Counterterrorism Blog

Notable in FinCEN's announcement December 27, 2006 of an $800,000 civil money penalty against Beach Bank of Miami, Florida, is its listing as a significant money laundering compliance violation Beach Bank's failure to file a suspicious activity report on an unnamed telecommunications company that conducted in excess of $100 million in wire transfers over a two month period for phone card sales and related services.

Treasury and federal law enforcment agencies have been increasingly focused on the use of phone cards and other forms of stored value devices as potential vehicles for money laundering and for terrorist finance. But this case may represent the first enforcement action against a financial institution for failing to notice such a pattern.

Also of interest in the case is Treasury's focus on failure to report currency transactions involving money services businesses by Beach Bank, suggested continued emphasis by FinCEN on money transmitters as a mechanism of high risk of money laundering abuse, at least in a location with obvious vulnerabilities to such laundering like Miami.

Stored value and cash are both seen by federal officials as major ongoing vulnerabilities in the U.S. anti-money laundering and counter terrorist finance system, and Treasury appears to be continuing to consider possible rulemaking that could for the first time place express constraints on the uses of the former. In the meantime, it is helping to drive efforts in the Financial Action Task Force to address risks involving innovative payments systems, including phone cards and other forms of stored value, which could well become the subject of new FATF recommendations in the near future.