Good morning, esteemed colleagues and distinguished members of the Caribbean financial crimes compliance community. It is a privilege to address you here in Puerto Rico today. I want to express my sincere gratitude to the Puerto Rico Bankers Association for hosting this important event and for their ongoing commitment to uniting public and private sectors in the fight against illicit finance. These gatherings are invaluable, offering fresh perspectives, sharpening our focus, and fostering collaboration to tackle the pressing security challenges facing the United States and our global partners.
As the Director of the Financial Crimes Enforcement Network (FinCEN), I am still relatively new to this role, and this visit to Puerto Rico has been instrumental in deepening my understanding of the critical issues confronting Puerto Rican financial institutions. I am deeply appreciative of the warm reception and eager to discuss the significance of this jurisdiction for the United States, the Caribbean region, and indeed, the stability of global financial systems.
Illicit financial activity serves as the lifeblood for nearly every criminal and security threat confronting the United States. The vast majority of crime is driven by profit, and virtually all national security threats require financial backing. In our increasingly interconnected world, it is paramount that we operate effectively and coordinate expertly to maximize our collective impact in disrupting these illicit flows.
Puerto Rico presents a complex landscape, characterized by both significant money laundering risks and considerable opportunities for progress and optimism. As highlighted in the 2024 U.S. National Money Laundering Risk Assessment, the Treasury Department has taken decisive actions against International Banking Entities (IBEs) and International Financial Entities (IFEs) operating within Puerto Rico – a topic I will revisit later in my remarks. Despite these acknowledged risks, significant strides have been made recently, marked by landmark prosecutions, robust enforcement actions, and the implementation of new, stricter regulations.
Today, I aim to detail how FinCEN is actively contributing to this positive trajectory. Our efforts are focused on addressing critical gaps within the U.S. Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime and illuminating specific risk factors, emerging trends, and prevalent typologies. We are particularly concerned with predicate offenses that pose significant challenges here in Puerto Rico and throughout the Caribbean region: corruption, fraud, and narcotics trafficking. I will also provide an overview of our recent enforcement strategies and highlight key cases that offer valuable lessons for all stakeholders present today. But first, recognizing the diverse backgrounds and experience levels within this audience, I want to briefly explain the core functions of FinCEN.
Understanding FinCEN’s Role in Safeguarding Puerto Rico Money and Beyond
Many of you are likely familiar with FinCEN, or at least have heard of our agency. Since joining FinCEN, I have been continually impressed by the breadth and depth of our responsibilities. Let me elaborate on some of the key components of our work that are crucial to protecting financial systems, including those in Puerto Rico.
Firstly, FinCEN is responsible for developing and issuing regulations designed to combat money laundering, terrorist financing, and other forms of illicit finance. These regulations mandate, among other things, that approximately 300,000 financial institutions adhere to the Bank Secrecy Act (BSA) by reporting timely and accurate information regarding suspicious activities and certain types of transactions. This reporting is the bedrock of our efforts to understand and disrupt illicit financial flows, including those impacting Puerto Rico Money movement.
Secondly, beyond simply collecting this crucial data, FinCEN plays a vital role in analyzing it. We provide access to this information to law enforcement agencies and other relevant bodies – facilitated through over 470 Memoranda of Understanding involving more than 14,000 users. Furthermore, we have dedicated teams of expert analysts who utilize sophisticated analytical tools and techniques to examine this vast data pool. Their work involves mapping intricate illicit networks, identifying emerging trends and typologies of financial crime, and pinpointing potential targets for investigation and enforcement actions. This analytical capability is essential for proactively addressing threats to Puerto Rico money and the broader financial system.
Thirdly, the collaborative nature of FinCEN’s mission necessitates strong partnerships with external stakeholders, including our global counterparts and allies. Internationally, we actively engage and exchange information with a global network of 170 Financial Intelligence Units (FIUs) through the Egmont Group, as well as with fellow regulatory and supervisory bodies worldwide. This international cooperation is vital to bolstering our analysis and promoting criminal justice both domestically and abroad, ensuring that efforts to protect Puerto Rico money are aligned with global standards.
