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Introduction
Colleagues and distinguished members of the Caribbean financial crimes compliance community, it is an honor to be here in Puerto Rico this morning speaking with you. Let me begin by thanking the Puerto Rico Bankers Association for the opportunity, and more importantly for their consistent work in bringing public and private stakeholders together each year to tackle the challenges we face across the illicit finance landscape. Events like this can help to freshen our perspectives, focus our attention, and find common ground to address the most pressing security issues that face the United States and our partners and allies around the globe.
I am relatively new as the Director of the Financial Crimes Enforcement Network (FinCEN), and I appreciate that this visit to Puerto Rico has given me the opportunity to become more familiar with the important issues facing Puerto Rican financial institutions. I’m incredibly grateful for the warm welcome I have received, and I look forward to discussing the importance of this jurisdiction for the United States, for the Caribbean region, and, indeed, for global financial systems.
Illicit financial activity is a common thread through nearly every criminal and security threat the United States faces. Most crime is simply for profit, and most national security threats necessarily require financing. In an increasingly interconnected world, this means that it is imperative that we get things right and expertly coordinate to maximize our impact.
Puerto Rico presents significant risks for money laundering, but also significant potential and cause for optimism. As discussed in the 2024 U.S. National Money Laundering Risk Assessment, Treasury has taken several actions against International Banking Entities and International Financial Entities that operate in Puerto Rico, which is something I’ll return to at the end of my remarks. However, despite the known risks, there has been significant progress in recent memory, with landmark prosecutions, other enforcement actions, and new rules imposed.
Today I’d like to spend time sharing how FinCEN is contributing to that progress, I hope, by addressing some of the most significant gaps in the U.S. Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime and exposing specific risk factors, trends, and typologies—particularly with respect to some of the predicate offenses that I know are of greatest concern here and throughout the region: corruption, fraud, and narcotics trafficking. I’ll also recap our recent approach to enforcement, and highlight some cases that I hope will provide valuable lessons learned for the audience. But first, because I know this audience comes from a diversity of backgrounds and experience levels, I’d like to quickly begin by talking about what exactly it is that FinCEN does.
Understanding FinCEN
I trust that many in this room know about or have at least heard of FinCEN. One thing that I can say since joining is that I have been struck by the range of functions that the organization performs. Let me go into a bit more detail about a few of the components that make up our work.
First, we work to issue regulations intended to combat money laundering, terrorist financing, and other forms of illicit finance. Those regulations require, among other things, that approximately 300,000 financial institutions report timely and accurate information under the Bank Secrecy Act (BSA) regarding suspicious activity and certain transactions.
Second, in addition to providing access to that information to law enforcement and other agencies—through more than 470 memoranda of understanding involving more than 14,000 users—we have teams of analysts who examine the data using advanced analytic tools and techniques to map illicit networks, identify trends and typologies, and isolate targets for investigation and enforcement.
Third, the nature of FinCEN’s work makes our collaboration with external stakeholders, including our global partners and allies, critical to shared success. Domestically, our relationship with U.S. financial institutions and other private sector entities is truly a partnership. You all are on the front lines of this work daily, and we want to support that wherever we can. We issue advisories to drive further reporting on priority risks to the U.S. financial system and national security, and host public-private events to discuss everything from ideas for improving our overall regulatory regime to details on criminal schemes and typologies. On the international front, we are fortunate to engage and share information with a global network of 170 FIUs—also known as the Egmont Group—as well as fellow regulatory and supervisory bodies around the world, to bolster our analysis and promote criminal justice at home and abroad.
Finally, we employ various tools to hold illicit or noncompliant actors to account. In addition to our rigorous support of civil and criminal investigations by other agencies, FinCEN imposes civil money penalties when U.S. financial institutions fail to comply with the BSA’s important mandate. FinCEN also imposes restrictions or reporting requirements on financial institutions that relate to foreign institutions or certain activities outside the United States that are deemed to be of “primary money laundering concern.”
And of course, we are busily implementing the Anti-Money Laundering Act of 2020 (AMLA), including the Corporate Transparency Act (CTA), which broadened FinCEN’s authorities significantly. I will turn to this next, in the context of our efforts to support the United States Strategy on Countering Corruption.
Priority Predicate Crimes
Corruption
Core to FinCEN’s mission is safeguarding the integrity of the U.S. financial system, which necessarily means combating corruption and its proceeds. FinCEN’s reporting and analysis on this topic, including as described in our 2022 advisory on kleptocracy and public corruption, has made clear that corrupt actors continue to exploit vulnerabilities to launder and hide illicit proceeds. Three specific regulatory efforts have been underway that are addressing some of these vulnerabilities, and advancing the United States Strategy on Countering Corruption that was issued in December 2021 and remains in effect.
