Small Business Reading Room

Thursday, June 09, 2005

FINCen by the numbers

The Financial Crimes Enforcement Network has published a recap of its activities under section 314(a), "By the Numbers" (pdf).

FINCen reports the feedback they get from law enforcement agencies is overwelmingly positive. The activities of the FINCen have resulted in the following actions and discoveries in the reporting period. (which is two and a half years as best I can tell. If they wanted to be helpful in reporting these numbers, they could have presented them by calendar year).

1,574 New Accounts Identified
2,076 New Transactions
907 Grand Jury Subpoenas
11 Search Warrants
150 Administrative Subpoenas/Summons/Other
43 Arrests
36 Indictments
2 Convictions
(02/01/2003 – 06/08/2005)
(Reprinted from the Report)

In other words, they got over 1000 subpoenas issued and that resulted in 2 convictions. Maybe these things take a long time to develop. But, once again, I wonder if the costs of these reports exceeds their utility.

These numbers are the result of using what is called the 314 system 408 times. Each time FINCen uses this system, 22,000 financial institutions must:

... query their records for data matches, including accounts maintained by the named subject during the preceding 12 months and transactions conducted within the last 6 months. Financial institutions have 2 weeks from the transmission date of the request to respond to 314(a) requests. If the search does not uncover any matching of accounts or transactions, the financial institution is instructed not to reply to the 314(a) request.

As we had reported in previous posts, more and more businesses in the US are being classified as "Financial Institutions". The latest were jewelers, and it is not clear to this writer if they are included in Section 314(a) reporting.

Tuesday, June 07, 2005

FINCen spreads its net

The U.S. Department of the Treasury, Financial Crimes Enforcement Network is once again expanding the circle of businesses that can be forced to be agents of the government.

Jewelers are now subject to the regulation of the government entity that is charged with enforcing the Bank Secrecy Act and the "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism" (USA PATRIOT) Act of 2001.

Quoting the Final Rule:
The new rules apply to "dealers" that have purchased and sold at least $50,000.00 worth of "covered goods" during the preceeding year....

"Covered Goods" include jewels, precious metals and precious stones, and finished goods that derive 50 percent or more of their value from jewels, precious metals or precious stones contained in or attached to such finished goods.

The rule summarizes actions of two dealers who were complicit with the criminals and extrapolates to conclude that all dealers are vulnerable to abuse by money launderers and terrorists.

The rule demands that Jewelry Dealers create compliance programs that include:

  • Policies, procedures and internal controls, based on the dealer’s assessment of the money laundering and terrorist financing risk associated with its business;

  • A compliance officer who is responsible for ensuring that the program is implemented effectively;

  • Ongoing training of appropriate persons concerning their responsibilities under the program; and

  • Independent testing to monitor and maintain an adequate program.

While I firmly believe it is every citizens' obligation to report criminal activity, I also think this will impose a burden on small businesses. I think there is probably a better way to get the information the government seeks without, in effect, deputising every jewelry dealer in America. I wonder if the burden is being considered along with the benefit when FINCen makes these new rules.

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