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Entries in Suspicious Activity Reporting (4)


FinCEN Issues Advisory on Third-Party Payment Processor Risk

The Financial Crimes Enforcement Network (FinCEN) recently issued an advisory bulletin warning financial institutions on the risks associated with maintaining deposit accounts for third-party payment processors (“Payment Processors”). Payment Processors are companies that initiate payment transactions on behalf of their own customers, typically merchants and other businesses, where these customers lack a direct relationship with the financial institution. Payment processors may service domestic or foreign businesses that are conventional bricks-and-mortar establishments or internet-based.

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FDIC Issues Revised Guidance on Third-Party Payment Processors

The FDIC recently issued Revised Guidance regarding account relationships with payment processors that process RCC and ACH payments on behalf of third-party merchants (the “Revised Guidance”). Such account relationships are relatively common for financial institutions, but come with the risk of association with unscrupulous third-party merchants serviced by the payment processor. The Revised Guidance focuses on the need for caution with respect to payment processors and merchants that have a higher risk profile for unauthorized payments and fraudulent/unlawful activity, such as those involved in telemarketing and certain internet-based industries.

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FinCEN Assesses the Maximum Civil Money Penalty for Illegal Disclosure of a SAR

The Financial Crimes Enforcement Network (“FinCEN”) recently assessed the maximum possible civil penalty against a former bank official in California, Frank Mendoza, who had intentionally disclosed the existence of a Suspicious Activity Report (a “SAR”) to the subject person of the SAR. The Bank Secrecy Act prohibits the disclosure of the existence of a SAR to any person involved in the transaction. Penalties for violation of this restriction can include civil penalties of up to the greater of $25,000 or the amount involved in the transaction (up to $100,000), criminal fines of up to $250,000, and up to five years imprisonment.

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FinCEN Issues Advisory on SARs in connection with Suspected Financial Exploitation of the Elderly

On February 22, 2011, the Financial Crimes Enforcement Network (“FinCEN”) issued an advisory to financial institutions with regard to the filing of suspicious activity reports (“SARs”) in connection with suspected financial exploitation of elderly persons.  Financial institutions are required to file SARs in a number of circumstances, depending (in part) upon the parties involved and the amounts at issue.  See, e.g., 12 CFR Part 353 (FDIC).  For example, a SAR may be necessary where a transaction is conducted with no business or apparent lawful purpose or where the customer would not normally be expected to engage in the transaction and if the bank after an examination of the facts knows no reasonable explanation for the transaction.  In its advisory, FinCEN provides a list of “red flags” that financial institutions can use in identifying suspected cases of financial exploitation, focusing on two areas of inquiry:

  • Erratic or unusual banking transactions or changes in banking patterns.
  • Interactions of customers and their caregivers with the financial institution.

In Maine, there a number of state laws regarding the reporting of suspected exploitation and/or abuse of elderly persons.  Generally, a person (including a financial institution) making a report in good faith to the Maine Department of Health and Human Services of suspected financial exploitation of an incapacitated or dependent adult is provided certain protections from civil liability.   The Maine banking code (with regard to the disclosure of financial records) also contemplates the making of such reports to DHHS.  A copy of the FinCEN advisory may be found at the following link:

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