FRB Reminds Firms on FinCEN "Special Measures"
Commentary by Thomas Delaney
The Federal Reserve Board ("FRB") reminded covered institutions of their obligations under "special measures" that may be imposed by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network ("FinCEN").
In a Supervision and Regulation Letter, the FRB explained that Section 311 of the USA PATRIOT Act authorizes FinCEN to impose five special measures on entities designated as being of "primary money laundering concern." The FRB stated that these measures include: (i) transaction recordkeeping and reporting; (ii) retention of beneficial ownership information; (iii) customer identification for payable-through accounts; (iv) customer identification for correspondent accounts; and (v) prohibitions or conditions on correspondent or payable-through accounts, which must be implemented through rulemaking.
The FRB highlighted that the Combating Russian Money Laundering Act and the FEND OFF Fentanyl Act expand this framework by adding a sixth measure. The FRB explained that this new authority permits FinCEN to prohibit or condition certain fund transmittals and, unlike the fifth measure, allows such restrictions to be imposed by order without formal rulemaking.
The FRB noted that, historically, the fifth measure has been the most frequently applied, but emphasized that all six measures impose binding compliance obligations on covered institutions of every size. The FRB directed firms to consult FinCEN’s orders and rulemakings for specific requirements and reminded institutions that FinCEN maintains a public list of entities subject to special measures.
Commentary
Since the passage of the USA PATRIOT Act, US financial institutions have had to comply with actions taken by the Treasury Department in consultation with the Federal Reserve to identify persons or entities as "primary money laundering concerns," which can lead to the imposition of a range of potential "special measures," impacting the designated entity’s access to the US payments system. This SR Letter (25-3) is an update of guidance that the Federal Reserve has issued in the past to update banks on their obligations with respect to complying with additional special measures that can be imposed as a result of the enactment of the Combating Russian Money Laundering Act in 2021 and the FEND OFF Fentanyl Act in 2024. It is not an earth-shattering development, but could be noteworthy on a slow news day.