Beneficial Ownership
First, and most significantly, is FinCEN’s ongoing implementation of the CTA. Around the world, opaque corporate structures make it easier to conceal illicit activity and launder ill-gotten gains, and in the case of corrupt actors, facilitate theft from innocent populations often for direct personal gain. As the largest economy in the world and home to so many companies, the United States must do its part to align with global AML/CFT regulatory standards and establish a robust beneficial ownership reporting regime.
On January 1, 2024, the regulations that implement the CTA’s reporting requirements went into effect, and FinCEN successfully launched the beneficial ownership registry. Now many companies doing business in the United States must report identifying information about who directly or indirectly owns or controls them. Since launching, we’ve already received more than 642,000 filings and are working tirelessly both to get the word out to affected stakeholders and ensure the process for filing reports is quick, simple, and free.
As reporting companies continue to file beneficial ownership information reports, FinCEN aims to provide access to beneficial ownership information to certain authorized recipients, such as law enforcement agencies, in phases. Access to beneficial ownership information will enhance our law enforcement colleagues’ abilities to investigate, prosecute, and disrupt financial crimes; it will also facilitate compliance by financial institutions with their customer due diligence requirements.
Real Estate
Second, we are shining a light on non-financed real estate transactions with a significant proposed rulemaking, which was published on February 16. For many years now, FinCEN has advanced its efforts to prevent corrupt and other illicit actors from misusing opaque legal entities to make non-financed (i.e., all-cash) purchases of residential real estate to launder or hide the proceeds of crime, including through our nearly decade-long Residential Real Estate Geographic Targeting Order (GTO) program. Through this program, FinCEN has collected information about these kinds of transactions in certain jurisdictions across the United States.
The proposed rulemaking will be an important step toward bringing greater transparency to this sector. We are also considering next steps with regard to addressing the illicit finance risks associated with the U.S. commercial real estate sector. There have been plenty of indications of money laundering through real estate here in Puerto Rico, including with ties to the drug trade. An interesting case is that of Vladimir Natera-Abreu, who was charged with—and in November of 2022 pleaded guilty to—a conspiracy to distribute various hard drugs such as cocaine, heroin, and oxycodone. This conspiracy involved the purchase of real estate properties in Guaynabo with proceeds of narcotics trafficking.
Investment Advisers
Third, we are working to address the risks associated with investment advisers with another significant proposed rulemaking issued last week. At present, investment advisers are not subject to consistent or comprehensive AML/CFT obligations in the United States, creating the risk that corrupt officials and other illicit actors may invest ill-gotten gains in the U.S. financial system through hedge funds, private equity firms, and other investment services. FinCEN’s proposed rule would apply BSA requirements, including AML compliance program and suspicious activity reporting obligations, to certain investment advisers.
Each of these three efforts will bring greater transparency and accountability to business and other transactional activity in the United States. With these actions, we are fortifying our existing regulatory architecture and simultaneously reiterating our longstanding and clear message: the United States is not and will not be a haven for dirty money, no matter how it is acquired or from where it comes.
Fraud
There is no shortage of serious fraud schemes and criminals who concoct the next big scam to target unwitting victims. FinCEN continues to identify, expose, and assist the private sector and the public at large with the detection of fraud schemes of considerable variety and novelty.
In the past several years, we have published multiple products on fraud, whether related to COVID-19 programs; elder financial exploitation; check fraud; or payroll tax evasion.
This past September, we issued a new advisory targeting so-called “Pig Butchering” schemes, in which perpetrators often located overseas, typically in Asia, cold contact a victim and attempt to establish rapport and slowly build trust, get them to invest in an opportunity often related to cryptocurrency, and then steal everything they can.
To give you an idea of what has been observed in Puerto Rico suspicious activity report (SAR) metrics by our team:
- More than 47,000 SARs were filed between January 1, 2022 and December 31, 2023 that listed Puerto Rico as the activity branch location.
- Nationally, check fraud was the largest fraud suspicious activity category. Although it was not as frequently cited in Puerto Rico-related filings, reports of suspected check fraud did increase by 66% from the previous year.
- Suspected money laundering was the most frequently reported suspicious activity subtype. Specific examples include transactions out of pattern, transactions below the recordkeeping threshold, and suspicious use of multiple locations.
- Some of the largest percentage increases in reporting were for transactions involving a high-risk jurisdiction and for those involving healthcare or health insurance.
- In the “Other” free text fields, SAR filers commonly reported a high volume of financial activity, concerns about the destination of funds, high dollar amounts, and possible tax evasion. In terms of scams being reported, Good Samaritan scams and online purchase scams, mostly for vehicle purchases and services, were most frequently reported. In addition, almost 700 SARs in Puerto Rico described possible fraud related to Government assistance or benefits.
