Financial Crimes Enforcement Network

Updated on March 26, 2024
Article byRutan Bhattacharyya
Edited byRutan Bhattacharyya
Reviewed byDheeraj Vaidya, CFA, FRM

What Is The Financial Crimes Enforcement Network (FinCEN)?

The Financial Crimes Enforcement Network (FinCEN) refers to a government bureau that maintains a network with the aim of protecting the financial system by punishing criminals participating in financial crimes or preventing them from conducting such activities. It is entirely administered by the United States Department of Treasury.

Financial Crimes Enforcement Network

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This financial intelligence unit fosters transparency and improves collaboration among international partners, government agencies, and financial institutions. It operates internationally as well as domestically, primarily focusing on terrorist financing and money laundering activities, among various financial crimes.

Key Takeaways

  • Financial Crime Enforcement Network is a regulatory body the US Treasury Department set up to reduce money laundering activities and other financial crimes. The primary objective of this government bureau is to protect the US financial system. 
  • Some key roles and functions of FinCEN include reporting and monitoring, spotting financial crime threats, and regulating AML compliance.
  • Sharing of information, record keeping, customer identification, and the reporting of suspicious transactions are a few FinCEN requirements for every financial institution.
  • A key difference between FinCEN and OFAC is that the former does not enforce economic and trade sanctions.

Financial Crimes Enforcement Network Explained

Financial Crimes Enforcement Network refers to a regulatory watchdog established by the US Department of Treasury. Its purpose is to safeguard the country’s financial system from different financial crimes. The agency fosters national security by collecting and analyzing details concerning financial transactions necessary under the Bank Secrecy Act or BSA. Introduced in 1970, the government bureau received greater powers through the USA Patriot Act as a result of the September 11, 2001 terrorist attacks

An extensive range of activities, including straightforward cash smuggling activities to complex, large-scale digital transactions, can trigger this regulatory agency’s radar. The government bureau’s power lies in its network, which comprises the regulatory and financial services communities and law enforcement agencies. Note that money laundering can be complex. Hence, FinCEN tries to stop or prevent it by bringing multiple parties together.

The agency serves as the United States representative in an international organization named the Egmont Group, which has over 100 financial intelligence units. All units of this organization fight financial crime and share information.

History

In 1990, the US Department of Treasury launched FinCEN to carry out an analysis of the information required according to the BSA. Originally, the agency was to provide a multi-source intelligence and analytics network to minimize or eliminate financial crimes.

That said, in 1994, the FinCEN’s mission expanded to cover regulatory responsibilities. As a result, the bureau was able to administer the BSA. This means FinCEN controls and enforces rules about things like Suspicious Activity Reports (SAR) filings and Potentially Exposed Person (PEP) screening.  

After the Patriot Act came into effect, the regulatory agency’s authority increased concerning the collection of crucial information from different financial institutions and organizations. This happened via the increased information-sharing necessities for financial institutions. 

Role And Functions

Let us look at the Financial Crimes Enforcement Network’s responsibilities and functions.

  • It regulates and audits anti-money laundering (AML) compliance concerning regulated organizations, ensuring they comply with the relevant regulations.
  • The government bureau creates and imposes specific reporting requirements that organizations must fulfill. This promotes accountability and transparency.
  • FinCEN actively shares details with global Financial Intelligence Units, promoting international efforts to reduce financial crimes.
  • The regulatory agency diligently spots and gauges local and international financial crime threats. This helps in continuously improving its strategies to overcome emerging challenges.
  • FinCEN diligently reviews the reports financial institutions submit to spot terrorist financing or money laundering. The agency partners with such institutions to share information regarding suspicious activities and suspects.
  • The government bureau partners with different law enforcement agencies, offering invaluable support regarding prosecutions and investigations.

In addition, the agency assesses SARs from different financial institutions, offering an important system to spot and prevent any financial crime. 

Requirements For Financial Institutions

Per the Financial Crimes Enforcement Network regulations, financial institutions must meet the following requirements:

  • Risk Assessment: Financial institutions must determine the risk level associated with a customer by carrying out enhanced due diligence (EDD) and customer due diligence (CDD) procedures.
  • Information Sharing: Financial institutions must cooperate with the United States Department of Treasury Financial Crimes Enforcement Network by giving necessary information when required.
  • Sanction Compliance: All financial institutions must cancel US-sanctioned monetary transactions of entities and individuals.
  • Reporting Suspicious Transactions:  A financial institution must promptly inform regarding suspicious transactions and transaction reports to FinCEN.
  • Customer Identification: Financial institutions, like banks, need to execute Know Your Customer (KYC) procedures when carrying out customer account opening processes to ensure accurate identification.  
  • Adherence To AML Laws: Financial institutions must adhere to anti-money laundering (AML) laws to ensure protection against illegal activities.

In addition, the Financial Crimes Enforcement Network regulation requires financial institutions to maintain account transactions and customer information for a specific period.

Difference Between FinCEN And OFAC

The differences between the United States Department Of Treasury Financial Crimes Enforcement Network and the Office of Foreign Assets Control are as follows:

  • OFAC is a US Treasury body that has the responsibility of enforcing trade and economic sanctions. Meanwhile, financial crime enforcement network responsibilities include supporting banks and other financial information sharing and intelligence.
  • FinCEN provides regulatory supervision, helping financial institutions identify organizations and individuals suspected of engaging in financial crimes. Meanwhile, OFAC works to detect known criminals designated by the United States sanctions and watchlist. 

Additionally, FinCEN requires searches for any suspected criminal. On the other hand, OFAC searches can only detect known criminals.

Frequently Asked Questions (FAQs)

1. What is the Financial Crimes Enforcement Network 105 rule?

International travelers who leave the United States, regardless of their citizenship, with monetary or currency instruments worth more than $10,000 must file a FinCEN Form 105 before departure.

2. Which agencies does FinCEN collaborate with?

FinCEN shares information with various intelligence agencies. Some examples are the Drug Enforcement Administration, the United States Secret Service, the United States Postal Inspection Service, and the Internal Revenue Service.  

3. Who files Financial Crimes Enforcement Network Form 104?

Every financial institution except a casino and the US Postal Service needs to file this form for all withdrawals, exchange of currency, deposits, or any other transfer or payment that involves a transaction worth over $10,000 via, to or by the financial institution.

4. What are Financial Crimes Enforcement Network’s money laundering priorities?

National Combating the financing of terrorism or CFT and AML priorities include cybercrime, corruption, fraud, human smuggling and trafficking, etc.

This article has been a guide to what is Financial Crimes Enforcement Network. Here, we explain its history, roles, functions, requirements, and comparison with OFAC. You may also find some useful articles here –

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