In 2020, the top three U.S. districts for money laundering offenses were the Southern District of Florida, the Southern District of New York, and the Southern District of Texas. Although money laundering and financial crime happen in every part of the country, they are not evenly distributed; a few areas have significantly higher rates, putting businesses operating in those areas at greater risk.
To focus resources on these areas and enhance cooperation among authorities, the United States has designated certain geographic regions as High Intensity Financial Crime Areas (HIFCA). This article will discuss the impact operating in a HIFCA has on businesses and explore strategies to reduce AML compliance risks.
What Are High Intensity Financial Crime Areas (HIFCA)?
A High Intensity Financial Crime Area — also known as a High Risk Money Laundering and Related Financial Crimes Area — is a geographic region designated by the U.S. government as having a high concentration of financial crimes, such as money laundering, fraud, and other illicit financial activities. These areas receive increased attention and resources from law enforcement agencies and regulatory bodies. The HIFCA designation was introduced in the Money Laundering and Financial Crimes Strategy Act of 1998.
Current HIFCA Locations
Several areas in the United States are currently given the HIFCA designation. As of this writing, there are seven HIFCA zones:
- New York and New Jersey.
- The California Northern District, including the counties of Los Angeles, Orange, Riverside, San Bernardino, Santa Barbara, Ventura, and San Diego in California.
- The California Southern District, including San Francisco, Alameda, Contra Costa, San Mateo, Santa Clara, Solano, and Marin.
- South Florida, including Miami-Dade, Broward, and Palm Beach in Florida.
- Chicago, including the counties of Cook, DuPage, Lake, Will, and McHenry in Illinois.
- Southwest Border covers the entire U.S.-Mexico border region, including the states of California, Arizona, New Mexico, and Texas.
- Puerto Rico and the U.S. Virgin Islands.
It is important to note that HIFCA designations may change over time, and new areas might be added or existing areas removed. The Financial Crimes Enforcement Network (FinCEN) or other government sources should be consulted for the most up-to-date information on HIFCA designations.
The Impact of HIFCAs on Financial and Money Services Businesses
Financial and money services businesses operating in a HIFCA may be subject to increased scrutiny from regulators and law enforcement agencies. They may also face higher penalties for non-compliance with anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements.
Businesses operating in these areas should ensure that they comply with all relevant AML regulations and make efforts to assess and act on the money laundering risk posed by their customers, including monitoring customer activities for any suspicious or unusual patterns or behaviors that may indicate money laundering or financial crime.
Strategies to Reduce HIFCA Compliance Risk
Customer Due Diligence
Financial and money services businesses operating in HIFCAs should implement rigorous customer due diligence procedures, including identity verification and KYC, understanding the nature and purpose of their transactions, and monitoring for any suspicious or unusual activity.
Transaction Monitoring and Reporting
Financial services businesses need to closely monitor transactions involving customers in HIFCAs for any suspicious activities. They are also required to file Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) with the FinCEN for transactions that meet certain criteria, such as structuring or unusual transaction patterns.
Regular and ongoing risk assessments are necessary to identify and evaluate the risks associated with serving customers in HIFCAs. This includes reviewing customer identities, transaction patterns, and services offered to determine if they expose service providers to a higher risk of financial crimes.
Adopt Technological Solutions to Overcome AML Compliance Challenges
Technology can play a crucial role in helping businesses to meet their AML compliance obligations. Modern AML compliance software offers advanced analytics, machine learning, and compliance automation to help businesses detect and prevent money laundering and other financial crimes efficiently and cost-effectively.
HIFCAs cover huge geographic areas that are home to tens of millions of people, only a small proportion of whom engage in money laundering and other financial crimes. However, money services and financial services businesses operating within a HIFCA face increased risk, both from the heightened incidence of financial crime and the greater scrutiny of regulatory and law enforcement agencies.
AML compliance software reduces the cost, complexity, and labor required to control your business’s exposure to financial crime and AML compliance risks. To learn more, request a free demonstration of the Alessa platform.