FinCEN Expands Data Collection Geography Beyond Banking

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Heather Kabele, a partner in the Vorys Houston office and a member of the litigation group, authored an article for International Law360 titled “FinCEN Expands Data Collection Geography Beyond Banking.”

The full text of the article is included below. 


FinCEN Expands Data Collection Geography Beyond Banking

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network is continuing to take aggressive measures, across industries, to fulfill its mission of safeguarding the financial system, combating money laundering and promoting national security. Over the last 15 months, FinCEN has issued five Geographic Targeting Orders (GTOs) aimed at the collection of data, two of which it has extended thus far by 6-12 months beyond their initial 180-day compliance periods. This trend does not appear likely to stop anytime soon.

FinCEN gathers most of its financial intelligence through reporting required under the Bank Secrecy Act and relies on the USA PATRIOT Act and the issuance of GTOs to collect and share data.

It is not surprising that FinCEN relies heavily on financial intelligence gathered from required reporting in the banking sector to fulfill its responsibilities. More recently, though, FinCEN has been reaching beyond the traditional banking sector — indeed, even beyond the more broadly defined group of “financial institutions” subject to the BSA — for sources of data to assist FinCEN in carrying out its mission.[2]

FinCEN has expanded the scope of data that it is seeking to obtain by (1) temporarily eliminating reporting exemptions under the BSA applicable to certain businesses that already routinely report; and (2) targeting new businesses in industries that might not routinely report and ordering those businesses to collect and report data. While FinCEN has had the ability to issue GTOs to financial institutions or nonfinancial trades or businesses for many years under 31 U.S.C. § 5326(a), the last 15 months have seen a significant uptick in GTO issuance. FinCEN issued its most recent GTOs in August and September of this year, and recently extended two other GTOs such that they too will apply until at least the first quarter of next year.The uptick in activity began with FinCEN’s issuance of a GTO on Aug. 11, 2014, to armored car services and other common carriers transporting more than $10,000 in currency in the aggregate across the border between San Diego County, California, and Mexico at the San Ysidro and Otay Mesa ports of entry and departure. The GTO temporarily modified reporting requirements applying to these transactions, removing existing reporting exemptions and requiring 100 percent reporting and record keeping. FinCEN has extended this GTO twice thus far, first on Feb. 8, 2015, and more recently on Aug. 8, 2015. The GTO will now expire on Feb. 4, 2016 unless further extended.

A second GTO went into effect on Oct. 9, 2014, requiring most of the nearly 2,000 businesses in the Los Angeles Fashion District to report any instance in which they received more than $3,000 in a cash transaction. The garment district was targeted because it had been identified as a hotbed of activity for trade-based money laundering in which drug money in the U.S. is converted into goods that are shipped to Mexico and other countries, to be sold for local currency that then goes to the international drug cartels. This GTO expired on April 6, 2015.

A third GTO went into effect on April 28, 2015, targeting approximately 700 electronics exporters and common carriers in Miami and requiring reporting of all cash or cash-equivalent transactions in excess of $3,000. FinCEN recently renewed the Miami GTO, such that reporting will be required through at least April 2016.

FinCEN issued a fourth GTO effective Aug. 3, 2015, to check cashers in two South Florida counties. This GTO is directed towards detecting cases of stolen identity refund fraud and requires enhanced reporting on the identities of customers who cash federal tax refund checks in excess of $1,000. The GTO will expire on Jan. 30, 2016 unless extended.

Most recently, FinCEN issued a GTO applicable to eight major points of entry in Texas. The GTO, which went into effect on Sept. 17, 2015, is directed to armored car services and other common carriers transporting more than $10,000 in currency in the aggregate across the United States/Mexico border between and including the Del Rio/Amistad Dam and Brownsville/Los Indios Ports of Entry. This GTO will expire on March 15, 2016 unless extended.

Looking at FinCEN’s history of GTO issuance over the last 15 months, it seems the question to ask is not whether FinCEN will issue another GTO, but rather, when it will do so and what industry and geographic area will be targeted. FinCEN Director Jennifer Shasky Calvery, speaking at a Washington, D.C., conference on Oct. 13, 2015, gave as a concrete example of how it is shaping the collection of BSA data, issuance of the Los Angeles Fashion District GTO and the increase in TBML filings that it engendered. The director noted that these TBML filings, along with the filings of suspicious activity reports by financial institutions concerning accounts used to finance TBML, had “drastically improved [FinCEN’s] collection efforts.”[2]

Companies both in and outside of the traditional banking sector should take note. Certainly companies in the business of moving money or goods — armored car services, common carriers — should keep apprised of developments in this area. But FinCEN is also showing that it will not hesitate to demand reporting from other sources, such as the variety of industries operating within the Los Angeles Fashion District, if it deems those sources to have information likely to disrupt criminal activity and promote national security.


[1] By definition, a “financial institution” subject to the BSA includes not only banks and credit unions, but also money remitters, check cashers and virtual currency exchangers; dealers in foreign exchanges; casinos and card clubs; insurance companies; securities and futures brokers; mutual funds; operators of credit card systems; dealers in precious metals, stones and jewels; and various other types of businesses. See 31 U.S.C. § 5312(a)(2).

[2] See Prepared Remarks of FinCEN Director Jennifer Shasky Calvery, delivered at the Predictive Analytics World for Government Conference, Oct. 13, 2015.