Kenneth Blanco, director of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), embraced gathering more data to combat fraud, but rejected senators’ request to consider raising the reporting threshold for filing suspicious activity reports, or SARs, during a recent hearing.
Additional requirements and rules that Congress has been mulling would be yet “another layer of bureaucracy” in the anti-money laundering framework, Blanco told members of the Senate Banking Committee during a Thursday hearing on potential reforms to and streamlining of agency coordination regarding the Bank Secrecy Act.
The sometimes heated Senate hearing was the fourth hearing this year on potential BSA reforms. As part of the effort, Senate Banking Committee members are looking at possibly changing the thresholds and requirements for SARs as well as currency transaction report (CTR) requirements, including reporting thresholds.
Blanco told lawmakers that Treasury already has a “very strong, thriving” interaction with stakeholders and adding more legislative requirements would move resources away from his current workload of investigating terrorists, money launderers, human traffickers and human rights violators.
Blanco and Steven D’Antuono, section chief, financial crimes section for the Federal Bureau of Investigation, both told lawmakers that the more information they can glean, the better for fighting crime.
“Beneficial ownership information is critical to national security and investigations,” D’Antuono told lawmakers. “I can almost assure you that if we had a beneficial ownership system, I can almost say it would have been found earlier and the investigation would have been quicker,” the FBI official said, referring to an investigatory matter under discussion.
On Justice Department letterhead, he said in written testimony that “increasingly, sophisticated criminals seek access to the U.S. financial system by masking the nature, purpose or ownership of their accounts and the sources of their income through the use of front companies, shell companies or nominee accounts with unknown beneficial owners.”
Blanco cast a wary eye on the notion of raising the suspicious-activity reporting threshold of $10,000, citing concerns internally as well as from law enforcement partners.
Based on a reviewed of CTR filings, FinCEN found that increasing the SARs threshold to $20,000 would cause FinCEN to lose over 60% of CTR-based financial intelligence on which FinCEN and law enforcement, in particular, currently rely.
Increasing the threshold to $30,000 could result in a loss of close to 80% of currently provided data, the very kind needed to find illegal networks and investigate them properly, according to Blanco.
“It is important to consider how changing practices can highlight the suspiciousness of a cash transaction, even in low amounts. Because customers often rely on wire transfers instead of cash deposits and withdrawals, a cash deposit of $10,000 can be a valuable source of information,” the seasoned BSA enforcement official said in written testimony.
Blanco at times provided emotional testimony about crime-fighting efforts in response to probing from Republican senators, particularly Sen. John Kennedy, R-La.
Blanco also spoke of creating more efficiency and the use of data and artificial intelligence to modernize efforts.
The FBI’s D’Antuono, underscoring Blanco’s points, told lawmakers that there are many data points on a CTR that could point to all kinds of illicit activity, noting for instance, elder fraud with caregivers siphoning off money from senior citizens’ bank accounts.
He compared a CTR to an aged, “fine wine.” The report might prove valuable 10 years down the road when the person on whom it was collected is now a fugitive.
Treasury, which houses both FinCEN and the Office of the Comptroller of the Currency, revealed its internal tension on the matter.
Grovetta Gardineer, senior deputy comptroller for compliance and community affairs at the Office of the Comptroller of the Currency, signaled in her testimony before the committee that the OCC is ready to consider threshold changes in SARs in an effort to reduce burdens on banks with lower risk profiles.
The OCC “intends to explore a range of CTR requirements with the other agencies, FinCEN and law enforcement including the appropriateness of the current CTR threshold, opportunities to tailor the content of the CTRs, and efficiencies for banks filing relatively few CTRs each month to file their CTRs on a quarterly basis,” she testified.
Gardineer said that the OCC is focusing agency resources and those of its supervised banks on “the areas of highest risk.”
— Check out Banking Regulators to Encourage AML Innovation on ThinkAdvisor.