FinCEN Announces Enforcement Initiative For MSBs Along The Southwest Border

Yesterday, FinCEN announced an ongoing enforcement initiative against more than 100 money services businesses ("MSBs") operating along the Southwest U.S. border. FinCEN says that it reviewed over one million currency transaction reports ("CTRs") and 87,000 suspicious activity reports ("SARs") using new data processing techniques to identify potential Bank Secrecy Act ("BSA") compliance concerns with MSBs there. The agency says this resulted in six FinCEN Notices of Investigation, "dozens" of referrals to the IRS, and 50 compliance outreach letters. An accompanying video from Treasury Secretary Scott Bessent suggests that the initiative is intended to "stop terrorist cartels, drug traffickers, and human smugglers" and to "root out potential cartel-related money laundering from the U.S. financial system."

This is the latest in a series of actions by FinCEN and other federal agencies against drug cartels and other transnational criminal organizations ("TCOs"), most notably the U.S. State Department's designation of 14 cartels and TCOs in Mexico and elsewhere in Latin America as "foreign terrorist organizations," which carries additional risks of criminal and civil liability for third parties that provide support to these entities. FinCEN also has issued two geographic targeting orders ("GTOs") requiring increased reporting of cash transactions along the Southwest border, though one these has been the subject of an injunction that prevents its application to specific parties. FinCEN notes that it is cooperating with the Homeland Security Task Force and various federal and state agencies on the initiative, and will "seek to impose civil money penalties, pursue civil injunctive actions, issue warning letters, and make referrals to criminal authorities for willful violations of the" BSA.

This is a good time for MSBs operating along the Southwest border to be sure that their anti-money laundering ("AML") programs are compliant and have been updated to reflect the administration's many actions with respect to cartels and TCOs. In particular, FinCEN notes the obligation of MSBs to ensure "adequate oversight of agents, branches, and third-party service providers," such as pay-out partners. Banks, MSBs and other financial institutions more broadly should consider their exposure to MSBs operating along the Southwest border, which can arise in unusual ways through a variety of financial partnerships and counterparties, keeping in mind the elevated risks now present because of the Administration's designation of several of the larger Mexican cartels as FTOs.

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