Posts Tagged ‘James H. Freis Jr.’

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Poor follow-through by FinCEN?

September 19, 2010

Over the past five years, the anti-money laundering staff of the IRS has referred 60 significant money laundering cases to FinCEN which has resulted in only four fines by FinCEN.  This embarrassing revelation comes from an Aug. 31 article by MoneyLaundering.com:

IRS AML Exam Violation Letters, Referrals Lead to Few FinCEN MSB Penalties

By Brian Monroe

The division of investigatory and enforcement powers between two U.S. Treasury Department agencies has resulted in few monetary penalties for anti-money laundering compliance lapses by money services businesses and tension between the two agencies, say current and former government officials.

While the IRS’s anti-money laundering (AML) examination division issued more than 10,000 letters to money services businesses (MSBs) and referred more than 60 cases of “significant noncompliance” to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) over the past five years, only four have resulted in monetary penalties, according to government data.

It’s a system that undermines AML compliance, said Dave Tilzer, the former head of the New York IRS AML division. MSBs that deserve monetary penalties, including those who have shirked off several warning letters, are not being penalized, he said.

“We are the biggest paper tiger,” Tilzer said of the IRS’s AML examiners. The New York IRS division referred several cases to FinCEN the group believed were deserving of monetary penalties, “but the referrals didn’t go anywhere,” he said…

Some officials have argued that there were few penalties because the MSBs corrected their noncompliant behavior before the case progressed any further.  Nevertheless, one wonders why FinCEN can’t fine an MSB for prior noncompliant activity while acknowledging that it has taken the steps to correct it going forward.

It doesn’t look like MoneyLaundering.com could get a quote for this story from FinCEN Director James H. Freis, Jr. or Deputy Director Charles M. Steele, but I’d love to hear their reaction.

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Rift in Treasury?

March 12, 2010

According to MoneyLaundering.com, a leading AML news source, federal regulators released guidance last Friday suggesting that banks take greater steps to verify the beneficial ownership (the true owners) of their customers.  In theory, this would help uncover shell companies in the U.S. acting in behalf of nefarious countries like Iran.

MoneyLaundering.com spoke with Heather Lowe, lawyer for the Global Financial Integrity program, who said the guidance was “unexpectedly weak” because many insiders anticipated a requirement that banks “shall” rather than “may” verify beneficial ownership.

FinCEN, one of the four major federal agencies under Treasury’s Office of Terrorism and Financial Intelligence (TFI), was one of the regulators endorsing the new guidance.  It is somewhat surprising that FinCEN would endorse the weak guidance given the strong support for beneficial ownership disclosure by David S. Cohen, Assistant Secretary for Terrorist Financing—one of TFI’s other major agencies.

In testimony before Congress last November, Cohen said that, “the Administration believes that S. 569,” which would require the disclosure of beneficial ownership information by corporations, “is an important step in the right direction on this issue…”

James H. Freis Jr., the director of FinCEN, like most senior officials at TFI, is a Bush-era holdover and financial crimes expert.  David Cohen, on the other hand, is a Democrat lawyer selected by Pres. Obama and Sec. Tim Geithner.  In fairness to Cohen, his testimony included comments that ownership transparency has to be balanced with the need for financial and legal efficiency, and he does have a legal background in white collar financial crime.

Still, it would appear that Mr. Cohen has aligned himself very closely with Sen. Levin and the “incorporation transparency” proponents, while more experienced Treasury officials are more circumspect.

If my suspicion is incorrect, I would welcome a rebuttal from any Treasury insider.