FinCEN: Geographic Targeting Order Issued Against ~700 Miami Businesses; Requires Implementation of Elevated Anti-Money Laundering Controls.
On April 15, 2015, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Geographic Targeting Order (GTO) imposing additional anti-money laundering controls against businesses in Miami that export electronics. This rarely utilized authority was last used by FinCEN when it targeted LA’s fashion district back on September 26, 2014.
At issue, according to FinCEN, are widespread trade-based money laundering schemes. FinCEN indicates in its press release that “[t]hese complex schemes are a primary method used by drug cartels, including the Sinaloa and Los Zetas, to launder their illicit proceeds.”
These are general allegations. Imposition of the GTO does not equate to individualized suspicion of wrongdoing by each covered business. Instead, it is a generalized suspicion that businesses in the area may be complicit in the trade-based money laundering scheme. To help determine the perpetrators through financial intelligence (and to deter them), the GTO enhances reporting requirements and makes them more onerous.
Specifically, each covered business (defined in the GTO) must file FinCEN Form 8300 if, in the course of its trade or business the covered business receives currency in excess of $3,000 in one transaction (or two or more related transactions). Such transactions are called “covered transactions.” Filing Form 8300 is usually reserved for when businesses receive more than $10,000 in the course of its trade or business. The GTO effectively enhances this reporting requirement by lowering the reporting threshold for covered businesses.
FinCEN is authorized to adjust and modify reporting requirement pursuant to the Bank Secrecy Act (BSA). Specifically, in 31 USC Section 5326, the Treasury is authorized to “issue an order requiring any . . . nonfinancial trade or business or group of . . . nonfinancial trades or businesses in a geographic area . . . to obtain such information as the [Treasury] may describe in such order concerning any transaction.”
As such, with respect to the instant GTO, each covered business is obligated to provide the Treasury with full information identifying customers and third parties involved in each covered transaction. Covered businesses must verify the identity of each such person by reviewing and copying identification cards, recording addresses, and recording phone numbers. Covered businesses must also retain all records involved in such transactions for five years after the expiration of the GTO.
Failure to comply with the GTO may subject covered businesses (and their managers and employees) to severe civil and criminal penalties. Civil fines may be as high as $100,000 per violation. Criminal penalties may include imprisonment for up to 10 years and/or fines as high as $500,000. Criminal violations require a finding of willfulness in the violation.
If taken at FinCEN’s word, they have given personal service of the GTO to each covered business. As such, covered businesses may have trouble arguing that they did not know about the GTO if they in fact violate its provisions. Covered businesses therefore have elevated exposure to criminal liability.
Disclaimer: Blog posts should not be relied upon as legal advice and are only provided for informational purposes. Information contained in blog posts may also become outdated with the passage of time as laws change and U.S. foreign policy and national security objectives ev