Alert August 21, 2012

FinCEN Issues Ruling Concerning AML Compliance Obligations of Loan or Finance Company Subsidiaries of Banks and Other Financial Institutions

The Financial Crimes Enforcement Network (“FinCEN”) issued a ruling (the “Ruling”) to clarify that a loan or finance company subsidiary (an “LorF Subsidiary”) of a federally-regulated bank or other “financial institution” (as defined by the Bank Secrecy Act, or “BSA”) will be regarded by FinCEN as having complied with its compliance obligations under the BSA if the LorF Subsidiary: (i) is a subsidiary of a parent financial institution that is subject to at least anti-money laundering (“AML”) program and suspicious activity (“SAR”) reporting requirements; (ii) is required to comply with the AML and SAR regulations applicable to its parent financial institution; and (iii) is subject to examination by the Federal functional regulator of its parent financial institution.

The purpose of the Ruling, said FinCEN, is to avoid subjecting an LorF Subsidiary to redundant, overlapping regulations and examinations. For example, if an LorF Subsidiary of a national bank is subject to the OCC’s AML regulations for loan and finance company operating subsidiaries, the LorF Subsidiary will not be required to comply with FinCEN’s parallel regulations.