The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) took an unexpected turn recently when it leveraged its “Gap Rule” to enforce action against Bancrédito International Bank and Trust Corporation (BANCRÉDITO), an International Banking Entity (IBE) based in Puerto Rico. This marks FinCEN’s initial enforcement action using the Gap Rule, as indicated in a Consent Order between parties.
This decision originates from the Bank Secrecy Act (BSA) which was enacted to combat financial crimes like money laundering. The “Gap Rule” is a regulatory provision within the BSA, designed to compensate for time taken by financial institutions to implement a complete Customer Due Diligence (CDD) system.
As per the consent order, Bancrédito evidently failed to maintain a satisfactory CDD program, failed to ensure timely action was taken to address identified compliance deficiencies, and failed to file Suspicious Activity Reports with FinCEN as required by law. Such failures constitutes violations of BSA rules, resulting in monetary penalties and remedial actions.
The use of the Gap Rule in this instance places great importance on compliance with BSA regulations. It suggests that the Treasury department will not hesitate to penalize institutions who exploit loopholes, no matter their size or influence in the banking sector.
It is important for legal professionals working with financial institutions to be well-versed in these regulatory changes. Compliance with BSA rules is no longer discretionary – this case has set a precedent that these rules will indeed be enforced.
For those keen to delve deeper into the specifics of the FinCEN enforcement action, more information can be found in the original article here.