Domestically, our relationship with U.S. financial institutions and other private sector entities is truly a partnership. You, the financial institutions, are on the front lines of this fight daily, and we are committed to providing support wherever we can. We issue advisories to encourage enhanced reporting on priority risks to the U.S. financial system and national security. We also host public-private forums to facilitate open dialogue, discussing everything from high-level improvements to our overall regulatory framework to granular details on specific criminal schemes and typologies that may impact Puerto Rico money flows.
Finally, FinCEN is equipped with a range of enforcement tools to hold illicit and noncompliant actors accountable. In addition to our robust support for civil and criminal investigations led by other agencies, FinCEN has the authority to impose civil money penalties on U.S. financial institutions that fail to comply with the BSA’s critical mandates. FinCEN can also impose restrictions or enhanced reporting requirements on financial institutions concerning foreign institutions or certain activities outside the United States that are deemed to be of “primary money laundering concern,” which can be particularly relevant to jurisdictions like Puerto Rico with its international financial connections.
Crucially, we are actively implementing the Anti-Money Laundering Act of 2020 (AMLA), including the Corporate Transparency Act (CTA), which has significantly broadened FinCEN’s authorities and capabilities. I will now discuss these developments in the context of our efforts to support the United States Strategy on Countering Corruption, a strategy highly relevant to maintaining the integrity of Puerto Rico money and its financial sector.
Priority Predicate Crimes Affecting Puerto Rico Money: Corruption, Fraud, and Narcotics Trafficking
Corruption and its Impact on Puerto Rico Money
At the heart of FinCEN’s mission is the safeguarding of the integrity of the U.S. financial system, which inherently includes combating corruption and the illicit proceeds it generates. FinCEN’s reporting and analysis on this critical issue, notably our 2022 advisory on kleptocracy and public corruption, have unequivocally demonstrated that corrupt actors persistently exploit vulnerabilities to launder and conceal their ill-gotten gains. This is a global problem, and Puerto Rico money and financial institutions are not immune to these risks. We are actively pursuing three specific regulatory initiatives to address some of these vulnerabilities and advance the United States Strategy on Countering Corruption, which was launched in December 2021 and remains a guiding framework for our efforts.
Beneficial Ownership Transparency and Puerto Rico Money
The first and most impactful initiative is FinCEN’s ongoing implementation of the CTA. Globally, opaque corporate structures are frequently used to obscure illicit activities and launder criminal proceeds. In the context of corruption, these structures can facilitate the theft of public funds for personal enrichment, often at the expense of vulnerable populations. As the world’s largest economy and home to a vast number of companies, the United States is committed to aligning with global AML/CFT regulatory standards and establishing a robust beneficial ownership reporting regime. This is vital for ensuring the legitimate flow of Puerto Rico money within the global financial system.
On January 1, 2024, the regulations implementing the CTA’s reporting requirements took effect, and FinCEN successfully launched the beneficial ownership registry. Now, many companies operating in the United States are required to report identifying information about the individuals who ultimately own or control them, the so-called “beneficial owners.” Since its launch, we have already received over 642,000 filings and are working diligently to raise awareness among affected stakeholders and ensure the reporting process is efficient, straightforward, and free of charge. This increased transparency will make it harder for corrupt actors to hide illicit Puerto Rico money within corporate structures.
As reporting companies continue to file beneficial ownership information reports, FinCEN is focused on providing phased access to this information to authorized recipients, primarily law enforcement agencies. Access to this beneficial ownership data will significantly enhance the ability of our law enforcement partners to investigate, prosecute, and disrupt financial crimes, including those involving Puerto Rico money. It will also streamline compliance for financial institutions with their customer due diligence obligations, making it easier to identify and verify the true owners of accounts and businesses interacting with Puerto Rico money.
Real Estate Transparency and Risks to Puerto Rico Money
Secondly, we are increasing scrutiny on non-financed real estate transactions through a significant proposed rulemaking, published on February 16. For many years, FinCEN has been actively working to prevent corrupt and other illicit actors from exploiting opaque legal entities to make non-financed (all-cash) purchases of residential real estate as a means to launder or conceal criminal proceeds. Our nearly decade-long Residential Real Estate Geographic Targeting Order (GTO) program has been instrumental in this effort. Through this program, FinCEN has gathered valuable data on these types of transactions in specific jurisdictions across the United States.
