The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) plays a critical role in safeguarding the financial system from illicit use. One of the key tools FinCEN utilizes to achieve this mission is the Geographic Targeting Order, or Gto. This document serves as a comprehensive guide to understanding GTOs, their purpose, and implications, particularly for financial institutions and businesses operating within designated geographic areas.
I. The Foundation of GTOs: Legal Authority and Purpose
GTOs are not arbitrary measures; they are grounded in the robust legal framework of the Bank Secrecy Act (BSA). This act empowers the Secretary of the Treasury to impose additional record-keeping and reporting requirements when there are reasonable grounds to believe such measures are necessary to enforce the BSA or prevent its evasion. This authority is specifically outlined in 31 U.S.C. 5326.
The core objective of a GTO is to target and combat illicit financial activities within specific geographic locations. These orders are often deployed in areas identified as high-risk for money laundering, terrorist financing, or other financial crimes. By focusing on particular regions, FinCEN can gather valuable data and intelligence to disrupt criminal networks and protect the integrity of the financial system. The Director of FinCEN is delegated the authority to issue these GTOs.
II. Key Components of a Geographic Targeting Order
To fully grasp the implications of a GTO, it’s essential to understand its key components. A typical GTO will clearly define several crucial elements:
A. Covered Businesses
A GTO specifies which types of businesses are subject to its requirements. Often, these orders target “Covered Businesses,” which are frequently defined as money services businesses (MSBs) as defined under 31 CFR 1010.100(ff). MSBs encompass a wide range of financial service providers, including money transmitters, check cashers, and currency exchangers. The specific types of businesses covered will be explicitly outlined in the GTO itself.
B. Covered Transactions
The GTO will also delineate the types of transactions that fall under its purview. These are known as “Covered Transactions.” Typically, a GTO focuses on transactions involving currency within a specific dollar range. In the example provided, a “Covered Transaction” is defined as any deposit, withdrawal, exchange of currency, or other payment or transfer involving currency of more than $200 but not more than $10,000, conducted by, through, or to a Covered Business. This specific range allows FinCEN to capture transactions that may be indicative of structuring or attempts to evade higher reporting thresholds, such as the Currency Transaction Report (CTR) threshold of $10,000.
C. Covered Geographic Area
Perhaps the most defining characteristic of a GTO is its geographic focus. The order will clearly identify the “Covered Geographic Area,” which is the specific region where the enhanced reporting and record-keeping requirements apply. This area is often defined by specific ZIP codes, counties, or other geographic boundaries. In the provided example, the Covered Geographic Area includes designated ZIP codes within several counties in California and Texas, along the southwest border of the United States. This geographic targeting reflects FinCEN’s strategic approach to address specific regional risks.
D. Reporting Requirements
A GTO mandates specific reporting requirements for Covered Businesses operating within the Covered Geographic Area. These requirements typically involve reporting Covered Transactions to FinCEN using Currency Transaction Reports (CTRs). While standard CTR reporting is required for currency transactions exceeding $10,000, GTOs often lower this threshold for specific geographic areas and business types. In the example GTO, Covered Businesses are required to report currency transactions between $200 and $10,000. These reports must be filed within 15 days of the transaction and submitted electronically through the BSA E-Filing System. It’s crucial to note that even if the system generates a warning about the transaction being below the standard $10,000 CTR threshold, businesses must disregard this warning and proceed with filing as mandated by the GTO.
E. Identification and Verification
Beyond transaction reporting, GTOs often include enhanced customer identification and verification requirements. Covered Businesses are typically required to comply with existing Customer Identification Program (CIP) rules, as outlined in 31 CFR 1010.312. This includes verifying the identity of individuals conducting Covered Transactions and recording specific identifying information on the CTR. Simply noting “known customer” or “bank signature card on file” is not sufficient; specific details such as account numbers or driver’s license numbers are required.
F. Order Period and Record Retention
GTOs are not permanent regulations; they are temporary orders with a defined effective period. The maximum effective period for a GTO is 180 days, although they can be renewed if necessary. The GTO will clearly state its effective dates. Furthermore, Covered Businesses are required to retain records related to GTO compliance, including filed reports and supporting documentation, for a period of five years from the last day the GTO is in effect. These records must be readily accessible to FinCEN or other law enforcement and regulatory agencies upon request.
III. Compliance and Consequences of Non-Compliance
Adhering to the terms of a GTO is not optional; it is a legal obligation for Covered Businesses. Businesses are responsible for ensuring that all officers, directors, employees, and agents comply with the GTO. This includes disseminating the GTO to relevant personnel, particularly those operating within the Covered Geographic Area. Failure to comply with a GTO can result in significant penalties, both civil and criminal, for the business and responsible individuals.
IV. GTOs and the Broader BSA Framework
It is important to understand that GTOs operate within the broader context of the Bank Secrecy Act and its implementing regulations. GTOs do not replace or supersede existing BSA obligations unless explicitly stated. For instance, even with a GTO in place, Covered Businesses must still file Currency Transaction Reports (CTRs) for transactions exceeding $10,000 and Suspicious Activity Reports (SARs) when appropriate, according to standard BSA requirements. In fact, FinCEN encourages voluntary SAR filing even for transactions below the GTO reporting threshold if there are suspicions of evasion or illicit activity.
V. Confidentiality and Public Availability of GTOs
While the information gathered through GTO reporting is confidential and used for law enforcement and regulatory purposes, the GTO itself is a public document. FinCEN publicly issues GTOs, and their terms are not confidential. This transparency ensures that affected businesses and the public are aware of the requirements and geographic areas targeted by these orders.
VI. Seeking Clarification and Further Information
For businesses and individuals seeking further clarification or with questions about a specific GTO, FinCEN provides resources for assistance. Inquiries can be submitted through the FinCEN website, www.fincen.gov/contact. It is crucial for Covered Businesses to seek clarification if any aspect of a GTO is unclear to ensure full compliance.
Conclusion: GTOs as a Vital Tool in Combating Financial Crime
Geographic Targeting Orders are a powerful and adaptable tool employed by FinCEN to combat financial crime and protect the U.S. financial system. By understanding the legal basis, key components, and compliance requirements of GTOs, financial institutions and businesses can effectively operate within these targeted areas and contribute to the broader effort of preventing illicit finance. GTOs demonstrate a targeted and strategic approach to law enforcement, focusing resources on high-risk areas to disrupt criminal activity while ensuring transparency and providing clear guidance to affected businesses.
(Authority: 31 U.S.C. 5326)
Footnotes
- The Bank Secrecy Act, as amended, is codified at 12 U.S.C. 1829b, 1951-1960 and 31 U.S.C. 5311-5314, 5316-5336 and includes other authorities reflected in notes thereto. Regulations implementing the BSA appear at 31 CFR chapter X. The Secretary of the Treasury’s authority to administer the BSA has been delegated to the Director of FinCEN. ↩
- 31 U.S.C. 5326; see also 31 CFR 1010.370. ↩
- Treasury Order 180-01 (Jan. 14, 2020). ↩
- 31 CFR 1022.320 (SAR rule for money services businesses). ↩
- To electronically file a Currency Transaction Report, a Covered Business will need a BSA E-Filing User account. To create a BSA E-Filing User account, please visit https://bsaefiling.fincen.treas.gov/Enroll_Now.html. For more information on e-filing, please visit https://bsaefiling.fincen.treas.gov/AboutBsa.html. ↩
