March 27th, 2021. Through the AML Act of 2020, convertible virtual currency (“CVC”) and digital assets with legal tender status (“LTDA”) will be included in the definition of monetary instruments. Banks and money services businesses (“MSBs”) will be required to complete a similar report to the Currency Transaction Report (“CTR”) regarding CVC or LTDA transactions greater than $10,000 or aggregating to greater than $10,000 that involve unhosted wallets (wallets not hosted by a financial institution) or wallets hosted in a jurisdiction identified by FinCEN. MSBs will also need verify and record the identity of the individual presenting the transaction, as well as record the identity, account number, and social security or taxpayer identification number, if any, of any person or entity on whose behalf such transaction is to be effected. 

To see the full report, click here.

To see the Notice of Proposed Rulemaking, click here.

Capital One Enforcement Action

FinCEN assessed Capital One a $390,000,000 civil money penalty for both willful and negligent violations of the Bank Secrecy Act (“BSA”) and its implementing regulations. Capital One failed to properly implement an adequate AML program to guard against money laundering. Capital One willfully failed to file thousands of Suspicious Activity Reports (“SAR”) and CTRs with respect to a particular business unit known as the Check Cashing Group. Capital One was aware of several money laundering risks associated with banking this particular group, including warnings by regulators, criminal charges against some of these customers, and internal assessments that ranked most of the customers in the top 100 of the bank’s highest risk customers for money laundering. Capital One had an account for a convicted associate of an organized crime family. The Bank failed to file SARs even when it had knowledge of criminal charges against the specific customer and continued to process over 20,000 transactions valued at $160 million, including cash withdrawals, for the perpetrator’s business. These funds later were connected to money laundering in activities such as loan sharking and illegal gambling.

To see the full report, click here.