Narcotics Trafficking
I would now like to turn to the nation’s opioid crisis, which continues to carry high costs for communities across the country, to include Puerto Rico. Recent law enforcement cases have shown that Puerto Rico is an important transshipment point. A November 2023 indictment of three individuals in possession of firearms and with conspiracy to distribute; September charges of 42 gang members from the Manati municipality; and many other indictments and arrests of large-scale fentanyl and fentanyl-adjacent operations that drive other violent criminal activity are just a few of the cases that underscore Puerto Rico’s challenges with fentanyl and other deadly drugs.
FinCEN and the Treasury Department are core participants in the President’s National Drug Control Strategy, and we have been leveraging the full range of our tools in service of degrading and disrupting transnational criminal organizations that traffic these dangerous substances. Internal to Treasury alone, we have redoubled our efforts with key partners like the Office of Foreign Assets Control (OFAC) and the Internal Revenue Service - Criminal Investigation (IRS-CI) under the auspices of a newly announced Fentanyl Strike Force. More broadly, we have pursued a series of FinCEN Exchange events around the country, including the one we hosted here yesterday, to bring law enforcement agencies and financial institutions together to share typologies and approaches and build a collectively more nuanced understanding.
We continue to urge financial institutions to monitor for and report on suspicious activity related to the trafficking of fentanyl, fentanyl analogues, and other synthetic opioids, including on the basis of our 2019 advisory on the subject, which remains timely. We are also looking closely at new typologies, trends, and red flag indicators associated with this activity, and will seek to publish any new actionable information as rapidly as possible.
Driving Compliance through Enforcement
Enforcement has long been a critical component of FinCEN’s mission. People who follow the enforcement space have noticed FinCEN becoming increasingly active in this space. This is consistent with recent efforts across various workstreams to increase enforcement by strategically deploying our resources. A significant component of such efforts is FinCEN’s commitment to implementing, and realizing the full potential of, its new Anti-Money Laundering and Sanctions Whistleblower Program.
This program holds tremendous potential as an enforcement force-multiplier. Whistleblowers have submitted information relating to some of the most pressing policy objectives of the United States, from Iran- and Russia-related sanctions evasion to drug-trafficking to cyber-crimes and corruption. While efforts are underway to develop an online tip intake portal and other aspects of this important program, I want to note that even while these efforts are underway, the program is actively receiving, reviewing, and sharing tips with our enforcement partners. To date, we have received over 240 unique tips since the program’s inception, and many of the tips received have been highly relevant to many of Treasury’s top priorities. Whistleblowers who voluntarily submit original information to FinCEN about certain violations of the BSA or economic sanctions could be awarded between 10 to 30 percent of penalties collected if their information leads to successful enforcement actions.
I want to conclude today by speaking to how FinCEN is promoting further compliance, particularly in non-“traditional” sectors, by taking a firm approach to enforcement, including here in Puerto Rico. Let me recap a few of our recent cases and some of the related lessons that industry should take away from them.
Kingdom Trust Company
In April of last year, FinCEN imposed a $1.5 million civil money penalty against the Kingdom Trust Company for willful failure to file SARs. Notably, Kingdom Trust was FinCEN’s first action against a trust company. But we saw similar themes to other actions: Kingdom Trust did not grow its compliance program in real-time, and to a level that was commensurate with the elevated risks associated with an expansion of its business. Kingdom Trust’s failures led to unreported suspicious activity related to a trade-based money laundering scheme that was ultimately the subject of a criminal indictment, as well as multiple securities fraud schemes that were the subject of both civil and criminal actions.
Binance
In November, FinCEN brought a landmark $3.4 billion enforcement action against Binance, the world’s largest virtual asset service provider. FinCEN’s enforcement action against Binance is the largest in Treasury’s history, and was a truly collaborative effort with Treasury counterparts at OFAC and CI as well as our partners at the U.S. Department of Justice (DOJ) and the Commodities Futures Trading Commission. FinCEN’s penalties reflect the breadth and significance of Binance’s BSA violations, which included:
- Failing to Register with FinCEN as a Money Services Business (MSB): Binance claimed to have exited the U.S. market years ago, but actually did not, retaining U.S. users and other significant ties with the United States.
- Failure to Develop, Implement, and Maintain an Effective AML Program: Binance initially failed to develop an AML program, and its subsequent program contained critical gaps that included failing to conduct Know Your Customer processes on large swaths of its users, a lack of risk-based procedures for various offerings, and instructing staff to withhold information from law enforcement.