The proposed rulemaking represents a crucial step towards bringing greater transparency to the real estate sector. We are also actively considering next steps to address the illicit finance risks associated with the U.S. commercial real estate sector. There is ample evidence of money laundering through real estate in Puerto Rico, including links to the drug trade. A notable case is that of Vladimir Natera-Abreu, who was charged with – and pleaded guilty to in November 2022 – conspiracy to distribute hard drugs such as cocaine, heroin, and oxycodone. This conspiracy involved the purchase of real estate properties in Guaynabo using proceeds from narcotics trafficking, demonstrating the direct connection between illicit activities and Puerto Rico money in the real estate market.
Investment Advisers and the Flow of Puerto Rico Money
Thirdly, we are addressing the risks associated with investment advisers through another significant proposed rulemaking issued last week. Currently, investment advisers are not consistently subject to comprehensive AML/CFT obligations in the United States. This creates a vulnerability that could be exploited by corrupt officials and other illicit actors to invest ill-gotten gains – including potentially Puerto Rico money derived from illicit activities – into the U.S. financial system through hedge funds, private equity firms, and other investment services. FinCEN’s proposed rule would extend BSA requirements, including mandatory AML compliance programs and suspicious activity reporting obligations, to certain investment advisers.
Each of these three initiatives – beneficial ownership transparency, real estate rulemaking, and investment adviser regulations – will collectively enhance transparency and accountability across various sectors of business and transactional activity in the United States, including those involving Puerto Rico money. Through these decisive actions, we are reinforcing our existing regulatory framework and reiterating a clear and consistent message: the United States is not, and will not be, a haven for dirty money, regardless of its origin or how it is acquired. This commitment extends to ensuring the integrity of Puerto Rico money and its financial system.
Fraud Schemes Targeting Puerto Rico Money
The landscape of fraud is constantly evolving, with a seemingly endless stream of sophisticated schemes and criminals devising new ways to target unsuspecting victims. FinCEN remains vigilant in identifying, exposing, and assisting both the private sector and the public in detecting a wide array of fraud schemes, often characterized by their novelty and complexity. These schemes can significantly impact Puerto Rico money and its citizens.
Over the past several years, we have issued numerous advisories and reports on various types of fraud, including those related to COVID-19 programs, elder financial exploitation, check fraud, and payroll tax evasion.
Just last September, we issued a new advisory specifically targeting “Pig Butchering” schemes. In these scams, perpetrators, often based overseas (typically in Asia), initiate contact with victims, cultivate rapport and trust over time, and then persuade them to invest in a seemingly lucrative opportunity, frequently involving cryptocurrency, before ultimately stealing their entire investment. These scams can have devastating consequences for individuals and can involve the illicit transfer of Puerto Rico money out of the jurisdiction.
To provide a clearer picture of the fraud landscape in Puerto Rico, our team has analyzed suspicious activity report (SAR) metrics:
- Over 47,000 SARs were filed between January 1, 2022, and December 31, 2023, that listed Puerto Rico as the location of the suspicious activity branch. This significant volume underscores the importance of vigilance regarding Puerto Rico money and financial transactions.
- Nationally, check fraud was the most prevalent category of fraud reported in SARs. While not as frequently cited in Puerto Rico-related filings, reports of suspected check fraud in Puerto Rico did increase by a substantial 66% from the previous year, indicating a growing concern for Puerto Rico money security.
- Suspected money laundering was the most frequently reported suspicious activity subtype in Puerto Rico SARs. Specific examples included transactions that were out of pattern for the customer, transactions deliberately structured below the recordkeeping threshold, and suspicious use of multiple financial institution locations. These typologies are crucial for financial institutions in Puerto Rico to recognize and report to protect Puerto Rico money from illicit flows.
- Some of the largest percentage increases in reporting from Puerto Rico were related to transactions involving a high-risk jurisdiction and transactions involving healthcare or health insurance, suggesting potential vulnerabilities in these sectors concerning Puerto Rico money.
