FinCEN, short for Financial Crimes Enforcement Network, is a government bureau that aims to prevent money laundering and other financial crimes—and punish bad actors that commit them. The U.S. Department of the Treasury oversees FinCEN, which operates in the U.S. and abroad.
History of FinCEN
FinCEN was launched in 1990 by the U.S. Department of the Treasury to analyze the information required under the Bank Secrecy Act (BSA). It was originally meant to offer a multi-source analytics and intelligence network to prevent financial crimes. Its mission expanded in May 1994 to include regulatory responsibilities, allowing it to administer the Bank Secrecy Act. That means it oversees and enforces rules around things like PEP screening and SAR filings.
What Is FinCEN’s Mission?
FinCEN involves three key components: financial services companies, regulators, and law enforcement agencies. FinCEN fights money laundering by keeping a close eye on mandatory reports submitted by financial institutions that signal suspicious activity. It then tracks the suspicious target, including the person’s activities and assets, to make sure money laundering does not occur.
A wide range of activities may trigger FinCEN’s radar, including simple cash smuggling operations to large-scale, complex digital transactions. The power of FinCEN lies in the network of regulators, companies, and law enforcement it maintains, which allows it to monitor across a broader scope.
FinCEN is also the U.S. representative in the Egmont group—an international organization of more than 100 financial intelligence units. These units cooperate and share information to fight financial crime globally.
How Does FinCEN Operate?
FinCEN has broad powers to detect financial crimes, enforce compliance, and regulate and analyze data. The bureau can issue regulations and interpret them—and it can mandate compliance with those regulations. For example, FinCEN issued a final rule in September 2022 regarding beneficial ownership information reporting requirements. Under the rule, nearly all companies and entities that do business in the U.S. must report information about beneficial owners (those who own or control the company) to FinCEN. The goal is to strengthen the transparency of corporations to reduce financial crime.
In sum, FinCEN does two key things:
- Prevents money laundering and related financial crimes and punishes criminals who commit them.
- Identifies and tracks suspicious persons and activity by looking at the required reports financial institutions submit under the Banking Secrecy Act (BSA).
As an anti-money laundering (AML) mechanism, the BSA requires certain recordkeeping and reporting for financial institutions. FinCEN adds value to this paper trail by adding new information to these investigations. That information is shared with federal, state, local, and international law enforcement as it tracks criminals, activities, a nd assets. For example, FinCEN may enhance and share information included in a suspicious activity report (SAR) with the appropriate law enforcement agencies to prevent money laundering.
Criminals must launder their money to use it; laundered money isn’t traceable to the illegal activity that produced it. Bad actors like terrorists, drug dealers, and arms dealers try to game the system so they can use their dirty money without detection. When criminals try to introduce their ill-gotten financial gains into the U.S. financial system, FinCEN works in tandem with regulators and law enforcement to stop them.
Since FinCEN manages, processes, and protects a large volume of financial reporting data, it can help law enforcement investigators and aid in the prosecution of financial crimes. The bureau can also recommend how to allocate resources based on the data it processes, allowing investigators to focus on where the greatest risk of financial crime exists.
In action, the bureau works hand-in-hand with its financial intelligence counterparts abroad to combat terrorism and anti-money laundering worldwide. It may also support policymakers, intelligence agencies, law enforcement, and regulators with its analysis.
Compliance refers to the regulations, laws, and guidelines governing businesses and financial institutions.
- 1What is SOC 2?
- 2What is Section 314(b)?
- 3Financial Crimes Enforcement Network (FinCEN)
- 4Customer Due Diligence
- 5Customer Identification Program
- 6What is Section 314(a)?
- 7Suspicious Activity Report
- 8Politically Exposed Person
- 9Specially Designated Nationals
- 10What is a Currency Transaction Report?
- 11What is OFAC?
- 12What is the Bank Secrecy Act (BSA)?
- 13What is PCI DSS Certification?
- 14What is AML Compliance?
- 15Office of the Comptroller of the Currency (OCC)
- 16What is the Electronic Fund Transfer Act?
- 17Personal Identifiable Information (PII)
- 18Compliance Risk Management
- 19What is Know Your Customer (KYC)?
- 20Know Your Business (KYB)
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