Financial Crime World

Financial Crimes Enforcement Network Cracks Down on Money Laundering in Puerto Rico: Compliance Requirements for Banks and MSBs

The Financial Crimes Enforcement Network (FinCEN), the major anti-money laundering (AML) and counter-terrorism financing (CTF) regulatory body in the United States and Puerto Rico, is stepping up its efforts to protect the financial system from illicit activities in Puerto Rico.

FinCEN’s Role in Protecting Puerto Rico’s Financial System

As an unincorporated U.S. territory, Puerto Rico is subject to many federal laws, including crucial AML regulations. FinCEN is responsible for overseeing these activities, collecting and analyzing financial data, disseminating relevant intelligence, and employing financial and law enforcement tools to safeguard the financial system from unlawful use.

Key AML Regulations for Financial Institutions in Puerto Rico

Two primary AML regulations that financial institutions in Puerto Rico must adhere to are the Bank Secrecy Act (BSA) and the USA PATRIOT Act.

Bank Secrecy Act (BSA)

First enacted to combat terror financing and money laundering, the BSA requires banks and financial institutions to:

  • Develop AML programs with robust customer due diligence (CDD) procedures.
  • Implement screening mechanisms.
  • Maintain record-keeping requirements.

These measures have proven invaluable in criminal, tax, and regulatory investigations and prosecutions.

USA PATRIOT Act

In response to the 9/11 terrorist attacks, the USA PATRIOT Act was passed in 2001 to prevent and penalize acts of terrorism both domestically and abroad while strengthening law enforcement’s investigative capabilities. Some key provisions include:

  • Extended surveillance against terrorism-related offenses.
  • Increased monitoring of highly skilled terrorists.
  • Access to corporate records in national security or terrorism cases.
  • Information-sharing among federal organizations.

Compliance Requirements

Establishing Comprehensive BSA Compliance Systems

  • Internal controls.
  • Independent testing.
  • Designating a Compliance Officer.
  • Providing employee training.

Setting up Effective Monitoring and CDD Mechanisms

Screening Transactions

  • Against government listings.
  • The Office of Foreign Assets Control (OFAC).

Creating a Method for Reporting Suspicious Activity

Implementing Risk-based AML Programs

Developing CDD and Customer Identification Programs

Maintaining Records

  • Cash payments for movable property.
  • Report cash transactions exceeding $10,000.

Banks

  • File Currency Transaction Reports (CTRs) electronically to FinCEN within 15 days of the transaction date.
  • Maintain records for five years.

MSBs

  • Keep records of cash acquisitions amounting to $3,000-$10,000.
  • Record information for each money transfer above $3,000.

Reporting Suspicious Activity

All reports are exempt from disclosure requirements, and financial institutions are not permitted to inform customers about Suspicious Activity Reports (SARs) filed.

With FinCEN’s stringent regulations and dedication to uncovering financial crimes, Puerto Rico can rely on a robust AML framework to safeguard its financial system.