- In the “Other” free text fields of SARs filed in Puerto Rico, financial institutions commonly reported concerns about a high volume of financial activity, suspicions regarding the destination of funds, high dollar amounts involved in transactions, and possible tax evasion schemes. In terms of specific scams reported, “Good Samaritan” scams and online purchase scams – particularly for vehicle purchases and services – were the most frequently mentioned. Additionally, almost 700 SARs filed in Puerto Rico described potential fraud related to Government assistance or benefits programs, highlighting the exploitation of social safety nets and the diversion of Puerto Rico money intended for legitimate purposes.
Narcotics Trafficking and its Nexus with Puerto Rico Money
I now want to address the nation’s opioid crisis, which continues to inflict devastating costs on communities across the country, including Puerto Rico. Recent law enforcement cases have demonstrated that Puerto Rico is a significant transshipment point for narcotics. The November 2023 indictment of three individuals in possession of firearms and charged with conspiracy to distribute narcotics, the September charges against 42 gang members from the Manati municipality, and numerous other indictments and arrests related to large-scale fentanyl and fentanyl-adjacent operations – which fuel other forms of violent criminal activity – are just a few examples that underscore Puerto Rico’s serious challenges with fentanyl and other deadly drugs. The illicit proceeds from narcotics trafficking are a significant source of illicit Puerto Rico money.
FinCEN and the Treasury Department are core participants in the President’s National Drug Control Strategy, and we are leveraging the full spectrum of our tools to degrade and disrupt transnational criminal organizations that traffic these dangerous substances and launder the associated Puerto Rico money. Within the Treasury Department, we have intensified our collaborative efforts with key partners such as the Office of Foreign Assets Control (OFAC) and the Internal Revenue Service – Criminal Investigation (IRS-CI) under the umbrella of a newly established Fentanyl Strike Force. More broadly, we have conducted a series of FinCEN Exchange events across the country, including one held here yesterday in Puerto Rico, to bring together law enforcement agencies and financial institutions to share typologies, discuss effective approaches, and build a more comprehensive and nuanced understanding of these threats and their impact on Puerto Rico money flows.
We continue to strongly urge financial institutions to remain vigilant in monitoring for and reporting suspicious activity linked to the trafficking of fentanyl, fentanyl analogues, and other synthetic opioids, consistent with our 2019 advisory on this subject, which remains highly relevant. We are also closely examining new typologies, emerging trends, and red flag indicators associated with this illicit activity and are committed to disseminating any new actionable information as swiftly as possible to aid in the detection and disruption of narcotics trafficking and the associated Puerto Rico money laundering.
Driving Compliance in Puerto Rico and Beyond Through Robust Enforcement
Enforcement has long been a cornerstone of FinCEN’s mission. Observers of the enforcement landscape have noted FinCEN’s increasingly active role in this area. This heightened enforcement activity aligns with broader efforts across various government workstreams to strategically deploy resources to maximize impact. A critical component of these efforts is FinCEN’s commitment to fully implementing and realizing the potential of its new Anti-Money Laundering and Sanctions Whistleblower Program.
This program holds tremendous promise as an enforcement force-multiplier. Whistleblowers have already provided valuable information relating to some of the United States’ most pressing policy objectives, ranging from Iran- and Russia-related sanctions evasion to drug trafficking, cybercrimes, and corruption – all of which can have implications for Puerto Rico money and its financial system. While we are actively developing an online tip intake portal and other essential aspects of this program, it is important to note that the program is already operational, actively receiving, reviewing, and sharing tips with our enforcement partners. To date, we have received over 240 unique tips since the program’s inception, and many of these tips have been highly relevant to Treasury’s top priorities, including those related to Puerto Rico money laundering risks. Whistleblowers who voluntarily provide original information to FinCEN about certain violations of the BSA or economic sanctions are eligible to receive awards ranging from 10 to 30 percent of the penalties collected if their information leads to successful enforcement actions.
I want to conclude today by emphasizing how FinCEN is promoting enhanced compliance, particularly in non-“traditional” sectors, by adopting a firm enforcement posture, including here in Puerto Rico. Let me recap several of our recent enforcement cases and highlight key lessons that the financial industry, including those institutions handling Puerto Rico money, should take to heart.
