On October 20, 2023, FinCEN issued an alert to assist financial institutions (FIs) in identifying funding streams for Hamas. On October 19, 2023, FinCEN released proposed regulations related to cryptocurrency mixers.
What Is FinCEN?
The U.S. Financial Crimes Enforcement Network (FinCEN) is a bureau of the U.S. Department of the Treasury. FinCEN’s goal is to safeguard the financial system from illicit use and combat money laundering and promote national security. Section 1010.320 of the U.S. Bank Secrecy Act (BSA) requires FIs to file a Suspicious Activity Report (SAR) with FinCEN for transactions involving $5000 or more in funds and assets if the FI knows, suspects, or has reason to suspect illegal behavior.
FinCEN Financial Red Flags Involving CRE
In its three-page alert, FinCEN listed the following seven red flags that FIs should watch for as part of its due diligence and SAR filings:
A customer or a customer’s counterparty conducts transactions with OFAC-designated entities and individuals, or transactions that contain a nexus to identifiers listed for OFAC-designated entities and individuals, to include email addresses, physical addresses, phone numbers, or passport numbers, or virtual currency addresses.
Information included in a transaction between customers indicates support for terrorist campaigns.
A customer conducts transactions with a Money Services Business (MSB) or other financial institution, including one that offers services in virtual currency, that operates in higher-risk jurisdictions tied to Hamas activity, and is reasonably believed or suspected to have lax customer due diligence (CDD) requirements, opaque ownership, or otherwise fails to comply with anti-money laundering/combatting the financing of terrorism (AML/CFT) best practices.
A customer conducts transactions that originate with, are directed to, or otherwise involve entities that are shell corporations, general “trading companies,” or other companies that have a nexus with Iran or other Iran-supported terrorist groups, such as Hizballah and Palestinian Islamic Jihad.9
A customer that is a charitable organization or nonprofit organization (NPO)10 solicits donations but does not appear to provide any charitable services or openly supports Hamas’s terrorist activity or operations. In some cases, these organizations may post on social media platforms or encrypted messaging apps to solicit donations, including in virtual currency.
A customer that is a charitable organization or NPO receives large donations from an unknown source over a short period of time and then sends significant wire transfers or checks to other charitable organizations or NPOs.
A customer conducts transactions with known or suspected virtual currency addresses tied to terrorism or terrorist financing donation campaigns.
Click to read the complete 3-page document.
Crypto Mixers
FinCEN issued an 80-page notice of proposed rulemaking (NPRM) which proposes requiring U.S. FIs and domestic financial agencies to implement certain recordkeeping and reporting requirements relating to transactions involving convertible virtual currency (CVC) mixing. Comments on this proposal are due to FinCEN within 90 days after the NPRM is published in the Federal Register.
The goal of the proposal is to increase transparency related to international CVC mixing to prevent terrorist organizations and terrorist state supporters from accessing the U.S. and global financial systems. FIs would be required to report information about a transaction when the FI knows, suspects, or has reason to suspect the transaction involves CVC mixing within or involving jurisdictions outside the U.S.
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