The Financial Crimes Enforcement Network (FinCEN) recently issued a notice of proposed rulemaking (NPRM), pursuant to section 311 of the USA PATRIOT Act, finding that a class of transactions involving 10 Mexican gambling establishments are of “primary money laundering concern.” According to the press release announcing the NPRM, FinCEN has assessed that the gambling establishments have “directly and indirectly” facilitated money laundering benefiting a Mexico-based drug trafficking organization.
The NPRM would employ a special measure under section 311 to impose additional restrictions on covered US financial institutions related to processing transactions involving the gambling establishments. The NPRM represents an enhanced and more dynamic deployment of section 311 authority as a tool and suggests a shift in FinCEN’s approach to combatting money laundering.
Comments are due by December 17, 2025.
Background on section 311
Under section 311 of the USA PATRIOT Act, the Treasury secretary may determine that ‘‘reasonable grounds exist for concluding’’ that a foreign jurisdiction, financial institution operating outside of the US, class of transaction involving a foreign jurisdiction, or type of account is of “primary money laundering concern,” and subsequently require domestic financial institutions and financial agencies (covered financial institutions) to take specified “special measures” against the entity.[1] Section 311 sets forth these five special measures intended to protect the US financial system from money laundering and terrorist financing risks:
- Recordkeeping and reporting certain transactions
- Collection of information relating to beneficial ownership
- Collection of information relating to certain payable-through accounts
- Collection of information relating to certain correspondent accounts
- Prohibition or conditions on the opening or maintaining of correspondent or payable-through accounts[2]
Overview of the NPRM
In the NPRM, FinCEN first declares that “reasonable grounds exist” for determining that transactions involving the gambling establishments are of primary money laundering concern, based on public and nonpublic information indicating sustained laundering activity benefiting a Mexican cartel. As a result of this finding, FinCEN proposes to employ special measure #5 to:
- Prohibit a covered financial institution from opening or maintaining in the US any correspondent account for or on behalf of a foreign banking institution, if such account is used to process a transaction involving any of the gambling establishments.
- Require a covered financial institution to apply special due diligence to its correspondent accounts established with a foreign banking institution, including:
- Sending a notice to foreign correspondent account holders that the correspondents may not provide the gambling establishments access to the account at the financial institution.
- Implementing risk-based screening reasonably designed to ensure that no such account is being used to process transactions involving any of the gambling establishments.
FinCEN notes that an “appropriate screening mechanism” could be one already used to comply with legal requirements, such as the Treasury Department’s Office of Foreign Assets Control (OFAC) sanctions requirements.
The NPRM does not impose new suspicious activity report (SAR) obligations but requests that institutions, when filing SARs on activity involving any of the gambling establishments, include a specific identifier in the filing note and narrative.
What this means
The NPRM signals the continued expansion and forward-leaning use of section 311 authority.
The NPRM follows the incorporation of section 311 special measures in the FEND Off Fentanyl Act (FEND Act) and in section 9714(a) of the Combating Russian Money Laundering Act.[3] Further, FinCEN has evolved its use of these special measures by recently relying both on notice-and-comment rulemaking and orders, and has utilized the section 311 authority to target financial institutions and classes of transactions. We can expect to see this authority continue to be deployed in support of the administration’s priority on disrupting financial flows associated with opioid trafficking.
If the NPRM is finalized, covered financial institutions would need to incorporate the prohibition and special due diligence laid out in the NPRM into their correspondent banking risk assessments, onboarding and periodic reviews, and transaction screening logic, with particular focus on foreign correspondents that may service the affected sector or counterparties. As the NPRM moves through the rulemaking process, institutions should assess their ability to detect references to the gambling establishments, prepare notices to relevant correspondents, and document the risk-based rationale for any additional control enhancements adopted.
[1] 31 USC § 5318A(a).
[2] Id. § 5318A(b).
[3] As amended by section 6106(b) of the National Defense Authorization Act for fiscal year 2022 (Public Law 117-81).