Customers’ Foreign Bank Accounts Under Scrutiny as Financial Institutions Upgrade Compliance

Washington D.C. - US Treasury Issues Stern Warning on Enhanced Customer Due Diligence and Suspicious Activity Reporting

The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a stern warning to financial institutions regarding the need for enhanced customer due diligence and suspicious activity reporting in relation to foreign bank accounts.

Annual Filing Requirements for Foreign Bank Accounts

According to FinCEN, all individuals with a financial interest in or signature authority over any financial accounts maintained in a foreign country must report those relationships to the Internal Revenue Service (IRS) annually if the aggregate value of the accounts exceeds $10,000 at any point during the calendar year. The deadline for filing Form TD F 90-22.1 is June 30th of the succeeding calendar year.

Recordkeeping Requirements and Suspicious Activity Reporting

Financial institutions are required to conduct further research on customers’ transactions and determine whether a Suspicious Activity Report (SAR) should be filed with FinCEN if they identify any suspicious activity related to foreign bank accounts. The Treasury has also issued regulations regarding recordkeeping requirements for financial institutions, including:

• Obtaining identifying information from customers who purchase monetary instruments in cash amounts of $3,000 to $10,000
• Retaining certain records related to funds transfers and extensions of credit exceeding $10,000

Importance of Robust Customer Due Diligence and Suspicious Activity Reporting

In a statement, FinCEN emphasized the importance of robust customer due diligence and suspicious activity reporting in preventing money laundering and terrorist financing. “Financial institutions have a critical role to play in detecting and reporting suspicious activity, and we urge them to take these regulations seriously,” said a spokesperson for FinCEN.

Review and Update Compliance Procedures

The full text of the Treasury’s regulations can be found on the FinCEN website. Financial institutions are advised to review the regulations carefully and update their compliance procedures accordingly.

Takeaway

Financial institutions must prioritize enhanced customer due diligence and suspicious activity reporting to prevent money laundering and terrorist financing. Failure to comply with these regulations may result in severe consequences.