- Failure to Report Suspicious Transactions: Binance’s lack of AML controls allowed illicit actors to transact freely, supporting activities from child sexual abuse, to illegal narcotics, to terrorism, across more than 100,000 transactions. That includes transactions associated with terrorist groups like Hamas’s Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda, and ISIS. Binance processed these transactions, but it never filed a single SAR with FinCEN.
In addition to the historic penalty, the resolution requires Binance to undertake substantial compliance enhancements that will be overseen through a five-year monitorship (the first of its kind overseeing a virtual asset service provider like Binance). These compliance undertakings are also reinforced through a suspended penalty, which would be collected if Binance fails to comply.
FinCEN’s resolution with Binance, along with those of the Commodity Futures Trading Commission, DOJ, and OFAC, recognize the role that cryptocurrency companies play in our financial system. As with financial institutions that offer services in fiat currency, willful evasions of U.S. law will be subject to severe repercussions and remediation of the relevant conduct.
Bancredito International Bank and Trust Corporation
In September, in one of my first acts as Director, FinCEN took a first-of-its kind action against an International Banking Entity, or IBE, here in Puerto Rico. Bancredito International Bank and Trust Corporation, also known as Bancredito, was assessed a $15 million civil money penalty for willful violations of the BSA and its implementing regulations. Bancredito processed millions of dollars in suspicious transactions through the United States on behalf of high-risk customers. On top of its failures to file SARs, Bancredito ignored violations cited by the Office of the Commissioner of Financial Institutions, or OCIF, did not have an adequate due diligence program for correspondent accounts with foreign financial institutions, and failed to implement an AML program altogether as is now required pursuant to FinCEN regulation. This action should encourage industry to incorporate feedback and findings from their primary regulator on BSA violations. Here, Bancredito failed to address repeated violations cited by OCIF despite ample opportunity to do so.
This was FinCEN’s first enforcement action for willful failure to design and implement an AML program against a bank without a Federal functional regulator. Bancredito’s willful actions not only put the U.S. financial system at risk, its lack of controls and reporting deprived law enforcement of potentially critical information necessary to disrupt illicit activity.
OCIF and FinCEN collaborated closely on this case, and we are deeply grateful for the partnership we have built. In bringing this action, we sent a very clear message: the era of “easy” money laundering through Puerto Rican IBEs is over. All financial institutions subject to the BSA must fulfill their obligations or face appropriate enforcement action, regardless of the means through which they are chartered or licensed. OCIF and FinCEN are committed to ongoing and robust collaboration in this space, and will not hesitate to take further action to hold financial institutions accountable for BSA failures.
Asre
And lastly, FinCEN’s most recent enforcement action was against an individual, Gyanendra Kumar Azre. Asre both served as the BSA Officer of a New York credit union and had his own MSB that he failed to register with FinCEN.
During his tenure as BSA Officer, the credit union’s risk profile drastically increased, including by providing services to Asre’s unregistered MSB. Despite these elevated risks, Asre failed to implement adequate AML controls. As a result, hundreds of millions of dollars in high-risk and suspicious funds—including substantial bulk cash deposits—moved through the credit union without proper monitoring or reporting to FinCEN.
In addition to imposing a penalty on Asre, FinCEN’s action also imposes a five-year ban on Asre’s participation in the conduct of the affairs of a BSA-regulated financial institution. This was FinCEN’s first enforcement action against an individual for their conduct while affiliated with a credit union, and it demonstrates that FinCEN will not hesitate to take action against individuals when their conduct jeopardizes the integrity of our financial system.
All of these actions constitute considerable progress in addressing a risky sector for money laundering.
Conclusion
I’d like to conclude by reiterating that FinCEN looks forward to continuing to partner with the authorities and private industry here in Puerto Rico. I’ve shared today the many ways that FinCEN—along with you as our partners—are working to protect the financial system from harm. We continue to implement the CTA. We are proposing important new rules to bring transparency to the residential real estate and investment adviser industry. And yes, we sometimes have to use our enforcement authorities as a way to safeguard our financial system and send messages about deterrence to non-compliant financial institutions. However, at its core, our nation’s AML framework relies on effective actions not just by FinCEN but also by financial institutions in their role as gatekeepers. That’s why we enjoy taking the opportunity to participate in events like this one, which are attended by compliance professionals who are dedicated to furthering the purposes of the BSA. The more we engage with one another, the more we learn from each other, and that places us in a much better position to protect our financial system from harm. FinCEN, along with our law enforcement partners, will continue to promote justice for those who seek to harm lives and livelihoods and we will promote our shared security. To that end, I hope that this visit is the first of many.
Thank you again for your time today; with that, I am happy to take a few questions.
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