FinCEN Issues Financial Trends Analysis Linked to Identity-Related Suspicious Activity

January 10, 2024

FinCEN, the Financial Crime Enforcement Network has issued a Financial Trends Analysis Report highlighting identity-related suspicious activities reported in the Bank Secrecy Act (BSA) filings for the year 2021. As per FinCEN’s press release, the report findings indicated that 1.6 million reports, approximately 42% were filed in particularly 2021, revealing $212 billion in suspicious activity.

The analysis report also evaluates the misuse of identity procedures in opening and accessing accounts and processing transactions.

While talking about the identity-related suspicious activities, Andrea Gacki, Director FinCEN stated, “This report reveals the existence of significant identity-related exploitations through a large variety of schemes,”

She added, “Robust customer identity processes are foundational to the security of the U.S. financial system and critical to the effectiveness of financial institutions’ programs to combat money laundering and counter the financing of terrorism. Financial institutions are encouraged to work across their internal departments to address these schemes.”

Top 5 Identity Exploitations Revealed in the Report

As a part of FinCEN’s Identity Project, the report investigates how malicious actors exploit identity-related processes in transaction handling, account opening, and account access. In the context of the Bank Secrecy Act Framework, FinCEN has identified more than 14 typologies prevalent in suspicious activity reports (SARs) dealing with identity-related issues.

Among the frequently reported cases were fraud, manipulation of records, identity theft, third-party money laundering, and evasion of verification standards. The top typologies contributed 88% of identity-related BSA reports and encompassed 74% of overall suspicious activity linked to identity, for 2021.

Key Takeaways from the Analysis Report

  • Identity-related suspicious activity impacted various financial institutions, while depository institutions filed nearly 54% of all BSA reports
  • Most of the financial institutions experienced impersonation as top identity exploitation, while money services businesses reported circumvention of verification standards
  • The findings indicated that compromised credentials caused a greater financial impact in contrast to the other means of identity exploitation

FinCEN seeks to leverage its power to support financial institutions’ identity, report, and prevent criminals from evading these processes to victimize customers. Following the 2022 National Strategy for Combating Terrorist and Other Illicit Financing, the Treasury Department and FinCEN identify that advancement in digital identity can strengthen AML/CFT measures and facilitate FIs in detecting illicit activities.

Financial institutions must embrace robust and efficient identity verification solutions to prevent identity-related financial crimes. To achieve this, they need to establish tools that can effectively detect false identities and accept genuine identities.

Also read: The Dilemma of “False Acceptance Rate vs False Rejection Rate” in Identity Verification