Department of Treasury Releases Updated Guidance To Financial Institutions On Informal Value Transfer Systems

Sep 08, 2010   

On September 1, 2010, the Financial Crimes Enforcement Network (“FinCEN”) of the US Department of the Treasury issued a guidance for financial institutions on Suspicious Activity Reports (“SAR”) involving Informal Value Transfer Systems (“IVTS”).

The Department of the Treasury defines an IVTS as “any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form.” IVTS transfers usually occur through non-bank financial institutions whose primary business may not be the transmission of money.

IVTS are allowed to operate in the US as Money Services Businesses (“MSB”) as long as they follow applicable federal and state laws. IVTS are required to register with FinCEN to operate within the US. Additionally, IVTS must comply with the Bank Secrecy Act’s provisions regarding anti-money laundering and counter-terrorist financing. More information on how IVTS operate, how financial institutions may be used in the IVTS process, and potential indicators of IVTS activity can be found in FinCEN Advisory 33.

In its most recent guidance FinCEN states “if a financial institution knows, suspects, or has reason to suspect that an ITVS is operating in violation of the registration requirement under the BSA for money transmitters not acting solely as agents of others, or, even if registered, is being used in the illegal transmittal of funds, a SAR should be filed.” FinCEN also advised that when financial institutions complete a SAR involving an IVTS that it note the abbreviation IVTS in the narrative of the SAR and include an explanation as to why the financial institution suspects that an IVTS is involved in reportable activity. The full guidance can be read at FinCEN September 1, 2010 Guidance.

FinCEN’s purpose in issuing this guidance is to make SARs involving IVTS more helpful to law enforcement. FinCEN reports that IVTS can be used to launder money and possibly fund terrorist activities throughout the world. For insight and strategies on maintaining compliance with state and federal regulation of financial services, please contact Fuerst Ittleman at 305-350-5690 or contact@fidjlaw.com.