Financial Crimes Enforcement Network ("FinCEN") Director Kenneth A. Blanco urged financial institutions to help prevent the theft and abuse of personally identifiable information ("PII") by fraudsters, while making it clear that FinCEN's appetite for financial data to fight money laundering and terrorist financing continues unabated.

In a speech before the Federal Identity Forum and Exposition, Mr. Blanco warned that PII is one of the "key enablers" furthering a significant amount of fraud and cybercrime. According to Mr. Blanco, PII is used throughout the financial system to verify and authenticate users, which is what makes it such an attractive target. Additionally, he noted, FinCEN found that fraudsters are often able to gain access to PII by exploiting weaknesses in financial institutions. Instances of fraud that FinCEN has observed include fraudsters:

  • gaining unauthorized access to consumer accounts to misdirect funds (a/k/a "account takeover");
  • using FinTech data aggregators and integrators in account takeovers and fraudulent wires;
  • exploiting poor authentication processes in payment communications; and
  • targeting advanced technology developments, such as digital identity solutions and biometrics.

To protect identity and payment systems from this fraud, Mr. Blanco emphasized the importance of information obtained through Bank Secrecy Act ("BSA") reporting requirements. He stressed the value of currency and suspicious activity reports (SARs) collected from BSA-covered financial institutions, and the importance of filers knowing their customers so that such reports are as accurate as possible. He also talked about regulatory and legislative efforts to obtain as much information as possible on the beneficial owners behind shell companies, emphasizing that this data is critical in helping law enforcement conduct its mission.

Commentary Joseph Moreno

Director Blanco's comments were unambiguous: large financial institutions have lots of personal and financial data and, as a result, have large targets on their backs. FinCEN expects them to be part of the solution and not part of the problem. Using similar language directed by his predecessor toward casinos in years past, Director Blanco makes clear the expectation that large banks have the resources to collect data that are thorough and accurate, and report them accordingly.

He also touched on a legislative initiative that appears to be lingering in this Congress but remains very front-of-mind to FinCEN: efforts to amend the BSA to require a universal database of natural person identities behind legal entities formed under state law. This is clearly a priority for FinCEN which views it as key in fighting criminals, kleptocrats, and hostile foreign state actors. With bipartisan support it may yet become law.

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