Kingdom Trust Company Case: A Lesson for Trust Companies Handling Puerto Rico Money
In April of last year, FinCEN imposed a $1.5 million civil money penalty against Kingdom Trust Company for willful failures to file SARs. Notably, this action marked FinCEN’s first enforcement action against a trust company. However, the underlying themes resonated with other enforcement actions: Kingdom Trust failed to scale its compliance program in pace with the rapid expansion of its business and the corresponding increase in risk. Kingdom Trust’s compliance failures resulted in unreported suspicious activity related to a trade-based money laundering scheme that ultimately led to a criminal indictment, as well as multiple securities fraud schemes that became the subject of both civil and criminal actions. For institutions handling Puerto Rico money, the lesson here is clear: compliance programs must be dynamic and adapt to evolving business models and risk profiles.
Binance Case: Implications for Virtual Asset Service Providers and Puerto Rico Money
In November, FinCEN took a landmark $3.4 billion enforcement action against Binance, the world’s largest virtual asset service provider. This action, the largest in Treasury’s history, was a truly collaborative effort involving Treasury colleagues at OFAC and IRS-CI, as well as partners at the U.S. Department of Justice (DOJ) and the Commodities Futures Trading Commission. FinCEN’s penalties reflected the extensive and serious nature of Binance’s BSA violations, which included:
- Failure to Register with FinCEN as a Money Services Business (MSB): Binance falsely claimed to have exited the U.S. market years prior, but in reality, continued to serve U.S. users and maintain significant ties to the United States, potentially facilitating illicit flows of Puerto Rico money.
- Failure to Develop, Implement, and Maintain an Effective AML Program: Binance initially lacked any AML program, and its subsequent program contained critical deficiencies. These included a failure to conduct Know Your Customer (KYC) processes on a large portion of its user base, a lack of risk-based procedures for various product offerings, and even instructions to staff to withhold information from law enforcement. These failures created significant vulnerabilities for the flow of illicit Puerto Rico money through virtual assets.
- Failure to Report Suspicious Transactions: Binance’s inadequate AML controls allowed illicit actors to transact freely, supporting activities ranging from child sexual abuse and illegal narcotics trafficking to terrorism, across more than 100,000 transactions. This included transactions linked to terrorist groups such as Hamas’s Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda, and ISIS. Despite processing these high-risk transactions, Binance never filed a single SAR with FinCEN, hindering efforts to track and disrupt potentially illicit Puerto Rico money related to these activities.
In addition to the historic penalty, the settlement requires Binance to undertake substantial compliance enhancements, overseen by a five-year monitorship – the first of its kind for a virtual asset service provider like Binance. These compliance obligations are further reinforced by a suspended penalty, which would be collected if Binance fails to maintain compliance. This case sends a strong signal to virtual asset service providers operating with or impacting Puerto Rico money: BSA compliance is non-negotiable.
FinCEN’s resolution with Binance, alongside actions taken by the Commodity Futures Trading Commission, DOJ, and OFAC, underscores the critical role that cryptocurrency companies play in our financial system. Just like financial institutions dealing in fiat currency, willful evasion of U.S. law will result in severe repercussions and mandatory remediation of the deficient conduct. This principle applies equally to institutions handling Puerto Rico money in the virtual asset space.
Bancredito International Bank and Trust Corporation Case: Targeting International Banking Entities and Puerto Rico Money Laundering
In September, in one of my first official actions as Director, FinCEN took a groundbreaking action against an International Banking Entity (IBE) right here in Puerto Rico. Bancredito International Bank and Trust Corporation, also known as Bancredito, was assessed a $15 million civil money penalty for willful violations of the BSA and its implementing regulations. Bancredito processed millions of dollars in suspicious transactions through the United States on behalf of high-risk customers, demonstrating the potential for IBEs to be conduits for illicit Puerto Rico money. Beyond its failures to file SARs, Bancredito disregarded repeated violations identified by the Office of the Commissioner of Financial Institutions (OCIF), lacked an adequate due diligence program for correspondent accounts with foreign financial institutions, and failed to implement an AML program altogether, as now mandated by FinCEN regulation. This case should serve as a strong reminder to all financial institutions, especially IBEs handling Puerto Rico money, to proactively address feedback and findings from their primary regulators regarding BSA violations. Bancredito’s failure to rectify repeated violations cited by OCIF, despite ample opportunity to do so, was a significant factor in the enforcement action.
