ComplianceFinCEN outlines BSA expectations during COVID-19 disruptions
FinCEN issued a COVID-19 statement on 16 March 2020 clarifying that Bank Secrecy Act obligations remain in effect, encouraging institutions to maintain AML programs, notify regulators of any delays, and report pandemic-related fraud.
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On , FinCEN issued guidance clarifying that Bank Secrecy Act (BSA) and anti-money laundering (AML) obligations remain fully in effect during the COVID-19 pandemic while establishing communication channels for institutions experiencing operational difficulties. The statement simultaneously warned of emerging pandemic-related fraud schemes and established SAR reporting protocols to support law enforcement response.
Continuity of BSA Obligations
FinCEN's statement affirmed that BSA requirements—including customer due diligence, suspicious activity monitoring, currency transaction reporting, and record keeping—continue unabated during the pandemic. Financial institutions cannot unilaterally reduce compliance efforts based on operational challenges from remote work or staffing constraints.
However, the bureau acknowledged the unprecedented nature of pandemic disruptions and invited institutions to communicate early about anticipated compliance impacts. Institutions experiencing delays in SAR filing, examination responses, or other regulatory deadlines should contact their primary federal regulator and FinCEN's regulatory support hotline before deadlines pass.
This approach—maintaining obligations while offering regulatory dialog—reflects FinCEN's recognition that rigid enforcement during crisis conditions could undermine compliance program effectiveness. Institutions demonstrating good-faith efforts and early communication received more favorable treatment than those that simply missed deadlines without explanation.
Emerging COVID-19 Fraud Typologies
FinCEN's statement highlighted fraud schemes exploiting pandemic confusion and anxiety. Imposter scams featured criminals posing as government officials, healthcare workers, or charity representatives to extract payments or personal information. Investment fraud promoted fake COVID-19 treatments, vaccines, and cure-related stocks. Product scams sold counterfeit medical supplies, sanitizers, and protective equipment.
The bureau urged institutions to update transaction monitoring systems to detect pandemic-themed fraud indicators. Unusual patterns in healthcare-related merchants, spikes in wire transfers to newly established entities, and account activity inconsistent with customer profiles warranted improved scrutiny. Money mule activity supporting fraud schemes often showed characteristic patterns detectable through analytics.
Stimulus-related fraud emerged as a particular concern as economic relief programs launched. Fraudsters targeted unemployment insurance systems, small business loan programs, and direct payment distributions. Financial institutions serve as critical gatekeepers for detecting and disrupting these schemes through suspicious activity reporting.
SAR Reporting Guidance
FinCEN established specific reporting protocols for COVID-19-related suspicious activity. SARs filed for pandemic-related matters should include "COVID19" in the narrative to enable law enforcement aggregation and analysis. This tagging enables FinCEN to identify patterns across institutions and support coordinated investigative responses.
The guidance clarified that SAR filing remains mandatory regardless of remote work arrangements. Institutions must maintain secure access to SAR filing systems for remote compliance staff. Workflow adaptations should preserve supervisory review and approval processes even when conducted virtually.
FinCEN encouraged improved information sharing through Section 314(b) voluntary information sharing programs. Financial institutions investigating potential COVID-19 fraud can share information with other participating institutions to build fuller pictures of complex schemes spanning multiple entities.
Remote Work Implications for AML Programs
The pandemic's remote work shift created novel AML program challenges. Alert investigation requires access to account information, transaction records, and customer documentation. Compliance staff working from home need secure remote access to these systems while maintaining data protection requirements.
Know Your Customer (KYC) processes faced particular disruption. Document verification procedures designed for branch interactions required adaptation. Digital identity verification services gained importance as in-person verification became impractical. Enhanced due diligence for higher-risk relationships needed modification when site visits and in-person interviews were impossible.
Transaction monitoring alert volumes often increased during the pandemic's economic volatility. Unusual transaction patterns triggered by legitimate business disruption required investigation alongside genuinely suspicious activity. Compliance teams needed expanded capacity precisely when remote work reduced operational efficiency.
Regulatory Examination Considerations
FinCEN's statement implicitly addressed upcoming examination concerns. Institutions should document pandemic-related compliance impacts, remediation efforts, and compensating controls. This documentation supports examination discussions and shows good-faith compliance efforts during crisis conditions.
Examination timelines faced adjustment across federal banking regulators. FinCEN coordinated with OCC, FDIC, Federal Reserve, and NCUA on examination scheduling and scope adjustments. Institutions received relief from some examination activities while critical BSA review continued.
Self-assessment and internal audit remained important during the pandemic. Institutions should evaluate whether remote operations introduced control gaps and document findings. preventive identification and remediation of issues shows program effectiveness and supports favorable regulatory treatment.
Economic Crime Coordination
FinCEN emphasized coordination with law enforcement on COVID-19 fraud response. The bureau works with FBI, Secret Service, Postal Inspection Service, and state attorneys general on pandemic-related investigations. SAR reporting enables law enforcement to identify criminal networks and focus on investigative resources.
International coordination through the Financial Action Task Force (FATF) addressed cross-border pandemic fraud. Money laundering schemes exploit jurisdictional boundaries; coordinated AML responses help disrupt global criminal networks. FinCEN's participation in international information sharing supports these efforts.
The COVID-19 fraud environment evolved rapidly as criminals adapted to new opportunities. Vaccine-related fraud emerged as vaccines developed. Relief program fraud shifted as programs launched and modified. Ongoing vigilance and program updates remained necessary throughout the pandemic's evolution.
Compliance Program Adaptations
Institutions should review pandemic-period compliance performance and institutionalize successful adaptations. Remote investigation capabilities developed under pressure may improve long-term operational resilience. Digital onboarding processes can improve customer experience beyond pandemic necessity. Enhanced fraud detection for emerging typologies strengthens programs against future novel threats.
Post-pandemic examination will probably review pandemic-period compliance. Institutions should maintain documentation of challenges, decisions, and outcomes. Evidence of risk-based program adaptations and preventive regulatory communication supports favorable examination outcomes.
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Coverage intelligence
- Published
- Coverage pillar
- Compliance
- Source credibility
- 86/100 — high confidence
- Topics
- Anti-money laundering · COVID-19 · Regulatory enforcement
- Sources cited
- 3 sources (fincen.gov, cvedetails.com, iso.org)
- Reading time
- 6 min
References
- FinCEN Encourages Financial Institutions to Communicate Concerns Related to COVID-19 — Financial Crimes Enforcement Network
- CVE Details - Vulnerability Database — CVE Details
- ISO 37301:2021 — Compliance Management Systems — International Organization for Standardization
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