This enforcement action against Bancredito was FinCEN’s first for willful failure to design and implement an AML program against a bank lacking a federal functional regulator. Bancredito’s willful actions not only placed the U.S. financial system at risk but also deprived law enforcement of potentially critical information needed to disrupt illicit activity and trace illicit Puerto Rico money.
OCIF and FinCEN collaborated closely on this case, and we deeply value the partnership we have built. By bringing this action, we sent an unequivocal message: the era of “easy” money laundering through Puerto Rican IBEs is definitively over. All financial institutions subject to the BSA must fulfill their obligations or face appropriate enforcement action, regardless of their charter or licensing. OCIF and FinCEN are committed to sustained and robust collaboration in this area and will not hesitate to take further action to hold financial institutions accountable for BSA failures, ensuring the integrity of Puerto Rico money and its financial sector.
Asre Case: Holding Individuals Accountable for BSA Violations and Puerto Rico Money Risks
FinCEN’s most recent enforcement action targeted an individual, Gyanendra Kumar Asre. Asre served as the BSA Officer of a New York credit union while simultaneously operating his own MSB without registering it with FinCEN. This dual role created significant conflicts of interest and amplified risks to the financial system, including potential vulnerabilities for Puerto Rico money flows if such individuals were to operate in or through Puerto Rico.
During Asre’s tenure as BSA Officer, the credit union’s risk profile escalated dramatically, in part due to providing services to Asre’s unregistered MSB. Despite these heightened risks, Asre failed to implement adequate AML controls. As a result, hundreds of millions of dollars in high-risk and suspicious funds – including substantial bulk cash deposits – moved through the credit union without proper monitoring or reporting to FinCEN. This case highlights the critical importance of competent and ethical BSA officers in safeguarding the financial system, including the integrity of Puerto Rico money.
In addition to imposing a financial penalty on Asre, FinCEN’s action also includes a five-year ban on Asre’s participation in the affairs of any BSA-regulated financial institution. This action was FinCEN’s first enforcement action against an individual for misconduct while affiliated with a credit union, demonstrating our resolve to hold individuals accountable when their actions jeopardize the integrity of our financial system, including the systems that handle Puerto Rico money.
These enforcement actions collectively represent significant progress in addressing risks within sectors vulnerable to money laundering and highlight FinCEN’s commitment to protecting the integrity of the financial system, including the flow of Puerto Rico money.
Conclusion: A Collaborative Approach to Protecting Puerto Rico Money and Financial Integrity
In conclusion, I want to reiterate FinCEN’s strong commitment to partnering with authorities and the private sector here in Puerto Rico. Today, I have outlined the numerous ways in which FinCEN – in collaboration with you, our partners – is working to protect the financial system from harm and safeguard Puerto Rico money from illicit flows. We are actively implementing the CTA, proposing critical new rules to enhance transparency in the residential real estate and investment adviser industries, and, when necessary, utilizing our enforcement authorities to safeguard our financial system and send a clear deterrent message to non-compliant financial institutions, including those operating in Puerto Rico.
However, at its core, our nation’s AML framework relies on effective actions not just by FinCEN, but also by financial institutions in their crucial role as gatekeepers. This is why we value opportunities like this event, bringing together compliance professionals dedicated to advancing the objectives of the BSA and protecting Puerto Rico money. The more we engage with each other, the more we learn from each other, and the better equipped we become to protect our financial system from harm and ensure the legitimate flow of Puerto Rico money. FinCEN, together with our law enforcement partners, will continue to pursue justice for those who seek to harm lives and livelihoods through illicit finance, and we will steadfastly promote our shared security and the financial integrity of jurisdictions like Puerto Rico. To that end, I sincerely hope that this visit marks the beginning of a continued and strengthened partnership.
Thank you again for your time today. I am now happy to answer a few questions.
